strategic slides-6
TRANSCRIPT
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Do.Dr.Mustafa KILI Ch 6-1
Chapter 6Chapter 6
Strategy Analysis And ChoiceStrategy Analysis And Choice
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Do.Dr.Mustafa KILI Ch 6-2
Strategy Analysis & ChoiceStrategy Analysis & Choice
Strategic analysis and choice largelyStrategic analysis and choice largely
involves making subjective decisionsinvolves making subjective decisionsbased on objective informationbased on objective information..
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Do.Dr.Mustafa KILI Ch 6-3
Strategy Analysis & ChoiceStrategy Analysis & Choice
The Nature of Strategy Analysis and ChoiceThe Nature of Strategy Analysis and Choice
Establishing longEstablishing long--term objectivesterm objectives Generating alternative strategiesGenerating alternative strategies
Selecting strategies to pursueSelecting strategies to pursue
Best alternative to achieve mission and objectivesBest alternative to achieve mission and objectives
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Do.Dr.Mustafa KILI Ch 6-4
Strategy Analysis & ChoiceStrategy Analysis & Choice
Alternative strategies derive fromAlternative strategies derive from
VisionVision
MissionMission
ObjectivesObjectives
External auditExternal audit Internal auditInternal audit
Past successful strategiesPast successful strategies
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Do.Dr.Mustafa KILI Ch 6-5
Strategy Analysis & ChoiceStrategy Analysis & Choice
Participation in generating alternativeParticipation in generating alternative
strategies should be broadstrategies should be broad
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Do.Dr.Mustafa KILI Ch 6-6
StrategyStrategy--FormulationFormulation Analytical Framework
Stage 1: The Input Stage
Stage 2: The Matching Stage
Stage 3: The Decision Stage
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Do.Dr.Mustafa KILI Ch 6-7
Formulation FrameworkFormulation Framework
Internal Factor EvaluationMatrix (IFE)
External Factor Evaluation
Matrix (EFE)Stage 1:
The Input Stage
Competitive Profile
Matrix
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Do.Dr.Mustafa KILI Ch 6-8
Input StageInput Stage
Provides basic input information for theProvides basic input information for the
matching and decision stage matricesmatching and decision stage matrices
Requires strategists to quantifyRequires strategists to quantifysubjectivity early in the processsubjectivity early in the process
Good intuitive judgment always neededGood intuitive judgment always needed
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Do.Dr.Mustafa KILI Ch 6-9
Matching StageMatching Stage
Match between organizations internalMatch between organizations internal
resources and skills and the opportunitiesresources and skills and the opportunitiesand risks created by its external factors.and risks created by its external factors.
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Do.Dr.Mustafa KILI Ch 6-10
Formulation FrameworkFormulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:The Matching Stage BCG Matrix
IE Matrix
Grand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-11
Matching StageMatching Stage
SWOT MatrixSWOT Matrix
ThreatsThreats OpportunitiesOpportunities
StrengthsStrengths WeaknessesWeaknesses
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Do.Dr.Mustafa KILI Ch 6-12
SWOTSWOT MatrixMatrix
Develop four types of strategiesDevelop four types of strategies
StrengthsStrengths--Opportunities (SO)Opportunities (SO) WeaknessesWeaknesses--Opportunities (WO)Opportunities (WO)
StrengthsStrengths--Threats (ST)Threats (ST) WeaknessesWeaknesses--Threats (WT)Threats (WT)
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Do.Dr.Mustafa KILI Ch 6-13
SOSOStrategiesStrategies
Use a firms
internal strengths
to take advantage
of externalopportunities
StrengthsWeaknesses
Opportunities
Threats
SWOT
SO
Strategies
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Do.Dr.Mustafa KILI Ch 6-14
WOWOStrategiesStrategies
Improving internal
weaknesses by
taking advantage
of externalopportunities
StrengthsWeaknesses
Opportunities
Threats
SWOT
WO
Strategies
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Do.Dr.Mustafa KILI Ch 6-15
STSTStrategiesStrategies
Use a firms
strengths
to avoid or
reduce the impactof external
threats
StrengthsWeaknesses
Opportunities
Threats
SWOT
ST
Strategies
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Do.Dr.Mustafa KILI Ch 6-16
WTWTStrategiesStrategies
Defensive tactics
aimed at reducing
internal
weaknesses &
avoidingenvironmental
threats
WT
Strategies
StrengthsWeaknesses
Opportunities
Threats
SWOT
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Do.Dr.Mustafa KILI Ch 6-17
SWOTSWOT MatrixMatrix
Steps in developing the SWOT Matrix
1. List the firms key external opportunities
2. List the firms key external threats
3. List the firms key internal strengths
4. List the firms key internal weaknesses
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Do.Dr.Mustafa KILI Ch 6-18
SWOT MatrixSWOT Matrix
Developing the SWOT Matrix
5. Match internal strengths with external opportunitiesand record the resultant SO Strategies
6. Match internal weaknesses with externalopportunities and record the resultant WO Strategies
7. Match internal strengths with external threats andrecord the resultant ST Strategies
8. Match internal weaknesses with external threats andrecord the resultant WT Strategies
SWOT M i
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Do.Dr.Mustafa KILI Ch 6-19
SWOT MatrixSWOT Matrix
WT Strategies
Minimize weaknesses
and avoid threats
ST Strategies
Use strengths to avoid
threats
Threats-T
List Threats
WO Strategies
Overcome weaknesses
by taking advantage of
opportunities
SO Strategies
Use strengths to take
advantage of opportunities
Opportunities-O
List Opportunities
Weaknesses-W
List Weaknesses
Strengths-S
List Strengths
Leave Blank
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Do.Dr.Mustafa KILI Ch 6-20
Matching Key Factors to Formulate Alternative StrategiesMatching Key Factors to Formulate Alternative Strategies
Acquire Cellfone, Inc.=
20% annual growth in the
cell phone industry
(opportunity)
+Excess working capacity
(strength)
Key Internal Factor Key External Factor Resultant Strategy
Pursue horizontal integration
by buying competitor's
facilities
=
Exit of two major foreign
competitors from the
industry (opportunity)
+Insufficient capacity
(weakness)
Develop new products for
older adults=
Decreasing numbers of
young adults (threat)+Strong R&D (strength)
Develop a new employee
benefits package=Strong union activity
(threat)
+Poor employee morale
(weakness)
F l ti F kF l ti F k
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Do.Dr.Mustafa KILI Ch 6-21
Formulation FrameworkFormulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:The Matching Stage BCG Matrix
IE Matrix
Grand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-22
SPACE MatrixSPACE Matrix
Developing the SPACE Matrix:
EFE Matrix
IFE Matrix Financial Strength
Competitive Advantage
Environmental Stability
Industry Strength
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Do.Dr.Mustafa KILI Ch 6-23
SPACE MatrixSPACE Matrix
Two Internal Dimensions
Financial Strength [FS] Competitive Advantage [CA]
Two External Dimensions
Environmental Stability [ES]
Industry Strength [IS]
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Do.Dr.Mustafa KILI Ch 6-24
SPACE MatrixSPACE Matrix
Overall Strategic position determined by:
Financial Strength [FS]
Competitive Advantage [CA]
Environmental Stability [ES]
Industry Strength [IS]
SPACE F tSPACE F t
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Do.Dr.Mustafa KILI Ch 6-25
SPACE FactorsSPACE Factors
Environmental Stability (ES)
Technological changes
Rate of inflation
Demand variabilityPrice range of competing products
Barriers to entry
Competitive pressure
Price elasticity of demand
Financial Strength (FS)
Return on investment
Leverage
LiquidityWorking capital
Cash flow
Ease of exit from market
Risk involved in business
External Strategic PositionInternal Strategic Position
SPACE F tSPACE F t
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Do.Dr.Mustafa KILI Ch 6-26
SPACE FactorsSPACE Factors
Industry Strength (IS)
Growth potential
Profit potential
Financial stabilityTechnological know-how
Resource utilization
Capital intensify
Ease of entry into market
Productivity, capacity utilization
Competitive Advantage CA
Market share
Product quality
Product life cycleCustomer loyalty
Competitions capacity utilization
Technological know-how
Control over suppliers & distributors
External Strategic PositionInternal Strategic Position
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Do.Dr.Mustafa KILI Ch 6-27
SPACE MatrixSPACE Matrix
Select variables to define FS, CA, ES,
& IS Assign numerical ranking from +1
(worst) to +6 (best) for FS and IS;Assign numerical ranking from 1 (best)
to 6 (worst) for ES and CA.
Compute average score for FS, CA,ES, & IS
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Do.Dr.Mustafa KILI Ch 6-28
SPACE MatrixSPACE Matrix
Plot the average scores on the Matrix
Add the two scores on the x-axis andplot point on X. Add the scores on the
y-axis and plot Y. Plot the intersectionof the new xy point.
Draw a directional vector from origin
through the new intersection point.
SPACE MatrixSPACE Matrix
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Do.Dr.Mustafa KILI Ch 6-29
SPACE MatrixSPACE Matrix
FS
+6
+1
+5
+4
+3+2
-6
-5
-4
-3
-2
-1
ES
Conservative Aggressive
CA IS-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6
CompetitiveDefensive
SPACE M i
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Do.Dr.Mustafa KILI Ch 6-30
SPACE MatrixSPACE Matrix
Strategic Position and Action Evaluation Matrix
Four quadrant framework
Determines appropriate strategies
Aggressive
Conservative
Defensive Competitive
Formulation FrameworkFormulation Framework
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Do.Dr.Mustafa KILI Ch 6-31
Formulation FrameworkFormulation Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage BCG Matrix
IE Matrix
Grand Strategy Matrix
BCG M t iBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-32
BCG MatrixBCG Matrix
Boston Consulting Group Matrix
Enhances multidivisional firms effortsto formulate strategies
Autonomous divisions (or profit centers)constitute the business portfolio
Firms divisions may compete indifferent industries requiring separatestrategy
BCG MatriBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-33
BCG MatrixBCG Matrix
Boston Consulting Group Matrix
Graphically portrays differences amongdivisions
Focuses on market share position andindustry growth rate
Manage business portfolio throughrelative market share position andindustry growth rate
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-34
BCG MatrixBCG Matrix
Relative market share position defined:
Ratio of a divisions own market share
in a particular industry to the market
share held by the largest rival firm inthat industry.
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-35
BCG MatrixBCG Matrix
Relative Market Share Position
DogsDogsIVIV
Cash CowsCash CowsIIIIII
Question MarksQuestion Marks
II
StarsStars
IIII
??
High
1.0
Medium
.50
Low
0.0
Industry
SalesGrowthRa
te
Medium
High
+20
0
Low-20
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-36
BCG MatrixBCG Matrix
Question Marks Stars
Cash Cows
Dogs
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-37
BCG MatrixBCG Matrix
Question Marks
Low relative market share position yet
compete in high-growth industry.
Cash needs are high Case generation is low
Decision to strengthen (intensive
strategies) or divest
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-38
BCG MatrixBCG Matrix
Stars
High relative market share and highindustry growth rate. Best long-run opportunities for growth and
profitability
Substantial investment to maintain orstrengthen dominant position Integration strategies, intensive strategies, joint
ventures
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-39
BCG MatrixBCG Matrix
Cash Cows
High relative market share position, but competein low-growth industry
Generate cash in excess of their needs
Milked for other purposes
Maintain strong position as long as possible
Product development, concentric diversification If becomes weakretrenchment or divestiture
BCG MatrixBCG Matrix
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Do.Dr.Mustafa KILI Ch 6-40
BCG MatrixBCG Matrix
Dogs
Low relative market share position and
compete in slow or no market growth
Weak internal and external position
Decision to liquidate, divest, retrenchment
Formulation FrameworkFormulation Framework
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Do.Dr.Mustafa KILI Ch 6-41
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage BCG Matrix
IE Matrix
Grand Strategy Matrix
Grand Strategy MatrixGrand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-42
Grand Strategy MatrixGrand Strategy Matrix
Popular tool for formulating alternativestrategies
All organizations (or divisions) can be
positioned in one of four quadrants
Based on two evaluative dimensions:
Competitive position
Market growth
RAPID MARKET GROWTH
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Do.Dr.Mustafa KILI Ch 6-43
Quadrant IV
1. Concentric diversification
2. Horizontal diversification
3. Conglomeratediversification
4. Joint ventures
Quadrant III
1. Retrenchment
2. Concentric diversification
3. Horizontal diversification4. Conglomerate
diversification
5. Liquidation
Quadrant I
1. Market development
2. Market penetration
3. Product development
4. Forward integration5. Backward integration
6. Horizontal integration
7. Concentric diversification
Quadrant II
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration5. Divestiture
6. Liquidation
RAPID MARKET GROWTH
WEAK
COMPETITIVEPOSITION
STRONG
COMPETITIVE
POSITION
SLOW MARKET GROWTH
Grand Strategy MatrixGrand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-44
Grand Strategy MatrixGrand Strategy Matrix
Quadrant I
Excellent strategic position
Concentration on current markets andproducts
Take risks aggressively when necessary
Grand Strategy MatrixGrand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-45
Grand Strategy MatrixGrand Strategy Matrix
Quadrant II
Evaluate present approach seriously
How to change to improve competitiveness Rapid market growth requires intensive
strategy
Grand Strategy MatrixGrand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-46
Grand Strategy MatrixGrand Strategy Matrix
Quadrant III
Compete in slow-growth industries
Weak competitive position
Drastic changes quickly
Cost and asset reduction indicated(retrenchment)
Grand Strategy MatrixGrand Strategy Matrix
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Do.Dr.Mustafa KILI Ch 6-47
Grand Strategy MatrixGrand Strategy Matrix
Quadrant IV
Strong competitive position
Slow-growth industry
Diversification indicated to more promising
growth areas
Formulation FrameworkFormulation Framework
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Do.Dr.Mustafa KILI Ch 6-48
Formulation FrameworkFormulation Framework
Quantitative StrategicPlanning Matrix
(QSPM)
Stage 3:The Decision Stage
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-49
QSPMQ
Quantitative Strategic Planning Matrix
Only technique designed to determine the
relative attractiveness of feasiblealternative actions
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-50
QSQ
Quantitative Strategic Planning Matrix
Tool for objective evaluation of
alternative strategies Based on identified external and
internal crucial success factors
Requires good intuitive judgment
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-51
Q
Quantitative Strategic Planning Matrix
List the firms key external opportunities &threats; list the firms key internal strengths
and weaknesses
Assign weights to each external and internalcritical success factor
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-52
Quantitative Strategic Planning Matrix
Examine the Stage 2 (matching) matrices
and identify alternative strategies that theorganization should consider implementing
Determine the Attractiveness Scores (AS)
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-53
Quantitative Strategic Planning Matrix
Compute the total Attractiveness
Scores
Compute the Sum Total AttractivenessScore
QSPMQSPM Strategic Alternatives
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Do.Dr.Mustafa KILI Ch 6-54
Key Internal Factors
ManagementMarketing
Finance/Accounting
Production/Operations
Research and Development
Computer InformationSystems
Strategy 3Strategy 2Strategy 1WeightKey External Factors
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/Environmental
Technological
Competitive
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-55
Limitations:
Requires intuitive judgments and
educated assumptions
Only as good as the prerequisite inputs
QSPMQSPM
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Do.Dr.Mustafa KILI Ch 6-56
Positives:
Sets of strategies examined simultaneouslyor sequentially
Requires the integration of pertinent external
and internal factors in the decision-makingprocess
Cultural Aspects of StrategyCultural Aspects of Strategy
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Do.Dr.Mustafa KILI Ch 6-57
ChoiceChoice
Culture:
The set of shared values, beliefs,
attitudes, customs, norms,
personalities, heroes, and heroines thatdescribe a firm
Cultural Aspects of StrategyCultural Aspects of Strategy
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Do.Dr.Mustafa KILI Ch 6-58
ChoiceChoice
Culture:
Successful strategies depend on
degree of support from a firms culture
Politics of Strategy ChoicePolitics of Strategy Choice
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Do.Dr.Mustafa KILI Ch 6-59
Politics of Strategy ChoicePolitics of Strategy Choice
Politics in organizations:
Management hierarchy
Career aspirations
Allocation of scarce resources
Politics of Strategy ChoicePolitics of Strategy Choice
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Do.Dr.Mustafa KILI Ch 6-60
Politics of Strategy Choicegy
Political tactics for strategists:
Equifinality
Satisfying
Generalization
Focus on Higher-Order Issues Provide Political Access on Important Issues
Role of A Board of DirectorsRole of A Board of Directors
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Do.Dr.Mustafa KILI Ch 6-61
o e o oa d o ecto s
Duties and Responsibilities:
1. Control and oversight over management
2. Adherence to legal prescriptions
3. Consideration of stakeholder interests4. Advancement of stockholders rights