strama - chap 6

Strategy analysis and choice

seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives.

The Process of Generating and Selecting Strategies

Strategists never consider all feasible alternatives that could benefit the firm because there are an infinite number of possible actions and an infinite number of ways to implement those actions

The Process of Generating and Selecting Strategies

Identifying and evaluating alternative strategies should involve many of the managers and employees who earlier assembled the organizational vision and mission statements, performed the external audit, and conducted the internal audit.

Input Stage

Stage 1 summarizes the basic input information needed to formulate strategies.

Matching Stage

focuses upon generating feasible alternative strategies by aligning key external and internal factors

Decision Stage

involves a single technique, the Quantitative Strategic Planning Matrix (QSPM) which evaluates and prioritizes alternative strategies based on their attractiveness and the organization's strengths.

Autonomous divisions

in an organization commonly use strategy-formulation techniques to develop strategies and objectives.

Divisional Analyses

provide a basis for identifying, evaluating, and selecting among alternative corporate-level strategies.

Lenz

emphasized that the shift from a words-oriented to a numbers-oriented planning process can give rise to a false sense of certainty; it can reduce dialogue, discussion, and argument as a means for exploring understandings, testing assumptions, and fostering organizational learning.

Input Stage

The input tools require strategists to quantify subjectivity during early stages of the strategy-formulation process.

Input Stage

Making small decisions in the input matrices regarding the relative importance of external and internal factors allows strategists to more effectively generate and evaluate alternative strategies. Good intuitive judgment is always needed in determining appropriate weights and ratings.

Matching Stage

Strategy is sometimes defined as the match an organization makes between its internal resources and skills and the opportunities and risks created by its external factors.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix

it is an important matching tool that helps managers develop four types of strategies: SO (strengths-opportunities) Strategies, WO (weaknesses-opportunities) Strategies, ST (strengths-threats) Strategies, and WT (weaknesses-threats) Strategies.

strengths-opportunities strategies

strategies that uses a firm’s internal strengths to take advantage of external opportunities. All managers would like their organizations to be in a position in which internal strengths can be used to take advantage of external trends and events

weaknesses-opportunities strategies

aim at improving internal weaknesses by taking advantage of external opportunities.

strengths-threats strategies

use a firm’s strengths to avoid or reduce the impact of external threats. This does not mean that a strong organization should always meet threats in the external environment head-on

weaknesses-threats strategies

these are defensive tactics directed at reducing internal weakness and avoiding external threats. An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position.

The Strategic Position and Action Evaluation (SPACE) Matrix

should be both tailored to the particular organization being studied and based on factual information as much as possible.

Question Marks

Divisions in Quadrant I have a low relative market share position, yet they compete in a high-growth industry. G

Stars

It represent the organization’s best long-run opportunities for growth and profitability. Divisions with a high relative market share and a high industry growth rate should receive substantial investment to maintain or strengthen their dominant positions.

Cas Cows

Divisions positioned in Quadrant III have a high relative market share position but compete in a low-growth industry

Dogs

Quadrant IV divisions of the organization have a low relative market share position and compete in a slow- or no-market-growth industry

The Boston Consulting Group Matrix

graphically portrays differences among divisions in terms of relative market share position and industry growth rate

Aggressive Quadrant

the area of the company that has a strong financial position and industry position. In this area, the company can take advantage of eternal opportunities, overcome the weakness in void straits.

Conservative Quadrant

It is the area where the company has weaknesses and competitive position strong in financial position. It should focus on maintaining its position and making cautious moves to adapt to the external environment.

Defensive Quadrant

It is the company having competitive position and law stability position. The focus should be on protecting the business, cutting losses, and reducing risks.

Competitive Quadrant

It is the company's industry position in a stability position. The company is doing well internally but faces moderate external challenges. It should focus on leveraging its strengths to compete effectively in the market.

Two Dimension of SPACE Matrix

Internal Dimension

External Dimension

Financial Position

It reflects a company’s ability to manage its resources, generate revenue, and handle expenses. It assesses whether the company has strong financial health, such as high profits, low debt, or sufficient cash flow, enabling it to invest and grow.

Competitive Strength

It means how well the company competes in the market compared to others. For example, its market share, brand strength, customer loyalty, and the quality of its products or services.

Stability Position

It refers to how safe or risky the market is, or how stable or unstable the outside environment is. These factors deal with external conditions that the company cannot directly influence, such as economic conditions, market growth, and competition.

The Internal and External Matrix

It used to evaluate an organization’s Internal Strength and Weaknesses, as well as External Opportunities and Threats. It helps organization’s prioritize and make informed decisions about these strategies.

The Grand Strategy Matrix

It is based on two evaluative dimensions: competitive position and market (industry) growth.

Two evaluative dimensions

competitive position and market (industry) growth.

Quadrant 1

1. Market development

2. Market penetration

3. Product development

4. Forward integration

5. Backward integration

6. Horizontal integration

7. Related diversification

Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture

6. Liquidation

Quadrant III

1. Retrenchment

2. Related diversification

3. Unrelated diversification

4. Divestiture

5. Liquidation

Quadrant IV

1. Related diversification

2. Unrelated diversification

3. Joint ventures

Quadrant I

firms can afford to take advantage of external opportunities in several areas. They can take risks aggressively when necessary.

Quadrant II

need to evaluate their present approach to the marketplace seriously. Although their industry is growing, they are unable to compete effectively, and they need to determine why the firm’s current approach is ineffective and how the company can best change to improve its competitiveness.

Quadrant III

organizations compete in slow-growth industries and have weak competitive positions. These firms must make some drastic changes quickly to avoid further decline and possible liquidation.

Quadrant IV

businesses have a strong competitive position but are in a slow-growth industry. These firms have the strength to launch diversified programs into more promising growth areas

Decision Stage

Analysis and intuition provide a basis for making strategy-formulation decisions. The matching techniques just discussed reveal feasible alternative strategies.

The Quantitative Strategic Planning Matrix

there is only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions. This technique objectively indicates which alternative strategies are best.

QSPM

it determines the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved.

six steps required to develop a QSPM

Step 1 Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM.

Step 2 Assign weights to each key external and internal factor

Step 3 Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing

Step 4 Determine the Attractiveness Scores (AS)

Step 5 Compute the Total Attractiveness Scores

Step 6 Compute the Sum Total Attractiveness Score.

A positive feature of the QSPM

is that sets of strategies can be examined sequentially or simultaneously

A positive feature of the QSPM

it requires strategists to integrate pertinent external and internal factors into the decision process.

Culture

it includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm. it is the unique way an organization does business.

The Politics of Strategy Choice

Unless managed, political maneuvering consumes valuable time, subverts organizational objectives, diverts human energy, and results in the loss of some valuable employees.

Equifinality

It is often possible to achieve similar results using different means or paths. Strategists should recognize that achieving a successful outcome is more important than imposing the method of achieving it

Satisfying

Achieving satisfactory results with an acceptable strategy is far better than failing to achieve optimal results with an unpopular strategy.

Generalization

Shifting focus from specific issues to more general ones may increase strategists’ options for gaining organizational commitment.

Focus on Higher-Order Issues

By raising an issue to a higher level, many short-term interests can be postponed in favor of long-term interests.

Provide Political Access on Important Issues

Strategy and policy decisions with significant negative consequences for middle managers will motivate intervention behavior from them.

Governance Issues

A “director,” according to Webster’s Dictionary, is “one of a group of persons entrusted with the overall direction of a corporate enterprise.”

Shareholders

they are also upset at boards for allowing CEOs to receive huge end-of-year bonuses when the firm’s stock price drops drastically during the year.