ch8 SM16
ch8 SM16
ch8 SM16
Generation
and Selection
Chapter Eight
Chapter Objectives
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Chapter Objectives
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Chapter Objectives
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A Comprehensive Strategic-
Management Model
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The Process of Generating and
Selecting Strategies
A manageable set of the most attractive
alternative strategies must be developed,
examined, prioritized, and selected.
The advantages, disadvantages, trade-
offs, costs, and benefits of these
strategies should be determined
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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.
All participants in the strategy analysis and
choice activity should have the firm’s external
and internal audit information avalaible.
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The Process of Generating and
Selecting Strategies
Alternative strategies proposed by
participants should be considered and
discussed in a series of meetings
Proposed strategies should be listed in
writing
When all feasible strategies identified by
participants are given and understood,
the strategies should be ranked in order
of attractiveness
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The Strategy-Formulation
Analytical Framework
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A Comprehensive Strategy-
Formulation Framework
Stage 1 - Input Stage
Summarizes the basic input information
needed to formulate strategies
Consists of the EFE Matrix, the IFE Matrix,
and the Competitive Profile Matrix (CPM)
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A Comprehensive Strategy-
Formulation Framework
Stage 2 - Matching Stage
• Focuses on generating feasible alternative
strategis by aligning key external and internal
factors
• Techniques include the Strengths-
Weaknesses-Opportunities-Treats (SWOT)
Matrix, the Strategic Position and Action
Evaluation (SPACE) Matrix, the Boston
Consulting Group (BCG) Matrix, the Internal-
External (IE) Matrix, and the Grand Strategy
Matrix
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A Comprehensive Strategy-
Formulation Framework
Stage 3 - Decision Stage
• Involves the Quantitative Strategic Planning
Matrix (QSPM)
• Reveals the relative attractiveness of alternative
strategies and thus provides objectives basis for
selecting specific strategies
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Matching Key External and Internal Factors
to Formulate Alternative Strategies
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The Matching Stage
The Strengths-Weaknesses-Opportunities-Threats
(SWOT) Matrix helps managers develop four types of
strategies:
SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies
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The Matching Stage
SO Strategies WO Strategies
use a firm’s aim at improving
internal internal
strengths to take weaknesses by
advantage of taking advantage
external of external
opportunities opportunities
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The Matching Stage
ST Strategies WT Strategies
use a firm’s defensive tactics
strengths to avoid directed at
or reduce the reducing internal
impact of external weakness and
threats avoiding external
threats
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The Process of Constructing a
SWOT Matrix
1. List the firm’s key external opportunities
2. List the firm’s key external threats
3. List the firm’s key internal strengths
4. List the firm’s key internal weaknesses
5. Match internal strengths with external
opportunities, and record the resultant SO
Strategies in appropiate cell
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The Process of Constructing a
SWOT Matrix (cont.)
6. Match internal weaknesses with external
opportunities, and record the resultant
WO Strategies
7. Match internal strengths with external
threats, and record the resultant ST
Strategies
8. Match internal weaknesses with external
threates, and record the resultant WT
Strategies
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A SWOT Matrix for a Retail
Computer Store
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A SWOT Matrix for a Retail
Computer Store
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The SPACE Matrix
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The Strategic Position and Action
Evaluation (SPACE) Matrix
Strategic Position and Action
Evaluation (SPACE) Matrix
Four-quadrant framework indicates whether
aggressive, conservative, defensive, or
competitive strategies are most appropriate
for a given organization
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The Strategic Position and Action
Evaluation (SPACE) Matrix
Two internal dimensions (financial
position [FP] and competitive position
[CP])
Two external dimensions (stability
position [SP] and industry position [IP])
Most important determinants of an
organization’s overall strategic position
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Factors That Make Up the
SPACE Matrix Axes
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Steps to Develop a SPACE Matrix
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Steps to Develop a SPACE Matrix
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Steps to Develop a SPACE Matrix
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Steps to Develop a SPACE Matrix
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Example Strategy Profiles
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The Boston Consulting Group
(BCG) Matrix
BCG Matrix
graphically portrays differences among
divisions in terms of relative market on the x-
axis share position and industry growth rate on
the y-axis
allows a multidivisional organization to manage
its portfolio of businesses by examining the
relative market share position and the industry
growth rate for each division relative to other
divisions in the organization.
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The BCG Matrix
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The BCG Matrix
Question marks – Quadrant I
Organization must decide whether to
strengthen them by pursuing an intensive
strategy (market penetration, market
development, or product development) or to
sell them
Stars – Quadrant II
represent the organization’s best long-run
opportunities for growth and profitability
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The Internal-External (IE) Matrix
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The IE Matrix
Four-division IEMatrix
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The IE Matrix
Five-divisions IEMatrix
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The Grand Strategy Matrix
Grand Strategy Matrix
based on two evaluative dimensions:
- competitive position
- market (industry) growth
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The Grand Strategy Matrix
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The Grand Strategy Matrix
Quadrant I
continued concentration on current markets
(market penetration and market development)
and products (product development) is an
appropriate strategy
Quadrant II
unable to compete effectively
need to determine why the firm’s current
approach is ineffective and how the company
can best change to improve its competitiveness
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The Grand Strategy Matrix
Quadrant III
must make some drastic changes quickly to
avoid further decline and possible liquidation
Extensive cost and asset reduction
(retrenchment) should be pursued first
Quadrant IV
have characteristically high cash-flow levels and
limited internal growth needs and often can
pursue related or unrelated diversification
successfully
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The Quantitative Strategic
Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix
(QSPM)
objectively indicates which alternative
strategies are best
uses input from Stage 1 analyses and
matching results from Stage 2 analyses to
decide objectively among alternative
strategies
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The Quantitative Strategic
Planning Matrix (QSPM)
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Steps in a QSPM
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Steps in a QSPM (cont.)
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Positive Features of the QSPM
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Limitations of the QSPM
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A QSPM for a Retail
Computer Store
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A QSPM for a Retail
Computer Store
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Cultural Aspects of Strategy
Analysis and Choice
Culture is the unique way an organization
does business.
it is beneficial to view strategy analysis
and choice from a cultural perspective,
because success often rests on the
degree of support that strategies receive
from a firm’s culture.
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The Politics of Strategy Analysis
and Choice
Political maneuvering consumes valuable
time, subverts organizational objectives,
diverts human energy, and results in the
loss of some valuable employees
Political biases and personal preferences
get unduly embedded in strategy choice
decisions
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The Politics of Strategy Choice
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Tactics to Aid Strategists
Equifinality
Satisfying
Generalization
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Board of Director Duties and
Responsibilities
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Principles of Good Governance
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