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Strategic Choice
Strategic Choice
-- Establishing long-term objectives -- Generating alternative strategies -- Selecting strategies to pursue -- Best alternative - achieve mission & objectives
Note: EFE and CPM form external and IFE from internal (assessment)
Basic input information for the matching & decision stage matrices
Requires strategists to quantify subjectivity early in the process Good intuitive judgment always needed
SWOT Matrix
BCG Matrix
Match between organizations internal resources & skills and the opportunities & risks created by its external factors E.g. internal: strong R and D function External changing demographics (population getting older) Strategy: Develop new products for older adults (related to long term objectives financial or strategic)
SWOT Matrix
Strengths S
Leave Blank
Opportunities O
List Opportunities
Weaknesses W
List Weaknesses
List Strengths
SO Strategies
Use strengths to take advantage of opportunities
WO Strategies
Overcoming weaknesses by taking advantage of opportunities
Threats T
List Threats
ST Strategies
Use strengths to avoid threats
WT Strategies
Minimize weaknesses and avoid threats
Matching Key Factors to Formulate Alternative Strategies Key Internal Factor Key External Factor
20% annual growth in the cell phone industry (opportunity)
Resultant Strategy
12
Strengths:
Weaknesses:
1. 2. 3. 4.
5. 6. 7.
R and D almost complete Basis for strong management team Key first major customer acquired Initial product can evolve into range of offerings Located near a major centre of excellence Very focused management/staff Well-rounded and managed business
Threats:
1.
2. 3. 4. 5. 6. 7.
Over dependent on borrowings Insufficient cash resources Board of Directors is too narrow Lack of awareness amongst prospective customers Need to relocate to larger premises Absence of strong sales/marketing expertise Overdependence on few key staff Emerging new technologies may move market in new directions
Opportunities:
1. 2. 3. 4. 5. 6.
Major player may enter targeted market segment New technology may make products obsolescent Economic slowdown could reduce demand Euro/Yen may move against $ Market may become price sensitive Market segment's growth could attract major competition
1. 2. 3. 4.
Market segment is poised for rapid growth Export markets offer great potential Distribution channels seeking new products Scope to diversify into related market segments
BCG Matrix
Boston Consulting Group Matrix
Enhances multi-divisional firm in formulating strategies Autonomous divisions = business portfolio Divisions may compete in different industries Focus on market-share position & industry growth rate
BCG Matrix
Relative Market Share Position
Ratio of a divisions own market share in an industry to the market share held by the largest rival firm in that industry
BCG Matrix
Relative Market Share Position
High 1.0 High +20 Medium .50 Low 0.0
Stars II
Medium
Question Marks I
Dogs IV
16
BCG Matrix
Question Marks
Low relative market share compete in highgrowth industry
Cash needs are high
BCG Matrix
Stars
High relative market share and high growth rate
Best long-run opportunities for growth & profitability
BCG Matrix
Cash Cows
High relative market share, competes in lowgrowth industry
Generate cash in excess of their needs
If weakensretrenchment or divestiture
BCG Matrix
Dogs
Low relative market share & compete in slow or no market growth
Weak internal & external position
Competitive position
Market growth
3.
4. 5. 6.
Quadrant II Market development Market penetration Product development Horizontal integration Divestiture Liquidation
1. 2.
3.
4. 5. 6. 7.
Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integration Concentric diversification Quadrant IV Concentric diversification Horizontal diversification Conglomerate diversification Joint ventures GROWTH
Quadrant III Retrenchment 1. Concentric diversification 2. Horizontal diversification 3. Conglomerate diversification 4. Liquidation SLOW MARKET
22
Excellent strategic position Concentration on current markets/products Take risks aggressively when necessary Which type of strategy would you suggest?
Evaluate present approach How to improve competitiveness Rapid market growth requires intensive strategy
Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost & asset reduction (retrenchment)
Strong competitive position Slow-growth industry Diversification to more promising growth areas
Strategic Alternatives
Strategy 1 Strategy 2 Strategy 3
29
QSPM
Limitations
Requires intuitive judgments & educated assumptions
Advantages
Sets of strategies considered simultaneously or sequentially Integration of pertinent external & internal factors in the decision making process
Example of a QSPM for Dell
Assignment
Discuss 3 techniques that can be used by organisations to choose alternative paths to achieve their long term objectives. Discuss how to choose the best of a set of alternative strategies.