Chapter 6Strategy Analysis & Choice,Strategic Management: Concepts & Cases 11th Edition Fred David,1,Copyright 2005 Prentice Hall,Chapter Outline,The Nature of Strategy & Choice,A Comprehensive Strategy-Formulation Framework,The Input Stage,2,Copyright 2005 Prentice Hall,Chapter Outline (contd),The Matching Stage,The Decision Stage,Cultural Aspects of Strategy Choice,3,Copyright 2005 Prentice Hall,Chapter Outline (contd),The Politics of Strategy Choice,Governance Issues,4,Copyright 2005 Prentice Hall,To acquire or not to acquire, that is the question Robert J. Terry,Strategy Analysis & Choice,Life is full of lousy options General P.X. Kelley,5,Copyright 2005 Prentice Hall,- Establishing long-term objectives - Generating alternative strategies - Selecting strategies to pursue - Best alternative - achieve mission & objectives,Nature of Strategy Analysis & Choice,Strategy Analysis & Choice,6,Copyright 2005 Prentice Hall,Vision Mission Objectives External audit Internal audit Past successful strategies,Strategy Analysis & Choice,Alternative Strategies Derive From -,7,Copyright 2005 Prentice Hall,Strategy Analysis & Choice,Generating Alternatives -,Participation in generating alternative strategies should be as broad as possible,8,Copyright 2005 Prentice Hall,Comprehensive Strategy-Formulation Framework,Stage 1:The Input Stage,Stage 2:The Matching Stage,Stage 3:The Decision Stage,9,Copyright 2005 Prentice Hall,Strategy-Formulation Analytical Framework,Internal Factor EvaluationMatrix (IFE),External Factor EvaluationMatrix (EFE),Competitive Profile Matrix(CPM),Stage 1:The Input Stage,10,Copyright 2005 Prentice Hall,Stage 1: The Input Stage,Basic input information for the matching & decision stage matrices Requires strategists to quantify subjectivity early in the process Good intuitive judgment always needed,11,Copyright 2005 Prentice Hall,Strategy-Formulation Analytical Framework,SWOT Matrix,SPACE Matrix,BCG Matrix,IE Matrix,Grand Strategy Matrix,Stage 2:The Matching Stage,12,Copyright 2005 Prentice Hall,Stage 2: The Matching Stage,Match between organizations internal resources & skills and the opportunities & risks created by its external factors,13,Copyright 2005 Prentice Hall,Stage 2: The Matching Stage,Strengths Weaknesses Opportunities Threats,SWOT Matrix,14,Copyright 2005 Prentice Hall,SWOT Matrix,Strengths-Opportunities (SO) Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT),Four Types of Strategies,15,Copyright 2005 Prentice Hall,SO Strategies,Use a firmsinternal strengthsto take advantageof external opportunities,SOStrategies,StrengthsWeaknessesOpportunities ThreatsSWOT,16,Copyright 2005 Prentice Hall,WO Strategies,Improving internalweaknesses bytaking advantageof externalopportunities,WOStrategies,StrengthsWeaknessesOpportunities ThreatsSWOT,17,Copyright 2005 Prentice Hall,ST Strategies,Use a firms strengthsto avoid orreduce the impactof externalthreats,STStrategies,StrengthsWeaknessesOpportunities ThreatsSWOT,18,Copyright 2005 Prentice Hall,WT Strategies,Defensive tacticsaimed at reducinginternal weaknesses & avoidingenvironmentalthreats,WTStrategies,StrengthsWeaknessesOpportunities ThreatsSWOT,19,Copyright 2005 Prentice Hall,SWOT Matrix,Developing the SWOT,List firms key internal Strengths List firms key internal Weaknesses List firms key external Opportunities List firms key external Threats,20,Copyright 2005 Prentice Hall,SWOT Matrix,21,Copyright 2005 Prentice Hall,Key Internal Factor,Key External Factor,Resultant Strategy,Matching Key Factors to Formulate Alternative Strategies,22,Limitations with SWOT Matrix,Does not show how to achieve a competitive advantage Provides a static assessment in time May lead the firm to overemphasize a single internal or external factor in formulating strategies,23,Copyright 2005 Prentice Hall,Strategy-Formulation Analytical Framework,SWOT Matrix,SPACE Matrix,BCG Matrix,IE Matrix,Grand Strategy Matrix,Stage 2:The Matching Stage,24,Copyright 2005 Prentice Hall,SPACE Matrix,Strategic Position & Action Evaluation Matrix,Aggressive Conservative Defensive Competitive,25,Copyright 2005 Prentice Hall,SPACE Matrix,Two Internal Dimensions,Financial Strength (FS) Competitive Advantage (CA),26,Copyright 2005 Prentice Hall,SPACE Matrix,Two External Dimensions,Environmental Stability (ES) Industry Strength (IS),27,Copyright 2005 Prentice Hall,SPACE Factors,28,SPACE Factors,29,Steps to Developing a SPACE Matrix,Select a set of variables to define FS, CA, ES, & IS Assign a numerical value: From +1 to +6 to each FS & IS dimension From -1 to -6 to each ES & CA dimension Compute an average score for each FS, CA, ES, & IS,30,Copyright 2005 Prentice Hall,Steps to Developing a SPACE Matrix,Plot the average score on the appropriate axis Add the two scores on the x-axis and plot the point. Add the two scores on the y-axis and plot the point. Plot the intersection of the new xy point Draw a directional vector from the origin through the n