Strategy Analysis & Choice
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The process of generating and selecting strategies
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A manageable set of the most attractive
alternative strategies must be developed.
Advantages, disadvantages, trade offs, costs
and benefits of the strategies must be
determined
Involve as many managers and employees as
necessary in the process as was done with the
developing of the vision and mission
statement
Alternatives suggested must be considered
and evaluated
List them all
Assess them and rank them in order of
attractiveness
The 3process
Input stage – assess if current strategies are working
EFE Matrix
Competitive Profile Matrix
IFE Matrix
Matching stage – reveals attractiveness of strategies
SWOT
SPACE
BCG
IE
Grand Strategy
Decision Stage
Quantitative strategic planning matrix
External Factor Evaluation (EFE) Matrix
Tool for external (macroµ) environment analysis
Steps
1. List key external factors as identified in the external-audit process.
Include a total of 15 to 20 factors, including both opportunities and
threats
List the opportunities first and then the threats
2. Assign to each factor a weight that ranges from 0.0 (not important)
to 1.0 (very important)
Opportunities often receive higher weights than threats, but threats can
receive high weights if they are especially severe or threatening.
3. Assign a rating between 1 and 4 to each key external factor to
indicate how effectively the firm’s current strategies respond to the
factor, where 4 is a more superior response than 1
4. Multiply each factor’s weight by its rating to determine a weighted
score.
5. Sum the weighted scores for each variable to determine the total
weighted score for the organization. 4
External Factor Evaluation (EFE) Matrix
The highest possible total weighted score is 4.0.
A total weighted score of 4.0 indicates that an
organization is responding in an outstanding way
to existing opportunities and threats in its industry.
In other words, the firm’s strategies effectively take
advantage of existing opportunities and minimize
the potential adverse effects of external threats.
A total score of 1.0 indicates that the firm’s
strategies are not capitalizing on opportunities or
avoiding external threats
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Internal Factor Evaluation (IFE) Matrix
Tool for internal (macroµ) environment analysis
Steps
1. List key internal factors as identified in the internal-audit
process.
Include a total of 15 to 20 factors, including both strengths and
weaknesses
List the strengths first and then the weaknesses
2. Assign to each factor a weight that ranges from 0.0 (not
important) to 1.0 (very important)
3. Assign a rating between 1 and 4 to each key internal factor
to, where 4 is a more superior response than 1
4. Multiply each factor’s weight by its rating to determine a
weighted score.
5. Sum the weighted scores for each variable to determine the
total weighted score for the organization.
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Internal Factor Evaluation (IFE) Matrix
The highest possible total weighted score is 4.0.
A total weighted score of 4.0 a strong internal
position.
A total score of 1.0 indicates that the firm’s
internal position is weak; there are more
weaknesses than strengths.
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The 8Competitive Profile Matrix (CPM)
Identify a firm’s major competitors
Assess its strengths and weaknesses in relation to each sample firm’s
strategic position.
The weights and total weighted scores in both a CPM and an EFE
have the same meaning.
Critical success factors in a CPM include both internal and external
issues;
therefore, the ratings refer to strengths and weaknesses, where 4 = major
strength, 3 = minor strength, 2= minor weakness, and 1 = major
weakness.
The critical success factors in a CPM are not grouped into
opportunities and threats as they are in an EFE.
In a CPM, the ratings and total weighted scores for rival firms can be
compared to the sample firm.
This comparative analysis provides important internal strategic
information.
Just because one firm receives a 3.2 rating and another receives a 2.80
rating in a Competitive Profile Matrix, it does not follow that the first firm is 20
percent better than the second.
The aim is not to arrive at a single number, but to evaluate information in a
meaningful way that aids in decision making. i.e which company has the
best product quality or management experience or inventory system.
SWOT
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Strategies to be developed:
SO Strategies
Use internal strengths to take advantage of
external opportunities
WO Strategies
Improve internal weaknesses by taking advantage
of external opportunities
ST Strategies
Use strengths to avoid or reduce impact of threats
WT Strategies
Defensive tactics directed at reducing weaknesses
and avoiding external threats
The10BCG Growth-Share Matrix
BCG (Boston Consulting Group) Matrix
graphically portrays differences among
divisions in terms of relative market share
position and industry growth rate.
It is used to identify strategies for an
organisation’s business units
The11BCG Growth-Share Matrix
IE Matrix
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Similar to the BCG Matrix;
It is used to identify strategies for an organisation’s
business units
Business units are assessed using EFE and
IFE matrix, the plotted on the IE matrix,
using the total weighted scores
IE Matrix
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Space
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Matrix
Allows strategists to understand the
organisation’s current strategic position and
identify potential strategic direction.
Identify internal and external factors that
allows strategists to understand the
organizational position and where it is
headed
Plotted across X and Y axtis
Both have one internal and one external
factor
X axis has industry attractiveness (IA) and
competitive advantage (CA)
Y axis has financial strength (FS) and
environmental stability (ES)
Space
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Matrix
Grand
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strategy matrix
Assess overall strategic position
of an organisation based on
competitive position and market
growth potential
BCG matrix assesses different
business units, while grand
strategy assesses the overall
organisation
Grand
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strategy matrix
Culture & Politics of Strategic Choice
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Strategies that require fewer cultural
changes are more attractive because
extensive changes can take
considerable time and effort
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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