Professional Documents
Culture Documents
Strategic Management:
Concepts & Cases
11th Edition
Fred David
Ch 6 -1
Chapter Outline
The Nature of Strategy & Choice
A Comprehensive
Strategy-Formulation Framework
The Input Stage
Ch 6 -2
Ch 6 -3
Governance Issues
Ch 6 -4
Ch 6 -5
Vision
Mission
Objectives
External audit
Internal audit
Past successful strategies
Ch 6 -6
Ch 6 -7
Comprehensive Strategy-Formulation
Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage
Ch 6 -8
Strategy-Formulation Analytical
Framework
Internal Factor Evaluation
Matrix (IFE)
Stage 1:
The Input Stage
Ch 6 -9
Ch 6 -10
Strategy-Formulation Analytical
Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Ch 6 -11
Ch 6 -12
Ch 6 -13
SWOT Matrix
Four Types of Strategies
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats (WT)
Ch 6 -14
SO Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
SO
Strategies
Use a firms
internal strengths
to take advantage
of external
opportunities
Ch 6 -15
WO Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
WO
Strategies
Improving internal
weaknesses by
taking advantage
of external
opportunities
Ch 6 -16
ST Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
ST
Strategies
Use a firms
strengths
to avoid or
reduce the impact
of external
threats
Ch 6 -17
WT Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
WT
Strategies
Defensive tactics
aimed at reducing
internal
weaknesses &
avoiding
environmental
threats
Ch 6 -18
SWOT Matrix
Developing the SWOT
List firms key internal
Strengths
Weaknesses
Opportunities
Threats
Ch 6 -19
SWOT Matrix
Strengths S
Weaknesses W
Leave Blank
List Strengths
List Weaknesses
Opportunities O
SO Strategies
WO Strategies
List Opportunities
Overcoming weaknesses
by taking advantage of
opportunities
Threats T
ST Strategies
WT Strategies
List Threats
Ch 6 -20
Insufficient capacity
(weakness)
Resultant Strategy
Decreasing numbers of
young adults (threat)
Strong union
activity (threat)
Ch 6 -22
Strategy-Formulation Analytical
Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Ch 6 -23
SPACE Matrix
Strategic Position & Action Evaluation Matrix
Aggressive
Conservative
Defensive
Competitive
Ch 6 -24
SPACE Matrix
Two Internal Dimensions
Financial Strength (FS)
Competitive Advantage (CA)
Ch 6 -25
SPACE Matrix
Two External Dimensions
Environmental Stability (ES)
Industry Strength (IS)
Ch 6 -26
SPACE Factors
Internal Strategic Position
Ch 6 -27
SPACE Factors
Internal Strategic Position
Competitive Advantage CA
Market share
Product quality
Product life cycle
Customer loyalty
Competitions capacity utilization
Technological know-how
Control over suppliers & distributors
Growth potential
Profit potential
Financial stability
Technological know-how
Resource utilization
Ease of entry into market
Productivity, capacity utilization
Ch 6 -28
1.
2.
1.
2.
3.
Ch 6 -29
2.
3.
Ch 6 -30
SPACE Matrix
FS
Conservative
Aggressive
+6
+5
+4
+3
+2
+1
CA
IS
-6
-5
-4
-3
-2
-1
+1
-1
+2 +3
+4
+5
+6
-2
-3
-4
Defensive
Copyright 2007 Prentice Hall
-5
-6
Competitive
ES
Ch 6 -31
Strategy-Formulation Analytical
Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Ch 6 -32
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
Ch 6 -33
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
Ch 6 -34
BCG Matrix
High
1.0
High
+20
Medium
.50
Low
0.0
Stars
II
Question Marks
I
Cash Cows
III
Dogs
IV
Medium
Low
-20
Ch 6 -35
BCG Matrix
Question Marks
Low relative market share compete in highgrowth industry
Cash needs are high
Case generation is low
Ch 6 -36
BCG Matrix
Stars
High relative market share and high growth rate
Best long-run opportunities for growth & profitability
Ch 6 -37
BCG Matrix
Cash Cows
High relative market share, competes in lowgrowth industry
Generate cash in excess of their needs
Milked for other purposes
Ch 6 -38
BCG Matrix
Dogs
Low relative market share & compete in slow or
no market growth
Weak internal & external position
Ch 6 -39
Strategy-Formulation Analytical
Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Ch 6 -40
Ch 6 -41
Ch 6 -42
IE Matrix
Ch 6 -43
Ch 6 -44
Strategy-Formulation Analytical
Framework
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Ch 6 -45
Ch 6 -46
WEAK
COMPETITIVE
POSITION
1.
2.
3.
4.
5.
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 III
Quadrant IV
Retrenchment
1.
Concentric diversification
Concentric diversification
2.
Horizontal diversification
Horizontal diversification
3.
Conglomerate
diversification
Conglomerate
diversification
4.
Joint ventures
Liquidation
SLOW MARKET GROWTH
STRONG
COMPETITIVE
POSITION
Ch 6 -47
Ch 6 -48
Ch 6 -49
Ch 6 -50
Ch 6 -51
Strategy-Formulation Analytical
Framework
Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix
(QSPM)
Ch 6 -52
QSPM
Quantitative Strategic Planning Matrix
Ch 6 -53
Strategic Alternatives
QSPM
Key External Factors
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/
Environmental
Technological
Competitive
Weight
Strategy 1
Strategy 2
Strategy 3
Ch 6 -54
2.
3.
Ch 6 -55
Ch 6 -56
QSPM
Limitations
Ch 6 -57
QSPM
Advantages
Ch 6 -58
Ch 6 -59
Ch 6 -60
Ch 6 -61
Governance Issues
Board of Directors Roles & Responsibilities
Control & oversight over management
Adherence to legal prescriptions
Consideration of stakeholder interests
Advancement of stockholder rights
Ch 6 -62
Ch 6 -63
Ch 6 -64