report on strategic management, august 13, 2011 by flordeliza navidad
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Nature of Strategy Analysisand
Comprehensive StrategicFormulation
Flordeliza C. Navidad
Reporter
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Strategy
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Strategic analysis
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The Process of Strategic
Analysis
Tools
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1. PEST analysis -a technique for understanding the “ environment’ inwhich a business operates.
2. ScenarioPlanning
- A technique that builds various plausible views of possible futures for a business.
3. Five ForcesAnalysis
- a technique for identifying the forces which affectthe level of competition in an industry.
4. MarketSegmentation
- a technique which seeks to identify the similaritiesand differences between groups of customers or
users.5. Directional Policy
Matrix_ a technique which summarizes the competitive
strength of a business operations in specific markets.
6. Critical Success
Factor analysis
- A technique to identify those areas in which a
business must out perform the competition in order tosucceed.
7. SWOT Analysis - A useful summary technique for summarizing thekey issues arising from an assessment of abusiness” “internal” position and ‘ external environ’lposition.
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Comprehensive Strategy-FormulationFramework
Stage 1:The Input Stage
Stage 2:
The Matching Stage
Stage 3:
The Decision Stage
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Strategy-Formulation AnalyticalFramework
Competitive Profile Matrix(CPM)
Internal Factor EvaluationMatrix (IFE)
Stage 1:The Input Stage
External Factor EvaluationMatrix (EFE)
Note: EFE and CPM form external and IFE from internal (assessment)
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Stage 1: The Input Stage
Basic input information for the matching &decision stage matrices
Requires strategists to quantify subjectivityearly in the process
Good intuitive judgment always needed
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Strategy-Formulation AnalyticalFramework SWOT Matrix
BCG Matrix
Grand Strategy Matrix
Stage 2:The Matching Stage
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Stage 2: The Matching Stage
Match between organization’s internal resources &skills and the opportunities & risks created by itsexternal factors
E.g. internal: strong R and D function
External changing demographics (populationgetting older)
Strategy: Develop new products for older adults(related to long term objectives financial or
strategic )
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Strengths: Weaknesses:
1. R and D almost complete2. Basis for strong management team3. Key first major customer acquired
4. Initial product can evolve into rangeof offerings5. Located near a major centre of
excellence6. Very focused management/staff 7. Well-rounded and managed
business
1. Over dependent on borrowings -Insufficient cash resources
2. Board of Directors is too narrow
3. Lack of awareness amongstprospective customers4. Need to relocate to larger premises5. Absence of strong sales/marketing
expertise6. Overdependence on few key staff 7. Emerging new technologies may
move market in new directions
Threats: Opportunities:
1. Major player may enter targetedmarket segment
2. New technology may makeproducts obsolescent
3. Economic slowdown could reducedemand
4. Euro/Yen may move against $5. Market may become price sensitive6. Market segment's growth could
attract major competition
1. Market segment is poised for rapidgrowth
2. Export markets offer great potential3. Distribution channels seeking new
products4. Scope to diversify into related
market segments
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Develop a newemployee benefitspackage
=Strong unionactivity (threat)
+
Poor employeemorale(weakness)
Develop newproducts for older
adults
=
Decreasingnumbers of youngadults (threat)
+Strong R&D(strength)
Pursue horizontal
integration by buyingcompetitor's facilities
=
Exit of two major foreign competitors
from the industry(opportunity)
+
Insufficient
capacity(weakness)
AcquireCellfone, Inc.
=
20% annual
growth in the cellphone industry(opportunity)
+Excess workingcapacity (strength)
Key Internal Factor Key External Factor Resultant Strategy
Matching Key Factors to Formulate Alternative Strategies
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Key Strategies
1. Accelerate product launches by strengthening R and Dteam
2. Extend links with key technology centres
3. Raise additional venture capital
4. Expand senior management team in sales/marketing5. Recruit non-executive directors
6. Strengthen human resources function and introduceshare options for staff
7. Appoint advisers for intellectual property and finance
8. Seek new market segments/applications for products
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Limitations with SWOT Matrix
• Does not show how to achieve acompetitive advantage
• Provides a static assessment in time
• May lead the firm to over emphasize asingle internal or external factor informulating strategies
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BCG Matrix
Boston Consulting Group Matrix
Enhances multi-divisional firm informulating strategies
Autonomous divisions = business portfolio
Divisions may compete in differentindustries
Focus on market-share position & industrygrowth rate
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BCG Matrix
Relative Market Share Position
Ratio of a division’s own marketshare in an industry to the marketshare held by the largest rival firmin that industry
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17
BCG Matrix
DogsIV
Cash CowsIII
Question Marks
I
Stars
II
Relative Market Share PositionHigh
1.0
Medium
.50
Low
0.0
Industry
Sa
High+20
Low-20
Medium
0
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BCG Matrix
Question Marks
Low relative market share – compete inhigh-growth industry
Cash needs are high
Case generation is low
Decision to strengthen (intensive strategies)or divest
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BCG Matrix
Stars
High relative market share and high growthrate
Best long-run opportunities for growth &profitability
Substantial investment to maintain or strengthen dominant position
Integration strategies, intensive strategies, jointventures
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BCG Matrix
Cash Cows
High relative market share, competes in low-
growth industry
Generate cash in excess of their needs
Milked for other purposes
Maintain strong position as long as possible
Product development, concentric diversification
If weakens—retrenchment or divestiture
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BCG Matrix
Dogs
Low relative market share & compete in
slow or no market growthWeak internal & external position
Liquidation, divestiture, retrenchment
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Grand Strategy Matrix
Tool for formulating alternative strategies
Based on two dimensions
Competitive position
Market growth
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23
Quadrant IV
1. Concentric diversification
2. Horizontal diversification
3. Conglomeratediversification
4. Joint ventures
Quadrant III
1. Retrenchment
2. Concentric diversification
3. Horizontal diversification
4. Conglomerate
diversification
5. Liquidation
Quadrant I
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Concentric diversification
Quadrant II
1. Market development
2. Market penetration
3. Product development
4. Horizontal integration
5. Divestiture
6. Liquidation
RAPID MARKET GROWTH
SLOW MARKET GROWTH
WEAKCOMPETITIVE
POSITION
STRONGCOMPETITIVE
POSITION
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Grand Strategy Matrix
Excellent strategic position
Concentration on current markets/products
Take risks aggressively when necessary
Which type of strategy would you suggest?
Quadrant I
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Grand Strategy Matrix
Evaluate present approachHow to improve competitiveness
Rapid market growth requires
intensive strategy
Quadrant II
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Grand Strategy Matrix
Compete in slow-growthindustries
Weak competitive position
Drastic changes quickly
Cost & asset reduction
(retrenchment)
Quadrant III
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Grand Strategy Matrix
Strong competitive positionSlow-growth industry
Diversification to morepromising growth areas
Quadrant IV
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Strategy-Formulation AnalyticalFramework
Stage 3:
The Decision Stage
Quantitative Strategic
Planning Matrix(QSPM)
Technique designed to determine therelative attractiveness of feasible alternativeactions
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Steps to Develop a QSPM
1. Make a list of the firm’s key externalopportunities/threats and internalstrengths/weaknesses in the left column
2. Assign weights to each key external and
internal factor 3. Examine the Stage 2 (matching) matrices, and
identify alternative strategies that theorganization should consider implementing
4. Determine the Attractiveness Scores (A.S)5. Compare the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness Score
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QSPM
Requires intuitive judgments & educatedassumptions
Only as good as the prerequisite inputs
Limitations
Advantages
Sets of strategies considered
simultaneously or sequentially
Integration of pertinent external & internalfactors in the decision making process
Example of a QSPM for Dell
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“ Whether it’s broke or not, fix it –make it better, but the whole
company if necessary.’
Bell Saporito
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Thank You