Strategy analysis andchoice

Strategy Analysis &

Choice

RAMIL P. POLINTANHead, Mathematics Department, TNHS

Strategic analysis and choice largely involve making subjective decisions based on objective information.

This report introduces important concepts that can help strategists generate feasible alternatives, evaluate those alternatives, and choose a specific course of action. Behavioral aspects of strategy formulation are described, including politics, culture, ethics, and social responsibility considerations.

Strategy Analysis & Choice

-- Establishing long-term objectives-- Generating alternative strategies-- Selecting strategies to pursue-- Best alternative - achieve mission &

objectives

Nature of Strategy Analysis & Choice

Vision Mission Objectives

External audit Internal audit

Past successful strategies

Strategy Analysis & ChoiceAlternative Strategies Derive From --

Comprehensive Strategy-Formulation Framework

Stage 1:The Input Stage

Stage 2:The Matching Stage

Stage 3:The Decision Stage

Strategy-Formulation Analytical Framework

Internal Factor EvaluationMatrix (IFE)

External Factor EvaluationMatrix (EFE)

Stage 1:The Input Stage

Competitive Profile Matrix(CPM)

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

Strategy-Formulation Analytical Framework SWOT Matrix

BCG Matrix

Grand Strategy Matrix

Stage 2:The Matching Stage

Stage 2: The Matching StageMatch between organization’s 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)

Stage 2: The Matching Stage: SWOT MatrixFour Types of Strategies

Strengths-Opportunities (SO):Use a firm’s internal strengths to take advantage of external opportunities

Weaknesses-Opportunities (WO):Improving internal weaknesses by taking advantageof external opportunities

Strengths-Threats (ST):Use a firm’s strengths to avoid or reduce the impact of external threats.

Weaknesses-Threats (WT):Defensive tactics aimed at reducing internal weaknesses and avoiding external threats

SWOT MatrixStrengths – S

List Strengths

Weaknesses – W

List Weaknesses

Opportunities – O

List Opportunities

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

13

Develop a new employee benefits

package=

Strong union activity (threat)

+Poor employee morale (weakness)

Develop new products for older

adults=

Decreasing numbers of young adults (threat)

+Strong R&D (strength)

Pursue horizontal integration by

buying competitor's facilities

=

Exit of two major foreign competitors from the industry (opportunity)

+Insufficient capacity (weakness)

Acquire Cellfone, Inc.

=

20% annual growth in the cell phone industry (opportunity)

+Excess working capacity (strength)

Key Internal Factor

Key External Factor

Resultant Strategy

Matching Key Factors to Formulate Alternative Strategies

Which types of strategies, e.g. intensive diversification…, are referred to above

Strengths: Weaknesses:

1. R and D almost complete 2. Basis for strong management team 3. Key first major customer acquired 4. Initial product can evolve into range of

offerings 5. Located near a major centre of

excellence 6. 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 amongst prospective

customers 4. Need to relocate to larger premises 5. Absence of strong sales/marketing

expertise 6. Overdependence on few key staff 7. Emerging new technologies may move

market in new directions

Threats: Opportunities:

1. Major player may enter targeted market segment

2. New technology may make products obsolescent

3. Economic slowdown could reduce demand

4. Euro/Yen may move against $ 5. Market may become price sensitive 6. Market segment's growth could attract

major competition

1. Market segment is poised for rapid growth

2. Export markets offer great potential 3. Distribution channels seeking new

products 4. Scope to diversify into related market

segments

1. Accelerate product launches by strengthening R

and D team 2. Extend links with key technology centres 3. Raise additional venture capital 4. Expand senior management team in

sales/marketing 5. Recruit non-executive directors 6. Strengthen human resources function and

introduce share options for staff 7. Appoint advisers for intellectual property and

finance 8. Seek new market segments/applications for

products

Key Strategies


List Strengths

Weaknesses – W

List Weaknesses

Opportunities – O

List Opportunities

SO Strategies

Match and determine strategy

WO Strategies


Threats – T

List Threats

ST Strategies


WT Strategies


Inset key strategies into correct box element of the 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

Limitations with SWOT Matrix

BCG Matrix

Boston Consulting Group MatrixEnhances 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 division’s own market share in an industry to the market share held by the largest rival firm in that industry

20

BCG Matrix

DogsIV

Cash CowsIII

Question MarksI

StarsII

Relative Market Share PositionHigh1.0

Medium.50

Low0.0

Ind

ustr

y S

ale

s G

row

th R

ate

High+20

Low-20

Medium0

BCG Matrix

Question Marks

Low relative market share – compete in high-growth industry

Cash needs are high

Case generation is low

Decision to strengthen (intensive strategies) or divest

BCG Matrix

Stars

High relative market share and high growth rate

Best long-run opportunities for growth & profitability

Substantial investment to maintain or strengthen dominant position

Integration strategies, intensive strategies, joint ventures

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

BCG Matrix

Dogs

Low relative market share & compete in slow or no market growth

Weak internal & external position

Liquidation, divestiture, retrenchment


Tool for formulating alternative strategies

Based on two dimensions

Competitive position

Market growth

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Quadrant IV1. Concentric

diversification2. Horizontal

diversification3. Conglomerate

diversification4. Joint ventures

Quadrant III1. Retrenchment2. Concentric

diversification3. Horizontal

diversification4. Conglomerate

diversification5. Liquidation

Quadrant I1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Concentric

diversification

Quadrant II1. Market development2. Market penetration3. Product development4. Horizontal integration5. Divestiture6. Liquidation

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAK COMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION


Excellent strategic position

Concentration on current markets/products

Take risks aggressively when necessary

Which type of strategy would you suggest?

Quadrant I


Evaluate present approach

How to improve competitiveness

Rapid market growth requires intensive strategy

Quadrant II


Compete in slow-growth industries

Weak competitive position

Drastic changes quickly

Cost & asset reduction (retrenchment)

Quadrant III


Strong competitive position

Slow-growth industry

Diversification to more promising growth areas

Quadrant IV

Strategy-Formulation Analytical Framework

Stage 3:The Decision Stage

Quantitative StrategicPlanning Matrix

(QSPM)

Technique designed to determine the relative attractiveness of feasible alternative actions

1. Make a list of the firm’s key external

opportunities/threats and internal strengths/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 the organization should consider implementing

4. Determine the Attractiveness Scores (A.S)5. Compute the Total Attractiveness Scores 6. Compute the Sum Total Attractiveness Score

Steps to Develop a QSPM

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QSPM : information from IFE and EFE

Key Internal FactorsManagementMarketingFinance/AccountingProduction/OperationsResearch and DevelopmentComputer Information SystemsSum total A.S.

Strategy 3Strategy 2

Strategy 1

WeightKey External Factors EconomyPolitical/Legal/GovernmentalSocial/Cultural/Demographic/EnvironmentalTechnologicalCompetitive

Strategic Alternatives

AS 1 to 4 and blank if factor does not effect strategy: TAS = Weight x AS

QSPM

Requires intuitive judgments & educated assumptions

Only as good as the prerequisite inputs

Limitations

Advantages

Sets of strategies considered simultaneously or sequentially

Integration of pertinent external & internal factors in the decision making process

A. Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm.

B. All Organizations Have a Culture

1.It is beneficial to view strategic management from a cultural perspective because success often rests on the degree of support that strategies receive from a firm’s culture.

2.If a firm’s strategies are supported by cultural products such as values, beliefs, rites, rituals, ceremonies, stories, symbols, language, heroes, and heroines then managers often can implement changes swiftly and easily.

3.Strategies that require fewer cultural changes may be more attractive because extensive changes can take considerable time and effort.

CULTURAL ASPECTS OF STRATEGIC CHOICE

A. In the absence of objective analyses, strategy

decisions too often are based on the politics of the moment. With development of improved strategy-formulation tools, political factors become less important in making strategic decisions.

B. Tactics to aid in strategy:1. Equifinality 2. Satisfying3. Generalization4. Focus on Higher-Order Issues5. Provide Political Access on Important Issues

THE POLITICS OF STRATEGY CHOICE

A director is one of a group of persons entrusted with the overall direction of a corporate enterprise. A board of directors is a group of persons elected by the ownership of a corporation to have oversight and guidance over management and to look out for the shareholders’ interests.

THE ROLE OF A BOARD OF DIRECTORS

“Be an Effective Analyst using Strategies and

Choices”

Thank You….

SWOT ANALYSIS

SWOT Analysis is an effective way of identifying the strengths and weaknesses of the impact of legislation, policy, protocols, parent-partnership arrangements, and so on, and of examining the opportunities and threats your organisation/school may face as a result of implementing such policies, protocols, and arrangements.

SWOT Analysis

Attributes of the school that are

likely to have a positive effect on achieving the school’s objectives.

Strength

Weaknesses

Threats

Opportunities

Attributes of the school that are likely to have a positive effect on achieving the school’s objectives.

: Conditions external to the school that are likely to have a positive effect on achieving the school’s objectives.

Conditions external to the school that are likely to have a negative effect on achieving the school’s objectives.

In sum, the purpose of a SWOT

analysis is to develop strategies that capitalise on the school’s strengths, minimise the effects of any weaknesses, exploit available opportunities and defend against threats. Implementing these strategies should lead to achieving the school’s objectives.

Purpose

To carry out a SWOT Analysis, write

down answers to the following questions. Where appropriate, use similar questions and, whenever possible, consider your answers from your own point of view and from the point of view of the people you deal with.

How to use the tool ?

1. What advantages does this

policy/protocol/arrangement/other present?

2. What do we currently do well? 3. What relevant resources do we

access to? 4. What do other people see as your

strengths?

Strength

1. What can we improve? 2. What do we not do well? Consider what

you are criticised for or what you receive complaints about.

3. Where are we vulnerable?

Weaknesses

Remember to consider this from an internal and external perspective. Do other people perceive weaknesses that you do not see? Are other schools doing any better than you in this area? It is best to be realistic now, and face any unpleasant truths as soon as possible.

1. What opportunities do we know about but

have not addressed?2. Are there emerging trends on which we can

capitalise?

Opportunities

Useful opportunities can come from such things as:1. changes in technology and educational markets on

both a broad and narrow scale 2. changes in government policy related to your field 3. changes in social patterns, population profiles,

lifestyle changes, and so on 4. local events

A useful approach to considering opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Alternatively, examine your weaknesses and ask yourself whether you could open up opportunities by eliminating them.

Opportunities

1. What obstacles do we face? 2. Are economic conditions affecting our financial

viability? Ask yourself, what would be the financial, social, educational impact of not implementing changes?

3. Are the required specifications for our services changing?

4. Is changing technology threatening our position? 5. Could any of our weaknesses seriously threaten

our business, children’s educational attainment, and so on? In other words, are weaknesses likely to make us critically vulnerable?

Threats

Carrying out this analysis will often be illuminating – both in terms of pointing out what needs to be done, and in putting what we might see as a problem into perspective. You can then use a simple matrix such as the one below to record your analysis.

STRENGTH WEAKNESSES

OPPORTUNITIES THREATS

We will use an example of a teacher working within a local primary school who is keen to review and

improve relationships with parents.

TASK

1. Consider what practices you currently have in place to encourage parent-partnerships within your school.

2. Use this to conduct a SWOT analysis, identifying your current strengths and realistically appraising your current weaknesses.

3. Then suggest up to three opportunities for improving your current systems and, for each, list a possible threat that would need to be managed if you were to pursue each opportunity.

The Special Educational Needs Co-ordinator (SENCO) for a local Primary School identified

the following school objective:

To improve parent-partnership by encouraging parents to visit the

school and become active members of the learning

community, thereby fostering parental confidence.

Currently, the school’s practice is to hold

an Open House event once each year, using this as a means to encourage

parents to visit the school and engage with school staff. The SENCO formulated

the following SWOT Analysis.

STRENGTHS1. Highly-skilled, committed and

concerned teachers. 2. History of successful Open

House events.3. School has a strong ethos of

openness, sharing and commitment to increasing parental confidence

WEAKNESSES1. Teachers not available to

meet parents often enough.2. Insufficient school staff to

plan more frequent Open House events.

3. Staff not always clear of their responsibilities to parent partnership under current legislation.

OPPORTUNITIES1. Active volunteer group willing

to plan and organise Open House events.

2. Pupils active in the school’s Pupil Participation Project can be asked for their opinions and suggestions.

3. Head Teacher is willing to use some designated ‘training days’ for Open House events so that all teachers can attend.

THREATS1. Confidentiality is

compromised: need to ensure proper governance of voluntary organisations.

2. Pupil coercion: need to ensure that adults are not leading or forcing pupils’ opinions.

3. Incomplete mandatory training: need to ensure that time borrowed from the designated training day does not result in staff failing to complete statutory/mandatory training, leading to local authority censure.


List Strengths

Weaknesses – W

List Weaknesses

Opportunities – O

List Opportunities

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

Thank You….