2. Chapter Outline The Nature of Strategy & Choice A Comprehensive Strategy-Formulation Framework The Input Stage

3. Chapter Outline ( cont’d ) The Matching Stage The Decision Stage Cultural Aspects of Strategy Choice

4. Chapter Outline ( cont’d ) The Politics of Strategy Choice Governance Issues

8. Strategy Analysis & Choice Generating Alternatives -- Participation in generating alternative strategies should be as broad as possible

9. Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: The Matching Stage Stage 3: The Decision Stage

10. Strategy-Formulation Analytical Framework Internal Factor Evaluation Matrix (IFE) External Factor Evaluation Matrix (EFE) Competitive Profile Matrix (CPM) Stage 1: The Input Stage

12. Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

16. SO Strategies Use a firm’s internal strengths to take advantage of external opportunities SO Strategies Strengths Weaknesses Opportunities Threats SWOT

17. WO Strategies Improving internal weaknesses by taking advantage of external opportunities WO Strategies Strengths Weaknesses Opportunities Threats SWOT

18. ST Strategies Use a firm’s strengths to avoid or reduce the impact of external threats ST Strategies Strengths Weaknesses Opportunities Threats SWOT

19. WT Strategies Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats WT Strategies Strengths Weaknesses Opportunities Threats SWOT

21. SWOT Matrix WT Strategies Minimize weaknesses and avoid threats ST Strategies Use strengths to avoid threats Threats – T List Threats WO Strategies Overcoming weaknesses by taking advantage of opportunities SO Strategies Use strengths to take advantage of opportunities Opportunities – O List Opportunities Weaknesses – W List Weaknesses Strengths – S List Strengths Leave Blank

22. Key Internal Factor Key External Factor Resultant Strategy Matching Key Factors to Formulate Alternative Strategies 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 form the industry (opportunity) + Insufficient capacity (weakness) Acquire Cellfone, Inc. = 20% annual growth in the cell phone industry (opportunity) + Excess working capacity (strength)

23. Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

27. SPACE Factors Environmental Stability (ES) Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry Competitive pressure Price elasticity of demand Ease of exit from market Risk involved in business Financial Strength (FS) Return on investment Leverage Liquidity Working capital Cash flow External Strategic Position Internal Strategic Position

28. SPACE Factors Industry Strength (IS) Growth potential Profit potential Financial stability Technological know-how Resource utilization Ease of entry into market Productivity, capacity utilization Competitive Advantage CA Market share Product quality Product life cycle Customer loyalty Competition’s capacity utilization Technological know-how Control over suppliers & distributors External Strategic Position Internal Strategic Position

29. SPACE Matrix FS +6 +1 +5 +4 +3 +2 -6 -5 -4 -3 -2 -1 -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 ES CA IS Conservative Aggressive Defensive Competitive

30. Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix IE Matrix Grand Strategy Matrix Stage 2: The Matching Stage

33. BCG Matrix Relative Market Share Position High 1.0 Medium .50 Low 0.0 Industry Sales Growth Rate High +20 Low -20 Medium 0 Dogs IV Cash Cows III Question Marks I Stars II

38. Strategy-Formulation Analytical Framework SWOT Matrix SPACE Matrix BCG Matrix Grand Strategy Matrix Stage 2: The Matching Stage

45. Strategy-Formulation Analytical Framework Stage 3: The Decision Stage Quantitative Strategic Planning Matrix (QSPM)

47. QSPM Strategic Alternatives Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems Strategy 3 Strategy 2 Strategy 1 Weight Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environmental Technological Competitive