MGMT 478 ch. 6

The Quantitative Strategic Planning Matrix (QSPM)

- objectively indicates which alternative strategies are best - uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies

a defensive strategy of the SWOT Matrix directed at reducing internal weaknesses and avoiding external threats is

WT

internal politics ________

affect the choice of strategies in all organizations

the text states that perhaps the most important page in a students strategic planning case project is his/her recommendations page. Why is this?

because the recommendations page will include the estimated dollar amount of the costs (or savings) of each alternative

How did Acer address its business slump in 2000?

by restructuring

which SPACE matrix quadrant implies staying close to the firm's basic competencies and not taking excessive risks?

conservation

comprehensive strategy - formulation framework

input stage, matching stage, and decision stage

the strategy formulation analytical framework consists of what three stages

input, matching, and decision

According to the BCG​ Matrix, organizations should strive to achieve a portfolio of divisions that are ​______.

stars

the two key dimensions of the IE matrix are

the IFE total weighted scores and the EFE total weighted scores

Which of the following is NOT true of the SPACE matrix?

the axes represent four internal dimensions

Limitations of the QSPM

• Always requires informed judgments • It is only as good as the prerequisite information and matching analyses on which it is based

The Culture and Politics of Strategy Choice

• Strategies that require fewer cultural changes may be 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

Estimating Costs Associated With Recommendations

• The term recommendation is used to refer to "any alternative strategy that is selected for implementation." • Due to monetary and/or non-monetary constraints, no firm can implement all alternative strategies proposed in the matching matrices, so firms utilize the QSPM and expert judgment to select particular strategies.

A limitation of the QSPM is that ​______.

it can only be as good as the underlying input and matching matrices/analysis on which it is based

a classic study of strategic management found that successful strategists

kept a low political profile on unacceptable proposals

Successful strategists assign champions the responsibility for ​______.

major new thrusts

The IE matrix has _______ quadrants

nine

according to the BCG matrix, forward, backward, and horizontal integration; market development; and product development are appropriate strategies to consider for _______

stars

When planning a business strategy, leaders at Acer must consider pressures within their industry as characterized by the integration-responsiveness grid. Which of the following best describes the computer industry's position on the integration-responsiveness grid?

high industry pressure for global integration and high industry pressure for local responsiveness

BCG matrix analysis is used primarily for what purpose

to develop an appropriate allocation of resources across divisions/segments

SWOT Matrix

1. List the firm's key external opportunities. 2. List the firm's key external threats. 3. List the firm's key internal strengths. 4. List the firm's key internal weaknesses. 5. Match internal strengths with external opportunities, and record the resultant SO strategies. 6. Match internal weaknesses with external opportunities, and record the resultant WO strategies. 7. Match internal strengths with external threats, and record the resultant ST strategies. 8. Match internal weaknesses with external threats, and record the resultant WT strategies.

Steps in Performing SPACE Analysis

1. Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP). 2. Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the FP and I P dimensions. Assign a numerical value ranging from −1 (best) to −7 (worst) to each of the variables that make up the SP and CP dimensions. 3. Compute an average score for FP, CP, IP, and SP. 4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis. 5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point. 6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection point. - This vector reveals the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative

The SPACE matrix is used primarily to do what?

Formulate alternative strategies

Attractiveness scores in the QSPM ​______.

are rational and defensible

What is arguably the most important strategic decision companies make all year?

how to allocate resources across segments

Which of the following is an example of an appropriately stated alternative strategy in a​ QSPM?

open 50 new stores in the U.K.

as used in the video and chapter 6, the word portfolio refers to what

the mix of a company's segments or divisions

Positive Features of the QSPM

• Sets of strategies can be examined sequentially or simultaneously • Requires strategists to integrate pertinent external and internal factors into the decision process • Can be adapted for use by small and large for-profit and nonprofit organizations

a dog has

a low relative market share position and competes in a slow-growth industry

Which of the following statements is true of the politics of the strategy​ process?

all organizations are political

What do strategy analysis and choice seek to determine?

alternative courses of action

IN a QSPM, a total attractiveness score (TAS) rating of 1 signifies a particular strategy is _____ compared to another strategy

least attractive

what are the two dimensions used by the grand strategy matrix

market growth and competitive position

A​ firm's internal strengths are used to take advantage of external opportunities in which​ strategies?

SO

Texas Instruments used an excellent legal department to collect almost​ $700 million in damages from nine foreign firms that infringed on patents for semiconductor memory chips. This is an example of which type of​ strategy?

ST

Which strategy of the SWOT Matrix uses a​ firm's strengths to avoid or reduce the impact of external​ threats?

ST

The SWOT Matrix helps managers develop all of the following strategies​ EXCEPT:

SW

The SPACE Matrix

Strategic Position and Action Evaluation (SPACE) Matrix - four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization • Two internal dimensions (financial position [FP] and competitive position [CP]) • Two external dimensions (stability position [SP] and industry position [IP]) • Most important determinants of an organization's overall strategic position

what does the y-axis of the IE matrix represent?

The EFE total weighted scores

The Internal-External (IE) Matrix

The IE Matrix is based on two key dimensions: the IFE total weighted scores on the x-axis and the EFE total weighted scores on the y-axis Three Major Regions - Grow and build - Hold and maintain - Harvest or divest

the process of generating and selecting strategies should include which of the following?

a manageable set of the most attractive strategies

The primary purpose of performing QSPM analysis is to do what?

assess and select the most attractive strategy

grand strategy matrix

based on two evaluative dimensions: competitive position and market (industry) growth

When planning a corporate strategy, business executives consider all of the following EXCEPT:

mistakes

According to the BCG​ Matrix, a division that has high cash needs and low cash generation is a ​______.

question mark

Successful organizations are able to achieve a portfolio of businesses positioned in which region of the IE​ Matrix?

region 1 (the grow and build region) Region 2 is the hold/maintain region

it is important that both the internal and external factors and the SO, ST, WO, and WT strategies are stated in ______ terms

specific

IE Matrix

three major regions grow and build hold and maintain harvest or divest

the dollar amounts of alternative strategies should all be added to reveal a total amount of new capital needed over what time period?

three years

what is Rudins law

when a crisis forces decisions to be made, most firms pick the worst option

When is it especially important to evaluate and consider culture-stratey linkages?

when two firms merge

Relative market share position can be defined in what way

your firms revenues / the leaders revenues

The Process of Generating and Selecting Strategies

• A manageable set of the most attractive alternative strategies must be developed. • The advantages, disadvantages, trade-offs, costs, and benefits of these strategies should be determined. • Identifying and evaluating alternative strategies should involve many of the managers and employees who earlier assembled the organizational vision and mission statements, performed the external audit, and conducted the internal audit. Alternative strategies proposed by participants should be considered and discussed in a series of meetings. • Proposed strategies should be listed in writing. • When all feasible strategies identified by participants are given and understood, the strategies should be ranked in order of attractiveness.

The Grand Strategy Matrix

- based on two evaluative dimensions: competitive position and market (industry) growth Quadrant I - continued concentration on current markets (market penetration and market development) and products (product development) is an appropriate strategy Quadrant II - unable to compete effectively - need to determine why the firm's current approach is ineffective and how the company can best change to improve its competitiveness Quadrant III - must make some drastic changes quickly to avoid further decline and possible liquidation - Extensive cost and asset reduction (retrenchment) should be pursued first Quadrant IV - have characteristically high cash-flow levels and limited internal growth needs and often can pursue related or unrelated diversification successfully

what scale does the SPACE matrix use for its axes?

1-7 scale

Which of the following is a tactic used by politicians that can aid​ strategists?

Consider various methods and, whenever possible, choose the one(s) that will afford the greatest commitment from employees/managers

Layoffs are generally recommended when a firm is positioned in what quadrant of a SPACE matrix

Defensive

A QSPM sum total attractiveness score (STAS) should be used to do what?

Determine recommended strategy

the input stage of the strategy-formulation analytical framework includes the ________ Matrix

EFE

which matrix determines the relative attractiveness of feasible alternative strategies?

QSPM

which region of the IE matrix would prescribe a hold and maintain strategy?

Region 2

why is it important to consider a firms culture in strategy and choice anaylsis?

because success can rest on the degree of support received from the firm's culture

The SPACE matrix has how many quadrants?

4

Why might the struggle between Acer and HP be seen as a "David vs. Goliath" struggle?

Acer has 7000 employees worldwide while HP has 310,000 employees

which strategy tool is specifically designed to enhance a multidivisional firm's efforts to formulate strategies

BCG matrix

SPACE Matrix Axes

Internal Strategic Position Financial Position (FP) Return on investment Leverage Liquidity Working capital Cash flow Inventory turnover Earnings per share Price earnings ratio External Strategic Position Stability Position (SP) Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry into market Competitive pressure Ease of exit from market Risk involved in business Internal Strategic Position Competitive Position (CP) Market share Product quality Product life cycle Customer loyalty Capacity utilization Technological know-how Control over suppliers and distributors External Strategic Position Industry Position (IP) Growth potential Profit potential Financial stability Extent leveraged Resource utilization Ease of entry into market Productivity, capacity utilization

A Comprehensive StrategyFormulation Framework

Stage 1 - Input Stage - summarizes the basic input information needed to formulate strategies - consists of the EFE Matrix, the IFE Matrix, and the Competitive Profile Matrix (CPM) Stage 2 - Matching Stage - focuses on generating feasible alternative strategies by aligning key external and internal factors - techniques include the Strengths-WeaknessesOpportunities-Threats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the InternalExternal (IE) Matrix, and the Grand Strategy Matrix Stage 3 - Decision Stage - involves the Quantitative Strategic Planning Matrix (QS PM) - reveals the relative attractiveness of alternative strategies and thus provides objective basis for selecting specific strategies

A positive feature of the QSPM is that ​______.

There is no limit to the number of strategies that can be evaluated or the number of sets of strategies that can be examined at once

Steps in a QSPM

1. Make a list of the firm's key external opportunities and threats and internal strengths and 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 (AS). 5. Compute the Total Attractiveness Scores. 6. Compute the Sum Total Attractiveness Score.

A BCG matrix has how many quadrants

4

in performing QSPM analysis strategies should be rated in what manner

Horizontally

Which of the following strategy tools is considered a portfolio​ matrix?

IE matrix

which of the following is a QSPM guideline?

If you assign a rating to one strategy, assign a rating to all other strategies

In a BCG Matrix Question Mark segments could be characterized as having what?

Low relative market share

which of the following is an example of an appropriately stated alternative strategy in a QSPM?

Open 250 new stores in China

which matrix is based on the two evaluative dimensions of competitve position and market (industry) growth?

The grand strategy matrix

The decision stage of the strategy-formulation analytical framework

involves a single technique, the QSPM

what are the two dimensions represented on the BCG matrix axes?

relative market share and industry growth rate

Space Matrix

strategic position and action evaluation matrix four quadrants, aggressive, conservative, defensive, or competitive strategies internal dimensions (financial position (FP) and competitive position (CP)) external dimensions (stability position (SP) and industry position (IP)) +1 (worst) to +7(best) -1 (best) to -7 (worst)

According to the video a firm in a competitive industry might do what?

Acquire a rival firm

The Boston Consulting Group (BCG) Matrix

- graphically portrays differences among divisions in terms of relative market share position and industry growth rate - allows a multidivisional organization to manage its portfolio of businesses by examining the relative market share position and the industry growth rate of each division relative to all other divisions in the organization Question Marks - Quadrant I - Organization must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, or product development) or to sell them Stars - Quadrant II - represent the organization's best long-run opportunities for growth and profitability Cash Cows - Quadrant III - generate cash in excess of their needs - should be managed to maintain their strong position for as long as possible Dogs - Quadrant IV - compete in a slow- or no-market-growth industry - businesses are often liquidated, divested, or trimmed down through retrenchment The major benefit of the BCG Matrix is that it draws attention to the cash flow, investment characteristics, and needs of an organization's various divisions

BCG matrix

-question marks - high growth but weak-competitive position; need investment to improve or divest (quadrant 1) -stars - high growth; strong competitive position (quadrant 2) -cash cows - low growth with strong competitive position (quadrant 3) -dogs - low growth; weak competitive position (quadrant 4)

The Matching Stage

The Strengths-Weaknesses-Opportunities-Threats (SW OT) Matrix helps managers develop four types of strategies: - SO (strengths-opportunities) Strategies - WO (weaknesses-opportunities) Strategies - ST (strengths-threats) Strategies - WT (weaknesses-threats) Strategies SO Strategies - use a firm's internal strengths to take advantage of external opportunities WO Strategies - aim at improving internal weaknesses by taking advantage of external opportunities ST Strategies - use a firm's strengths to avoid or reduce the impact of external threats WT Strategies - defensive tactics directed at reducing internal weakness and avoiding external threats

Which problems does HP face as it addresses the challenge by competing brand Acer?

The company is spending less money on research and development and has had several shifts in corporate management

general Kelly says, life is full of lousy options. why does this video mention this statement?

because alternative strategies include many lousy options and the BCG, SWOT, and SPACE matricies help eliminate them

Based on the tactics of​ politicians, achieving​ ______ results with a popular strategy is generally better than trying to achieve​ ______ results with an unpopular strategy

satisfactory, optimal

According to the BCG​ Matrix, a division that has a high relative market share but competes in a​ low-growth industry is a​ _____.

cash cow