Strategic Management Chapter 6

are in an excellent strategic position.

Firms located in Quadrant I of the Grand Strategy Matrix

need to evaluate their present approach to the marketplace

Firms located in Quadrant II of the Grand Strategy Matrix

compete in slow growth industries and have weak competitive positions

Firms located in Quadrant III of the Grand Strategy Matrix

have a strong competitive position but are in a slow growth industry

Firms located in Quadrant IV of the Grand Strategy Matrix

Aggressive, Conservative, Defensive, Comparative Strategies

Four types of strategies included in the SPACE Matrix are:

I, II, or IV

Grow and Build fall into cells

VI, VIII, IX

Harvest or Divest fall into cells

III, V, and VII

Hold and Maintain fall into cells

Counterclockwise motion

The BCG matrix moves in an ongoing:

Competitive Position and Market Industry Growth

The Grand Strategy Matrix is based on two evaluative dimensions:

Grow and Build, Hold and Maintain, Harvest or Divest

The IE Matrix can be divided into three major regions:

the type of strategies recommended for the organization: aggressive, competitive, defensive, conservative.

What does the directional vector reveal?

it draws attention to cash flow, investment characteristics, and needs of an organization's various divisions.

What is the major benefit of the BCG Matrix?

Attractiveness

When all feasible strategies are identified they should be ranked in order of?

organizations must decide whether to strengthen them by pursuing an intensive strategy or to sell them

Why is Quadrant I called question marks?

generate cash in excess of their needs and are often milked

Why is Quadrant III called cash cows?

Business Portfolio

Autonomous divisions of an organization make up what is called

Backward, forward, horizontal integration, Market penetration, Market development, Product development

Comparative Quadrant (Lower right) include:

Market penetration, market development, product development, related diversification

Conservative strategies most often include:

Retrenchment, Divestiture, Liquidation, and Related Diversification

Defensive strategies include:

Question Marks

Divisions located in the Quadrant I of the BCG Matrix are called?

Stars

Divisions located in the Quadrant II of the BCG Matrix are called?

Cash Cows

Divisions located in the Quadrant III of the BCG Matrix are called?

Dogs

Divisions located in the Quadrant IV of the BCG Matrix are called?

a high relative market share position, but compete in a low growth industry

Divisions positioned in quadrant III have?

low relative market share position and compete in slow or no market growth industry

Divisions positioned in quadrant IV have?

Y-axis

Industry sales growth rate is along what axis on the BCG matrix

low relative market share position and compete in a high growth industry

Question marks have?

1= should not be implemented, 2= possibly should be implemented, 3= probably should be implemented, 4= definitely should be implemented

Ranks of attractiveness are:

X-axis

Relative Market Share Position is along what axis on the BCG matrix?

best long run opportunities for growth and profitability

Stars represent the organization's:

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 Matching matrices, and identify alternative strategies that the organization should consider implementing. 4. Determine the Attractiveness Score (AS). 5. Compute the Total Attractiveness Score (TAS). 6. Compute the Sum Total Attractiveness Score (STAS).

Steps of the QSPM

List the firm's key external opportunities and threats, List the firm's key internal strengths and weaknesses, Match key factors to find SO, WO, ST, and WT strategies.

Steps to constructing a SWOT Matrix:

the IFE total weighted scores on the x-axis and the EFE total weighted score on the y-axis.

The IE matrix is based on two key dimensions:

Governance

The act of oversight and direction is referred to as?

SO, WO, ST, WT

The four types of strategies that the SWOT Matrix helps managers develop are:

IFE, EFE, CPM

The input stage consists of?

BCG, I-E, Grand Strategy Matrix, SWOT, the SPACE matrix

The matching stage consists of?

the proportion of corporate revenues generated by that business unit

The size of the circle on the BCG and IE matrix corresponds to?

Input Stage, Matching Stage, and Decision Stage

The strategy formulation framework has three distinct parts to it:

Sales

Used to asses market share

1. Select variables to define FP, CP, SP, and IP. 2. Assign a numerical value ranging from 1 (worst) to 7(best) for FP and IP. Assign a numerical value ranging from -1(best) to -7(worst) for SP and CP. On FP and CP axes, make competitor comparisons. On IP and SP axes, make industry comparisons. 3. Compute an avg score for FP, CP, IP, and SP. 4. Plot avg scores on appropriate axis. 5. Add the two scores on x-axis and plot on X. Same for y axis. Plot intersection as xy. 6. Draw a directional vector from the origin through xy.

What are the 6 steps of the SPACE Matrix?

Backward, Forward, horizontal integration, Market penetration, market development, product development, and related or unrelated diversification strategies

What are the strategies are feasible for an organization in the aggressive quadrant?

Board of directors

a group of individuals who are elected by the ownership of a corporation to have oversight and guidance over management and who look out for the shareholders interest

WO strategies

aim at improving internal weaknesses by taking advantage of external opportunities.

Aggressive Quadrant (upper right)

an organization is in an excellent position to use its internal strengths to take advantage of external opportunities, overcome internal weaknesses, and avoid external threats

Market Penetration, Market Development, Product Development, Integration and Related Diversification Strategies

appropriate strategies for Quadrant I of the Grand Strategy Matrix

Market Development, Market Penetration, Product Development, Horizontal Integration, Divestiture, and Liquidation Strategies

appropriate strategies for Quadrant II of the Grand Strategy Matrix

Retrenchment, Related Diversification, Unrelated Diversification, Divestiture, and Liquidation Strategies

appropriate strategies for Quadrant III of the Grand Strategy Matrix

Related and Unrelated Diversification, and Joint Ventures

appropriate strategies for Quadrant IV of the Grand Strategy Matrix

Market Penetration and Product Development

appropriate strategies for the Hold and Maintain region are:

Intensive or Integration Strategies

appropriate strategies for the grow and build region are:

Product Development, Diversification, Retrenchment, Divestiture

are appropriate strategies for divisions in the cash cows quadrant to consider

Retrenchment, Divestiture, and Liquidation

are appropriate strategies for divisions in the dogs quadrant to consider

Forward, backward, horizontal integration, Market penetration, Market Development, and Product Development

are appropriate strategies for divisions in the star quadrant to consider

WT strategies

are defensive tactics directed at reducing internal weakness and avoiding external threats.

BCG Matrix and IE Matrix

designed specifically to enhance a multi-divisional firm's efforts to formulate strategies. Portfolio Matrices

Matching Stage

focuses on generating feasible alternative strategies by aligning key external and internal factors

Conservative Quadrant (upper left)

implies staying close yo the firm's basic competencies and not taking excessive risks

Decision Stage

involves a single technique, the Quantitative Strategic Planning Matrix (QSPM)

Boston Consulting Group (BCG)

is a large consulting firm that endured the recent economic downturn without laying off any employees and in 2010 hiring the most new consultants ever. Ranks #2 in Fortune's "100 best Companies to Work For"

Strength-Weaknesses-Opportunities-Threats Matrix (SWOT Matrix)

is an important matching tool that helps managers develop four types of strategies.

SP volatility

is based on the expected impact of changes in core external factors such as technology, economy, demographic, etc

The Strategic Position and Action Evaluation Matrix (SPACE Matrix)

its four-quadrant framework indicates whether aggressive, conservative, defensive, or comparative strategies are most appropriate for a given organization.

BCG Matrix

portrays differences among divisions in terms of relative market share position and industry growth rate.

Internal-External (IE) Matrix

positions an organization's various divisions in a nine cell display,

Stability Position (SP)

refers to the volatility (liability to change rapidly and unpredictably) of profits and revenues for the firms in a given industry

Strategy analysis and choice

seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives.

Defensive Quadrant (Lower left)

suggests that the firm should focus on rectifying internal weaknesses and avoiding external threats.

Input Stage

summarizes the basic input information needed to formulate strategies

Stability Position (SP) and Industry Position (IP)

the axes of the SPACE Matrix represent to external dimensions:

Financial Position (FP) and Competitive Position (CP)

the axes of the SPACE Matrix represent to internal dimensions:

the proportion of corporate profits generated by that division

the pie slice on the BCG and IE matrix indicates?

Relative market share position

the ratio of a division's own market share in a particular industry to the market share held by the largest rival firm in that industry.

Halo Error

the tendency to put too much weight on a single factor

SO strategies

use a firm's internal strengths to take advantage of external opportunities.

ST strategies

use a firm's strengths to avoid or reduce the impact of external threats

QSPM

uses the input information from stage 1 to objectively evaluate feasible alternative strategies identified in stage 2 and reveals the attractiveness of alternative strategies and this provides objective basis for selecting specific strategies.