Chapter 6 Strategy Analysis and Choice

Equifinality

"It is often possible to achieve similar results using different means or paths. Strategists should recognize that achieving a successful outcome is more important than imposing the method of achieving it."

Business Portfolio

The Autonomous divisions (or profit centers) of an organization.

Aggressive Quadrant

When a firm's directional vector is located in the upper right quadrant of the SPACE MATRIX, an organization is in an excellent position to use its internal strengths to (1) take advantage of external opportunities, (2) overcome internal weaknesses, and (3) avoid external threats. Strategies include Market Penetration, Market Development, Product Development, Backward Integration, Forward Integration, Horizontal Integration, or Diversification, can be feasible.

Strategy-Formulation Framework

A framework that includes 3 stages: the input stage, the matching stage, and the decision stage.

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 shareholders' interests.

Directional Vector

A vector that reveals the type of strategies recommended for an organization in the SPACE Matrix.

Stability Position (SP)

An external dimension of the SPACE Matrix on the Y axis that has values that range from (-1) to (-6).

Industry Position (IP)

An external dimension of the SPACE Matrix on the x axis that have values ranging from 1 to 6.

Strategic Position and Action Evaluation (SPACE) Matrix

An important Stage 2 matching tool and has four-quadrants (ACDC) aggressive, conservative, defensive, and competitive.

Strengths-Weaknesses Opportunities-Threats (SWOT) Matrix

An important matching tool that helps managers develop four types of strategies: (SO, WO, ST, and WT strategies).

Competitive Position (CP)

An internal dimension of the SPACE Matrix on the X axis with values from (-1) to (-6).

Financial Position (FP)

An internal dimension of the SPACE Matrix on the Y Axis, with values that range from 1 to 6.

WT Strategies

Defensive tactics directed at reducing internal weakness and avoiding external threats.

Stars

Divisions in Quadrant II that represent the organization's best long-run opportunities for growth and profitability. These divisions with a high relative market share and a high industry growth rate should be pursed with the following strategies: Foward, backward, and horizontal integration; market penetration; market development; and product development.

Culture

Includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heriones that describe a firm. Also the unique way an organization does business.

Relative Market Share Position

It is the horizontal axis in a BCG Matrix, which is the firm's particular segment's market share (or revenues or #stores) divided by the industry leader's analogous number

WO Strategies

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

SO Strategies

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

Question Marks

Quadrant I of the BCG Matrix that consists of divisions that have a low relative market share position, yet they compete in a high-growth industry. Organizations must decide whether to strengthen these divisions by pursuing an intensive strategy (Market penetration, market development, or product development) or to sell them.

Cash Cows

Quadrant III of the BCG Matrix, divisions in this quadrant have a high relative market share position but compete in a low-growth industry. Called cash cows because they generate cash in excess of their needs, they are often milked.

Dogs

Quadrant IV in the BCG Matrix where divisions of the organization have a low relative market share position and compete ina slow or no market growth industry. Because of their weak internal and external position, these businesses are often liquidated, divested, or timmed down through retrenchment.

ST Strategies

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

Decision Stage

Stage 3 of the Strategy-Formulation Analytical Framework, it involves a single technique, the Quantitative Strategic Planning Matrix (QSPM).

Governance

The act of oversight and direction.

Input Stage

The first stage of the Strategy-Formulation Analytical Framework, which summarizes the basic input information needed to formulate strategies.

Champions

The individuals most strongly identified with the idea or product and whose futures were linked to its success.

Defensive Quadrant

The lower-left quadrant of the SPACE Matrix, which suggests that firm should focus on rectifying internal weaknesses and avoiding external threats.

Competitive Quadrant

The lower-right quadrant of the SPACE Matrix that includes the following strategies: backward, foward, and horizontal integration; market penetration; market development and product development.

Matching Stage

The second stage of the Strategy-Formulation Analytical Framework, which matches exertnal opportunities and threats with internal strengths and weaknesses and consists of five techniques that can be used in any sequence: the SWOT Matrix, the SPACE Matrix, and the BCG Matrix.

Halo Error

The tendency to put too much weight on a single factor.

Conservative Quadrant

The upper-left quadrant of the SPACE Matrix which implies staying close to the firm's basic compentencies and not takin excessive risks.

Boston Consulting Group (BCG) Matrix

specifically designed to enhance a multidivisional firm's efforts to formulate strategies. The BCG Matrix graphically portrays differences among divisions in terms of relative market share position and industry growth rate. The BCG Matrix 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.