SWOT Matrix
1. The SWOT Matrix is an important matching tool that helps managers develop four types of strategies:
· SO strategies—use a firm’s internal strengths to take advantage of external opportunities.
· WO strategies—are aimed 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—are defensive tactics directed at reducing internal weaknesses and avoiding external threats.
Eight steps 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 resulting SO strategies in the appropriate cell.
6. Match internal weaknesses with external opportunities and record the resulting 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 resulting WT strategies.
SPACE Matrix
1. The SPACE Matrix, another important Stage 2 matching tool,four-quadrant framework indicates whether aggressive, conservative, defensive, or competitive strategies are more appropriate for a given organization.
2. Depending on the type of organization, numerous variables could make up each of the dimensions represented on the axes of the SPACE Matrix.
3. The steps to develop a SPACE Matrix:
a. Select a set of variables to define financial strength (FS), competitive advantage (CA), environmental stability (ES), and industry strength (IS).
b. Assign a numerical value ranging from 1 (worst) to 6 (best) for the variables that make up the FS and IS dimensions. Assign a number between –1 (best) to –6 (worst) for variables that make up the ES and CA dimensions. On the FS and CA axes, make comparison to competitors. On the IS and ES axes, make comparison to other industries.
c. Compute an average score for FS, CA, IS, and ES by summing the values given to the variables and dividing by the number of variables included in each dimension.
d. Plot the average scores for FS, IS, ES, and CA on the appropriate axis in the SPACE Matrix.
e. 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.
f. 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.
1. Aggressive
2. Competitive
3. Defensive
4. Conservative
BCG Matrix
1. The BCG Matrix graphically portrays differences among divisions (of a firm) in terms of relative market share position and industry growth rate.
2. Divisions in the respective circles in the BCG Matrix are called question marks, stars, cash cows, and dogs.
3. The four quadrants represent the following:
a. Question Marks—Divisions in Quadrant I have a low relative market share position, yet compete in a high-growth industry. Generally these firms’ cash needs are high and their cash generation is low.
b. Stars—Quadrant II businesses represent the organization’s best long-run opportunities for growth and profitability.
These businesses have a high relative market share and compete in high growth rate industries.
c. Cash Cows—Divisions positioned in Quadrant III have a high relative market position, but compete in a low-growth industry. Called cash cows because they generate cash in excess of their needs.
d. Dogs—Quadrant IV divisions of the organization have a low relative market share position and compete in a slowed or no-growth industry; they are Dogs in a firm’s portfolio.
IE Matrix
1. The IE Matrix positions an organization’s various divisions in a nine-cell display The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organization divisions in a schematic diagram; this is why they are called portfolio matrices.
2. Differences between the IE Matrix and the BCG Matrix
a. Axes are different.
b. IE Matrix requires more information about divisions than BCG.
c. Strategic implications of each matrix are different.
Grand Strategy Matrix
1. In addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the Grand Strategy Matrix has become a popular tool for formulating alternative strategies. All organizations can be positioned in one of the Grand Strategy Matrix’s four strategy quadrants.
2. It is based on two evaluative dimensions: competitive position and market growth.
THE DECISION STAGE
A. The Quantitative Strategic Planning Matrix (QSPM)
1. Other than ranking strategies to achieve the prioritized list, there is only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions.
2. This technique is the QSPM, which comprises Stage 3 of the strategy-formulation analytical framework. This technique objectively indicates which alternative strategies are best.
3. Six steps to developing a QSPM:
1. Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM.
2. Assign weights to each key external and internal factor.
3. Examine the Stage 2 matrices and identify alternative strategies that the organization should consider implementing.
4. Determine the Attractiveness Scores (AS).
5. Compute the total AS.
6. Compute the sum Total AS.
B. Positive Features and Limitations of the QSPM
1. A positive feature of the QSPM is that sets of strategies can be examined sequentially or simultaneously. Another positive feature of the QSPM is that it requires strategists to integrate pertinent external and internal factors into the decision process. Developing a QSPM makes it less likely that key factors will be overlooked or weighted inappropriately.
2. The QSPM is not without some limitations. First, it always requires intuitive judgment. Second, it can only be as good as the prerequisite information and matching analyses upon which it is based.
