Strategy Analysis and

Choice

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 Final step of strategic formulation

Several alternatives are there
Choosing among best alternative

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Implementing the chosen alternative

Decision maker has to set certain critria
Generating alternatives
Choosing among alternatives
Decision making process
Consist of setting objectives

Process of Strategic Analysis

Strategic choice

Decision to
select

Among the
grand strategies

The strategy
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Which will best meet enterprise

objective
4

 Focusing on alternatives
Narrow down the
choice
To manageable number
of feasible strategies
Limit the choice

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Customer requirements
Hygiene
Fragrance
Freshness
Flavor

Alternatives
Different Base Liquid /bar
material

Face wash
Hand wash
Cosmetics

Packaging

Hygiene

Segments

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Gap Analysis for focusing on

strategic alternatives
Desired
performance
Present
performance

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Performance
Gap

Corporate level strategy

analysis
Umbrella
Business

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What
corporate
entity to do
foe SBU

WHAT
PORTFOLIO

Strategic Analysis & Choice

Re-visit the Mission
Revise, create, or maintain mission

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Set Long-Term Objectives

Generate feasible alternatives
Evaluate alternatives
Choose courses of action

The Strategy Formulation Analytical

Framework
Stage 1: The Input Stage
External Analysis

Analysis

Internal Analysis SWOT

Stage 2: The Matching Stage

Re-visit Mission and Set Long Term Objectives
Generate feasible alternative Corporate Strategies

Stage 3: The Decision Stage

Evaluate and Choose Corporate Strategies
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10

Quantitative Areas
Profitability
Net

profit margin; ROI; ROE

Productivity
Lower

costs (% of sales CGS, S&A)

Activity ratios

Growth
Increases

Competitive Position
Market

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in sales, assets, net income

Share
12

 Technological Leadership
Shareholder Wealth
EPS; Dividends; Shareholder Value
(stock)
Industry specific metrics

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13

Qualitative Areas
Employee Relations
Social Responsibility
Reputation
These areas have long term objectives
that can be measured.

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Alternatives for Growth

Market Penetration
Market Development
Product Development
Expansion
of existing
Businesses
Alternatives
for Growth
Diversification
into new
Businesses
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Vertical
Integration Forward & Backward
Related

15
Unrelated

CORPORATE
PORTFOLIO ANALYSIS

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Help for
taking
strategic
decision

Set of
techniques

Individual
product

SBU

Business
portfolio
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BCG Matrix
Question Marks
Low relative market share compete in highgrowth industry
Cash needs are high
Case generation is low

Decision to strengthen (intensive strategies) or

divest

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BCG Matrix
Stars
High relative market share and high growth rate
Best long-run opportunities for growth & profitability

Substantial investment to maintain or strengthen

dominant position
Integration strategies, intensive strategies, joint
ventures

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BCG Matrix
Cash Cows
High relative market share, competes in low-growth
industry
Generate cash in excess of their needs
Milked for other purposes

Maintain strong position as long as possible

Product development, concentric diversification
If weakensretrenchment or divestiture

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BCG Matrix
Dogs
Low relative market share & compete in slow or no
market growth
Weak internal & external position

Liquidation, divestiture, retrenchment

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22

 Question mark
Taj
Tata Steel
Tanishq
Titan
Tata motors

Tata tea
Tata chemicals

Cash cow
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Tata
communication

Star

Voltas
Tata AIG

Dogs
23

WHY BCG MATRIX ?

To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment
decisions

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MAIN STEPS OF BCG

MATRIX
Identifying and dividing a company into SBU.
Assessing and comparing the prospects of
each SBU according to two criteria :
1. SBUS relative market share.
2. Growth rate OF SBUS industry.
Classifying the SBUS on the basis of BCG
matrix.
Developing strategic objectives for each SBU.
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26

GE 9 MODEL

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The GE/McKinsey Matrix

Relative market share

Profit margins
Ability to compete on price & quality
Knowledge of customer & market
Competitive strengths & weaknesses
Technological capability
Caliber of management

Business Strengths

High
Medium

Market size & growth

Industry profit margins
Competitive intensity
Seasonality
Economies of scale
Technology
Social, environmental, legal,
& human impacts

Medium

Low

Invest in,
growth
strategy
Monitor
performance,
selective
strategy
No growth
investment,
consider
divestment or
liquidation

Low

Industry Attractiveness

High

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GE 9 Cell Matrix
High

Attractiveness

High

Competitive Strengths

Low

Invest
Grow

Hold

Harvest
Divest
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Low

30

Behavioral Aspects/Tools

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Propensity for risk

Personal Agendas
Personalities
Time Pressures
Reputation/Integrity
Imagination/Conceptualizations
Support/Coalitions
31

Strategic Analysis
and Choice
Summary
Making subjective decisions based
on objective information, and
subjective interpretation

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Strategy-Formulation Analytical Framework

The Decision Stage

Quantitative Strategic
Planning Matrix
(QSPM)

Technique designed to determine the relative

attractiveness of feasible alternative actions

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Steps to Develop a QSPM

1. Make a list of the firms key external
opportunities/threats and internal
strengths/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 Scores (A.S)
5. Compare the Total Attractiveness Scores
6. Compute the Sum Total Attractiveness Score
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QSPM
Limitations
Requires intuitive judgments & educated
assumptions
Only as good as the prerequisite inputs

Advantages
Sets of strategies considered simultaneously or
sequentially
Integration of pertinent external & internal factors
in the decision making process
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Example of a QSPM for Dell

37

Thanks

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