Strategic Analysis Tools

Strategic Management Concepts:
A Competitive Advantage Approach
Sixteenth Edition
Chapter 6
Strategy Analysis and Choice
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All
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Learning Objectives (1 of 2)
6.1 Describe the strategy analysis and choice process.
6.2 Diagram and explain the three-stage strategy-formulation
analytical framework.
6.3 Diagram and explain the Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix.
6.4 Diagram and explain the Strategic Position and Action

Evaluation (SPACE) Matrix.
6.5 Diagram and explain the Boston Consulting Group
(BCG) Matrix.
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Learning Objectives (2 of 2)
6.6 Diagram and explain the Internal-External (IE) Matrix.
6.7 Diagram and explain the Grand Matrix.
6.8 Diagram and explain the Quantitative Strategic
Planning Matrix (QSPM).
6.9 Discuss the role of organizational culture in strategic
analysis and choice.
6.10 Identify and discuss important political considerations in
strategy analysis and choice.
6.11 Discuss the role of a board of directors (governance) in
strategic planning.

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Figure 6-1 A Comprehensive Strategic-
Management Model
Source: Fred R. David, “How Companies Define Their
Mission,” Long Range Planning 22, no. 3 (June 1988): 40. See
also Anik Ratnaningsih, Nadjadji Anwar, Patdono Suwignjo,
and Putu Artama Wiguna, “Balance Scorecard of David’s
Strategic Modeling at Industrial Business for National
Construction Contractor of Indonesia,” Journal of Mathematics
and Technology, no. 4 (October 2010): 20.
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The Process of Generating and Selecting
Strategies (1 of 3)
• 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.

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Strategies (2 of 3)
• 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.
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Strategies (3 of 3)
• 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.
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Figure 6-2 The Strategy-Formulation
Analytical Framework
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A Comprehensive Strategy-Formulation
Framework (1 of 3)
• 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)
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Framework (2 of 3)
• Stage 2 - Matching Stage
– focuses on generating feasible alternative strategies
by aligning key external and internal factors
– techniques include the Strengths-Weaknesses-
Opportunities-Threats (SWOT) Matrix, the Strategic
Position and Action Evaluation (SPACE) Matrix, the
Boston Consulting Group (BCG) Matrix, the Internal-
External (IE) Matrix, and the Grand Strategy Matrix
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Framework (3 of 3)
• Stage 3 - Decision Stage
– involves the Quantitative Strategic Planning Matrix
(QSPM)
– reveals the relative attractiveness of alternative

strategies and thus provides objective basis for
selecting specific strategies
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Table 6-1 Matching Key External and Internal
Factors to Formulate Alternative Strategies
Key Internal Factor Key External Factor Resultant Strategy
Excess working capital
(an internal strength)
+ Annual growth of 20 percent in
the cell phone industry (an external
opportunity)
= Acquire Cellfone, Inc.
Insufficient capacity
(an internal weakness)
+ Exit of two major foreign
competitors from The industry (an
external opportunity)

= Pursue horizontal
integration by buying
competitors’ facilities
Strong research and
development expertise
(an internal strength)
+ Decreasing numbers of younger
adults (an external threat)
= Develop new products
for older adults
Poor employee morale
(an internal weakness)
+ Rising health-care costs (an
external threat)
= Develop a new wellness
program

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The Matching Stage (1 of 3)
• The Strengths-Weaknesses-Opportunities-Threats
(SWOT) Matrix helps managers develop four types of
strategies:
– SO (strengths-opportunities) Strategies
– WO (weaknesses-opportunities) Strategies
– ST (strengths-threats) Strategies
– WT (weaknesses-threats) Strategies
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• 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

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• 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
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SWOT Matrix (1 of 2)
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.
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SWOT Matrix (2 of 2)
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.
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Figure 6-4 The SPACE Matrix (1 of 3)
Source: Based on H. Rowe, R. Mason, and K. Dickel, Strategic
Management and Business Policy: A Methodological
Approach (Reading, MA: Addison-Wesley Publishing Co. Inc.,
© 1982), 155

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• 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
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• 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

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SPACE Matrix Axes (1 of 2)
Table 6-2 Example Factors That Make Up the SPACE Matrix
Axes
Internal Strategic Position External Strategic Position
Financial Position (FP) Stability Position (SP)
Return on investment Technological changes
Leverage Rate of inflation
Liquidity Demand variability
Working capital Price range of competing products
Cash flow Barriers to entry into market
Inventory turnover Competitive pressure
Earnings per share Ease of exit from market
Price earnings ratio Price elasticity of demand
Blank Risk involved in business
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SPACE Matrix Axes (2 of 2)

[Table 6-2 continued]
Internal Strategic Position External Strategic Position
Competitive Position (CP) Industry Position (IP)
Market share Growth potential
Product quality Profit potential
Product life cycle Financial stability
Customer loyalty Extent leveraged
Capacity utilization Resource utilization
Technological know-how Ease of entry into market
Control over suppliers and distributors Productivity, capacity
utilization
Source: Based on H. Rowe, R. Mason, & K. Dickel, Strategic
Management and Business Policy: A
Methodological Approach (Reading, MA: Addison-Wesley
Publishing Co. Inc., © 1982), 155–156.
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Steps to Develop a SPACE Matrix (1 of 4)
1. Select a set of variables to define financial position (FP),

competitive position (CP), stability position (SP), and
industry position (IP).
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2. Assign a numerical value ranging from +1 (worst) to +7
(best) to each of the variables that make up the FP and
IP 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.
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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.
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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
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Figure 6-5 Example Strategy Profiles (1 of 2)
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Figure 6-5 Example Strategy Profiles (2 of 2)
Source: Based on H. Rowe, R. Mason, and K. Dickel, Strategic
Management and Business Policy: A Methodological
Approach (Reading, MA: Addison-Wesley Publishing Co. Inc.,
© 1982), 155.
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The Boston Consulting Group (BCG)
Matrix
• 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

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Figure 6-7 The BCG Matrix (1 of 4)
Source: Based on the BCG Portfolio Matrix from the Product
Portfolio Matrix, © 1970, The Boston Consulting Group
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• 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

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• 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
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• 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.

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Figure 6-10 The Internal-External (IE)
Matrix (1 of 2)
Source: Based on: The IE Matrix was developed from the
General Electric (GE) Business Screen Matrix. For a
description of the GE Matrix, see Michael Allen, “Diagramming
GE’s Planning for What’s WATT,” in R. Allio and M.
Pennington, eds., Corporate Planning: Techniques and
Applications l par; New York: AMACOM, 1979.
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Figure 6-10 The Internal-External (IE)
Matrix (2 of 2)
• 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
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Figure 6-11 An Example IE Matrix
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The Grand Strategy Matrix (1 of 3)
• Grand Strategy Matrix
– based on two evaluative dimensions: competitive
position and market (industry) growth
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Figure 6-13 The Grand Strategy Matrix
Source: Based on Roland Christensen, Norman Berg, and
Malcolm Salter, Policy
Formulation and Administration (Homewood, IL: Richard D.
Irwin, 1976), 16–18.

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• 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
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• 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
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The Quantitative Strategic Planning Matrix
(QSPM)
• 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

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Table 6-5 The Quantitative Strategic
Planning Matrix (QSPM)
Strategic Alternatives
Key Factors Weight Strategy 1 Strategy 2 Strategy 3
Key External Factors Blank Blank Blank Blank
Economy Blank Blank Blank Blank
Political/Legal/Governmental Blank Blank Blank Blank
Social/Cultural/Demographic/ Environmental Blank Blank
Blank Blank
Technological Blank Blank Blank Blank
Competitive Blank Blank Blank Blank
Key Internal Factors Blank Blank Blank Blank
Management Blank Blank Blank Blank
Marketing Blank Blank Blank Blank
Finance/Accounting Blank Blank Blank Blank
Production/Operations Blank Blank Blank Blank
Research and Development Blank Blank Blank Blank
Management Information Systems Blank Blank Blank Blank

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Steps in a QSPM (1 of 2)
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.
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Steps in a QSPM (2 of 2)
4. Determine the Attractiveness Scores (AS).
5. Compute the Total Attractiveness Scores.
6. Compute the Sum Total Attractiveness Score.

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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
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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
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Table 6-6 A QSPM for a Retail Computer
Store (1 of 3)
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Store (2 of 3)
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Store (3 of 3)
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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
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Tactics to Aid Strategists
• Choose Methods That Afford Employee Commitment
• Achieve Satisfactory Results with a Popular Strategy
• Shift from Specific to General Issues
• Focus on Long-Term Issues and Concerns
• Involve Middle Level Managers in Decisions
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Governance Issues
• 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
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Board of Director Duties and Responsibilities
1. Control and oversight over management
2. Adherence to legal prescriptions
3. Consideration of stakeholders/ interests
4. Advancement of stockholders’ rights
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Principles of Good Governance (1 of 2)
1. No more than two directors are current or former
company executives.
2. The audit, compensation, and nominating committees are
made up solely of outside directors.

3. Each director owns a large equity stake in the company,
excluding stock options.
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Principles of Good Governance (2 of 2)
4. Each director attends at least 75 percent of all meetings.
5. The board meets regularly without management present
and evaluates its own performance annually.
6. The CEO is not also the chairperson of the board.
7. There are no interlocking directorships (where a director
or CEO sits on another director's board).
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Copyright
College of Administrative and Financial Sciences
Assignment 3

Deadline: End of Week 12, 11/04/2020 @ 23:59
Course Name: Knowledge Management
Student’s Name:
Course Code: MGT 403
Student’s ID Number:
Semester: 2nd
CRN:
Academic Year: 1440/1441 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade: / 10
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
· The Assignment must be submitted on Blackboard (WORD
format only) via allocated folder.
· Assignments submitted through email will not be accepted.
· Students are advised to make their work clear and well
presented; marks may be reduced for poor presentation. This
includes filling your information on the cover page.
· Students must mention question number clearly in their
answer.
· Late submission will NOT be accepted.
· Avoid plagiarism, the work should be in your own words,
copying from students or other resources without proper
referencing will result in ZERO marks. No exceptions.
· All answered must be typed using Times New Roman (size 12,
double-spaced) font. No pictures containing text will be
accepted and will be considered plagiarism).
· Submissions without this cover page will NOT be accepted.
ASSIGNMENT-3

Knowledge Management (MGT-403)
Second Semester (2019-2020)
Assignment Workload:
This Assignment is a mini project type assignment.
Assignment is to be submitted by each student individually.
Course Learning Outcomes-Covered
1
Demonstrate ability to work with others effectively as a team
member in knowledge management projects, related to case
studies. (Lo 3.5 & 3.8).
2
The capacity to write coherent project about actual knowledge
management case studies (Lo 4.5).
Submission Guidelines
· All students are encouraged to use their own words.
· This assignment is individual assignment.
· Be very specific and focused on the issue while answering a
question.
· Student must apply Saudi Electronic University academic
writing standards and APA style guidelines and review at least
three (3) scholarly, peer-reviewed journal articles to support
their answer for each question or concept.
· A mark of zero will be given for any submission that includes
copying from other resource without referencing it.
· No marks will be given for irrelevant details.
· It is strongly encouraged that you should submit all
assignments into the safe assignment Originality Check prior to
submitting it to your instructor for grading.
· If the assignment shows more than 25% plagiarism, the
students would be graded zero.

Note: Students must follow the below assignment structure to
complete the assignment.
Assignment Structure:
Title: Knowledge management systems in organizations.
Part A. Introduction: (2 Marks)
The introduction part must highlight the following.
· Conceptual framework of knowledge management.
· A brief description of knowledge management systems in
organizations.
Part B. Organizational Analysis:(5 Marks)
Students must choose any organization and highlight following
points.
· Brief description of organization.
· Description of knowledge management system in the selected
organization.
· Highlight and analyze the major knowledge management tools
used by the selected organization for capturing and
disseminating knowledge throughout the organization.
Part C. Recommendation and Conclusion:(3 Marks)
The students must come up with some
suggestions/recommendations for the selected organization for
improving their knowledge management systems.
Write down conclusion in one paragraph.

Answer:
1.
2.
3.
.
.
Module 5 Discussion
You will begin by creating a SWOT and a BCG matrix. For the
SWOT, follow Steps 1-2 of the
Learning Exercise in your text. Then, prepare a SWOT Matrix
for Hershey’s Company. For the
BCG, use the information in the Learning Exercise in your text
to prepare a BCG matrix for
Hershey locating each division where you believe it represents
its position relative to market
share and growth.
When complete with both exercises, write a short narrative (one
page or less, double space) of
your key conclusions from (1) your SWOT analysis of Hershey,
(2) your BCG work on Hershey. In
addition, include your conclusions on the Hershey’s Company
as a result of its position in the

BCG and the results of SWOT. Make clear recommendations for
Hershey’s Company based on
integrating the work from the above models.
STRENGTHS WEAKNESSES
1)Hershey’s Company is the
largest chocolate producer in
North America
2) Hershey acquired Shanghai
Golden Monkey in China
3) Hershey acquired Krave
Pure Foods, Inc.
4) Hershey created an
assembly line that lowered
the unit cost for chocolate
5) Hershey has 11 board
members serving annual
terms
6) Hershey ranks high in
improving the communities in
which it operates
7) Hershey reduced its waste
through company initiatives
1)The company derives 85
percent of its revenue
from the United States
2)3-D printing slowly
produces confectionary
options but have high cost
factors
3)Hershey has low global

expansion
4)Late-mover in the healthy
snack business
5)Certain Hershey products
contain high-fructose corn
syrup and artificial flavors
6)Hershey does not report
sales and income by
product category
OPPORTUNITIES SO Strategies WO Strategies
1)Limited product line
options compared to
competitors
2)Product exposure into
foreign markets
3)Chocolate sales in the
United States are increasing
about 3 percent annually
4)Farmers are switching to
more profitable crops
5)Companies are beginning to
remove unnatural and
1)Introduce new and
limited-edition chocolate
lines (S3, O1)
2)Acquire more international
snack companies (S2, O2)
1) Invest in chocolate farmers
(W3, O4)
2)Increase research and

development for healthy
snack options (W4, O5)
unhealthy ingredients from
food products
THREATS ST Strategies WT Strategies
1)Growing demand for
healthier food options
2)Cocoa is more difficult to
produce and cocoa prices are
expected to rise
3)Cocoa trees task as many as
10 years to mature
4) Obesity is a major problem
among the world’s population
1)Establish a healthy eating
program (S6, T4)
2) Contribute part of proceeds
from purchases to growing
cocoa trees (S7, T2)
1)Separate revenue based on
categories to have a better
understanding of what
product is Hershey most
successful for (W6, T1)
Stars
II

North America Market
Question Marks
I
International Market
Cash Cows
III
Dogs
IV
Hershey continues to strive in the chocolate industry because of
their brand awareness,
brand image, and their first mover’s advantage when they made
chocolate affordable for most
consumers instead of just the rich. However, there is a lot of
room for growth when it comes to
changing the company image and increasing sales through
international growth. It is essential for
Hershey to invest in cocoa farmers because as the price of cocoa
continues to rise, farmers are
switching the types of crops they prefer to produce. If Hershey
can get ahead and show farmers
that they are worth the investment, Hershey may not have to
decrease the amount of cocoa used
in their products. This strategy will help with Hershey’s other
necessary plan to increase health
care awareness by investing in more healthier snack options.
Hershey currently has a solid presence in the United States but a
lot of room for growth
in its international market. The North American market is still

considered to be in the stars phase
because Hershey has had a long run of growth and profitability
within the United States, whereas
Hershey’s international market has room for growth (David &
David, 2016). The chocolate and
confectionary business is still considered a high growth industry
and Hershey’s market share is
very low in foreign markets.
Reference
David, F. R., & David, F. R. (2016). Strategic management: A
competitive advantage approach,
concepts, global edition (16th ed.) [QSR-PRO].

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