Chapter 3 -

Strategy
analysis and
management
decision
MA Dang Quynh Nhu
qdng21@gmail.com
ISEF- APD
Key points
3.1 Strategy analysis framework 3.3 Types of strategies in management
• SWOT matrix • Levels of strategic management
• SPACE matrix • Strategic management direction:
• BCG matrix Diversification vs. Concentration
• IE Matrix • Strategic management in different business
types
• QSPM Matrix
3.2 Role of organizational culture and
choice of management
• Cultural criteria in decision process
• Board of directors in strategic planning
• Other factors’ influence on strategic
management
The Strategy-Formulation Analytical
Framework
Is a three-stage decision-making framework
The Input Stage
• EFE Matrix, IFE Matrix, and CPM provides basic input information for the
matching and decision stage matrices.
• The input tools require quantifying subjectivity during early stages of the
strategy formulation process.
• Good intuitive judgment is always needed in determining appropriate
weights and ratings.
The Matching Stage
Strategy = a match of internal resources and skills vs. opportunities and
risks (from external envi.)
• The matching stage consists of five techniques: SWOT Matrix, the SPACE
Matrix, the BCG Matrix, the IE Matrix, and the Grand Strategy Matrix.
• These tools rely on information derived from the input stage to match.
• Matching external and internal key factors is the essential for effectively
generating feasible alternative strategies.
• Successful matching depends on those underlying key factors being
specific, actionable, and divisional to the extent possible.
The Decision Stage
QSPM offers a robust procedure to determine the relative
attractiveness of alternative strategies.
3.1 Strategy analysis framework
3.1.1 SWOT matrix
3.1.2 SPACE matrix
3.1.3 BCG matrix
3.1.4 IE Matrix
3.1.5 Grand Strategy Matrix
3.1.6 QSPM Matrix

T H U R S DAY, F E B R U A R Y 2 9 , 2 0 2 4 SAMPLE FOOTER TEXT 7

1# SWOT matrix
• SWOT analysis refers to strengths, weaknesses, opportunities,
and threats.
• Strengths (S) and weaknesses (W) refer to the organization’s
internal environment over which the organization has control.
• Opportunities (O) and threats (T) refer to the organization’s
external environment, over which the organization has much
less control.
allows an organization to determine the extent of the strategic fit between
its capabilities and the needs of its external environment.
Process of constructing a 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
resultant SO strategies in the appropriate cell.
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.
• 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.
• 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
weakness and avoiding external threats.
Limitations of SWOT Analysis
• is simply an organizing framework -> can help an organization to identify its
resources and capabilities more clearly
• often produces lengthy lists which are each accorded the same weighting
• Strengths and weaknesses may not be readily translated into opportunities
and threats -> no match
• Ambiguity: the same factor can be characterized as both a strength and a
weakness. One factor can also be an opportunity and a threat.
• The analysis may be too focused within the industry boundary and miss the
weak signals, tipping points, or disruptive innovations which can restructure
the organization’s industry.
2# SPACE matrix
SPACE - Strategic Position and Action Evaluation
• indicates whether aggressive, conservative, defensive, or
competitive strategies are most appropriate for a given
organization
• The axes represent 2 internal dimensions and 2 external dimensions
The dimensions
• financial position (FP), competitive position (CP), stability position (SP), and
industry position (IP)
• CP and IP: the horizontal axes
• SP and FP: the vertical axes
Q:
How about the smartphone industry?
How about the canned food industry?
Developing a SPACE Matrix
1. Select a set of variables to define: financial position (FP), competitive
position (CP), stability position (SP), and industry position (IP).
2. Assign a numerical value ranging from:
+1 to +7 to each of the variables that make up the FP and IP dimensions.
–1 (best) to –7 (worst) to each of the variables that make up the SP and CP dimensions.
On the FP and CP axes, make comparisons to competitors. On the IP and SP
axes, make comparisons to other industries.
On the SP axis, know that a –7 denotes highly unstable industry conditions,
whereas –1 denotes highly stable.
Developing a SPACE Matrix
3. Compute an average score for FP, CP, IP, and SP by summing the values given to the
variables of each dimension and then by dividing by the number of variables included in
the respective dimension.
4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the SPACE Matrix.
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 (x, y)
coordinate.
6. Draw a directional vector from the origin of the SPACE Matrix (0,0) through the new (x, y)
coordinate. That vector, being located in a particular quadrant, reveals particular strategies
the organization should consider.
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 Risk involved in business
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
Limitations of SPACE Matrix
1. It is a snapshot in time.
2. There are more than four dimensions that firms could/should be rated on.
3. The directional vector could fall directly on an axis, or could even go
nowhere if the coordinate is (0,0).
4. Implications of the exact angle of the vector within a quadrant are unclear.
5. The relative attractiveness of alternative strategies generated is unclear.
6. Key underlying internal and external factors are not explicitly considered.
#3 BCG matrix
• Boston Consulting Group (BCG) Matrix
• Based in Boston and having 6,200
consultants worldwide, the Boston
Consulting Group (BCG) has 87 offices
in 45 countries.
• The Boston Consulting Group is a
private management consulting firm
that specializes in strategic planning.
BCG Matrix
• graphically portrays differences among divisions based on two dimensions:
(1) relative market share position on the x-axis,
(2) industry growth rate, measured in percentage terms—that is, the average annual
increase in revenue for all firms in an industry, on the y-axis.

• Relative market share position (RMSP) is defined as the ratio of a

division’s own market share (or revenues) in a particular industry to the
market share (or revenues) held by the largest rival firm in that industry.
Other variables can be used in this analysis besides revenues.
Benefits of BCG Matrix
• draws attention to the cash flow, investment characteristics,
and needs of an organization’s various divisions.
• The divisions of many firms evolve over time
• Over time, organizations should strive to achieve a portfolio of
divisions that are stars
Limitations of BCG Matrix
• viewing every business as a star, cash cow, dog, or question
mark is an oversimplification
• does not reflect if various divisions or their industries are
growing over time
• other variables besides relative market share position and
industry growth rate in sales, such as size of the market and
competitive advantages, are important in making strategic
decisions about various divisions.
#4 IE Matrix
• positions an organization’s divisions (segments) in a nine-cell
display ~ portfolio matrices
• size of each circle represents the percentage of sales
contribution of each division
• pie slices reveal the percentage of profit contribution of each
division
Watch for more:
https://youtu.be/rVQoDa0OVeQ?si=7u3iDK6u_JbJAupB
BCG Matrix and IE Matrix
There are four important differences:
1. The x and y axes are different
2. The IE Matrix requires more information about the divisions
than does the BCG Matrix
3. The strategic implications of each matrix are different
4. The IE Matrix has nine quadrants versus four in a BCG Matrix
The 2 dimensions of IE Matrix:
(1) the IFE total weighted scores on the x-axis;
(2) the EFE total weighted scores on the y-axis
• On the x-axis of the IE Matrix, an IFE total weighted score of 1.0
to
1.99 represents a weak internal position; a score of 2.0 to 2.99
is considered average; and a score of 3.0 to 4.0 is strong.
• On the y-axis, an EFE total weighted score of 1.0 to 1.99 is
considered low; a score of 2.0 to 2.99 is medium; and a score
of 3.0 to 4.0 is high.
• Circles, representing divisions, are positioned in an IE Matrix
based on their (x, y) coordinate.
Despite having nine cells (or quadrants), the IE Matrix has
three major regions that have different strategy implications.

Region 1—The prescription for divisions that fall into cells I, II, or IV
can be described as grow and build.
Region 2—The prescription for divisions that fall into cells III, V, or
VII can be described as hold and maintain strategies
Region 3—The prescription for divisions that fall into cells VI, VIII, or
IX can be described as harvest or divest.
 hold and
grow and build grow and build
maintain

hold and
grow and build harvest or divest
maintain

hold and
harvest or divest harvest or divest
maintain
The Grand Strategy Matrix
• based on two evaluative dimensions:
1. competitive position on the x-axis

2. market (industry) growth on the y-axis

• four strategy quadrants
Excellent
position!

Should take
aggressive
approach
#5 QSPM Matrix
• The Decision Stage: The Quantitative Strategic Planning Matrix
(QSPM)
• The Quantitative Strategic Planning Matrix (QSPM) objectively
indicates which alternative strategies are best.
• The QSPM uses input from Stage 1 analyses and matching
results from Stage 2 analyses to decide
• QSPM requires assignment of ratings (called attractiveness
scores), but making “small” rating decisions enables strategists
to make effective “big” decisions
Six steps to develop a QSPM
Step 1: Make a list of the firm’s key external opportunities
and threats and internal strengths and weaknesses in the left
column of the QSPM.
Step 2: Assign weights to each key external and internal factor.
Step 3: Examine the Stage 2 (matching) matrices, and
identify alternative strategies that the organization should
consider implementing.
Step 4: Determine the Attractiveness Scores (AS), defined as numerical
values that indicate the relative attractiveness of each strategy considering a
single external or internal factor.
Attractiveness Scores (AS) are determined by examining each key external or internal factor, one at a time, and
asking the question, “Does this factor affect the choice of strategies being made?”
If the answer to this question is yes, then the strategies should be compared relative to that key factor.
Specifically, AS should be assigned to each strategy to indicate the relative attractiveness of one strategy over
others, considering the particular factor.
The range for AS is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive.
By “attractive,” we mean the extent.

Step 5: Compute the Total Attractiveness Scores.

Total Attractiveness Scores (TAS) are defined as the product of multiplying
the weights (Step 2) by the AS (Step 4) in each row.
Step 6: Compute the Sum Total Attractiveness Score. Add TAS in each
strategy column of the QSPM.
Limitations of QSPM
• First, it always requires informed judgments regarding AS
scores;
• Second, it can be only as good as the prerequisite information
and matching analyses on which it is based.
Key points
3.1 Strategy analysis framework 3.3 Types of strategies in management
• SWOT matrix • Levels of strategic management
• SPACE matrix • Strategic management direction:
• BCG matrix Diversification vs. Concentration
• IE Matrix • Strategic management in different business
types
• QSPM Matrix
3.2 Role of organizational culture and
choice of management
• Cultural criteria in decision process
• Board of directors in strategic planning
• Other factors’ influence on strategic
management
3.2 Role of organizational culture and
choice of management
• Cultural criteria in decision process
• Board of directors in strategic planning
• Other factors’ influence on strategic management

43
#1 Cultural criteria in decision process
Cultural Aspects of Strategy Analysis and Choice
• Organizational culture includes the set of shared values, beliefs, attitudes,
customs, norms, rites, rituals, personalities, heroes, and heroines that
describe a firm.
• If a firm’s strategies are supported by an organization’s culture, then
managers often can implement changes swiftly and easily, ánd vise versa.
• Strategies that require fewer cultural changes may be more attractive
because extensive changes can take considerable time and effort.
With M&A cases….?
#2 Board of directors in strategic planning
• A board of directors is a group of individuals elected by the
ownership of a corporation to have oversight and guidance
over management and to look out for shareholders’ interests.
• The act of oversight and direction is referred to as governance.
Board of Director Duties and Responsibilities
1. CONTROL AND OVERSIGHT OVER MANAGEMENT 2. ADHERENCE TO LEGAL PRESCRIPTIONS
a. Select the Chief Executive Officer (CEO). a. Keep abreast of new laws.
b. Sanction the CEO’s team. b. Ensure the entire organization fulfils legal prescriptions.
c. Provide the CEO with a forum. c. Pass bylaws and related resolutions.
d. Select new directors.
d. Ensure managerial competency.
e. Approve capital budgets.
e. Evaluate management’s performance. f. Authorize borrowing, new stock issues, bonds, and so on
f. Set management’s salary levels, including fringe benefits.
g. Guarantee managerial integrity through continuous auditing.
h. Chart the corporate course.
i. Devise and revise policies to be implemented by management.

3. CONSIDERATION OF STAKEHOLDERS’ INTERESTS 4. ADVANCEMENT OF STOCKHOLDERS’ RIGHTS

a. Monitor product quality. a. Preserve stockholders’ equity.
b. Facilitate upward progression in employee quality of work life. b. Stimulate corporate growth so that the firm will survive and
c. Review labor policies and practices. flourish.
d. Improve the customer climate. c. Guard against equity dilution.
e. Keep community relations at the highest level. d. Ensure equitable stockholder representation.
f. Use influence to better governmental, professional association, e. Inform stockholders through letters, reports, and meetings.
and educational contacts. f. Declare proper dividends.
g. Maintain good public image g. Guarantee corporate survival.
#3 Other factors’ influence on strategic management
The Politics of Strategy Analysis and Choice

• All organizations are political.

• Internal politics affect the choice of strategies in all organizations.
• A major responsibility of strategists is to guide the development of
coalitions, to nurture an overall team concept, and to gain the support of
key individuals and groups of individuals.
• In the absence of objective analyses, strategy decisions too often are
based on the politics of the moment. With development of improved
strategy-formation analytical tools, political factors become less
important in making strategic decisions.
• In the absence of objectivity, political factors sometimes dictate
strategies
Successful strategists
• kept a low political profile on unacceptable proposals
• let most negative decisions come from subordinates or a group consensus,
reserving their personal refusals for big issues and crucial moments
• did a lot of chatting and informal questioning to stay well-informed of how things
were progressing and to know when to intervene
• led strategy but did not dictate
• gave few orders, announced few decisions, depended heavily on informal
questioning, and sought to probe and clarify until a consensus emerged
• generously and visibly rewarded key thrusts that succeeded
• stayed alert to the symbolic impact of their own actions and
statements so as not to send false signals that could stimulate
movements in unwanted directions.
ensured that all major power bases within an organization were
represented in, or had access to, top management
• interjected new faces and new views into considerations of major
changes
• minimized their own political exposure on highly controversial issues
and in circumstances in which major opposition from key power
centers was likely
Tactics used by politicians that can aid strategists
1. Choose the methods that will afford the best commitment from
employees.
2. Employing a popular strategy for satisfactory results is better than trying
to achieve optimal results with unpopular ones.
3. Shifting from specific to general issues and concerns is a good way to
gain commitment, usually.
4. Shifting from short-term to long-term issues and concerns is a good way
to gain commitment and achieve desired result, usually.
5. Middle-level managers must be genuinely involved in and supportive of
strategic decisions, because successful implementation will hinge on their
support.
Key points
3.1 Strategy analysis framework 3.3 Types of strategies in management
• SWOT matrix • Levels of strategic management
• SPACE matrix • Strategic management direction
• BCG matrix • Strategic management in different business
• IE Matrix types
• QSPM Matrix
3.2 Role of organizational culture and
choice of management
• Cultural criteria in decision process
• Board of directors in strategic planning
• Other factors’ influence on strategic
management
3.3 Types of strategies in management
• Levels of strategic management
• Strategic management direction
• Strategic management in different business types

T H U R S DAY, F E B R U A R Y 2 9 , 2 0 2 4 SAMPLE FOOTER TEXT 52

Levels of strategic management
Large firms: four levels
Small firms: three levels
Integration Strategies
Integration strategies = Vertical and horizontal actions by firms
• Vertical integration strategies allow a firm to gain control over
distributors and suppliers
=> Forward integration & backward integration ~ vertical
integration
• Horizontal integration refers to gaining ownership and/or
control over competitors
Forward Integration
involves gaining ownership or increased control over
distributors or retailers.

Different stages in a typical supply chain

The following six guidelines indicate when forward
integration may be an especially effective strategy:
1. Present distributors are especially expensive, unreliable, or incapable of meeting the
firm’s distribution needs.
2. The availability of quality distributors is too limited
3. The industry that is growing and is expected to continue to grow markedly
4. An organization has both the capital and human resources needed to manage the new
business of distributing its own products
5. The advantages of stable production are particularly high
6. Present distributors or retailers have high profit margins

An effective mean of implementing forward integration is

franchising
Backward Integration
involves gaining ownership or increased control
over distributors or retailers.
De-integration
• makes sense in industries that have global sources of
supply.
• Some industries, such as automotive and aluminum
producers, are reducing their historical pursuit of backward
integration.
• Instead of owning their suppliers, companies negotiate
with several outside suppliers.
E.g: Ford and Chrysler
Backward integration may be an especially
effective strategy?
1. present suppliers are especially expensive, unreliable, or incapable of meeting the
firm’s needs for parts, components, assemblies, or raw materials.
2. The number of suppliers is small and the number of competitors is large.
3. An organization competes in an industry that is growing rapidly
4. An organization has both capital and human resources to manage the new
business of supplying its own raw materials.
5. The advantages of stable prices are particularly important;
6. Present suppliers have high profit margins
7. An organization needs to quickly acquire a needed resource.
Horizontal Integration
• Seeking ownership of or control over a firm’s competitors
• Mergers, acquisitions
Example:
Both Dollar General and Dollar Tree recently competed for months to acquire Family
Dollar.
The winner, Dollar Tree, is reducing prices and converting Family Dollar stores into
bright, clean, friendly places.
Dollar Tree still sells more items for a dollar or less, whereas Family Dollar sells more
branded merchandise.
5 guidelines indicate when horizontal integration may
be an especially effective strategy
1. An organization can gain monopolistic characteristics in a particular
area or region without being challenged by the federal government for
“tending substantially” to reduce competition.
2. An organization competes in a growing industry.
3. Increased economies of scale provide major competitive advantages.
4. An organization has both the capital and human talent needed to
successfully manage an expanded organization
5. Competitors are faltering as a result of a lack of managerial expertise
or a need for particular resources that an organization possesses; note
that horizontal integration would not be appropriate if competitors are
doing poorly because in that case overall industry sales are declining.
#2 Strategic management direction
• two general types of diversification strategies: related
diversification and unrelated diversification
• related diversification strategies to capitalize on synergies
• Transferring competitively valuable expertise, technological know-how, or
other capabilities from one business to another
• Combining the related activities of separate businesses into a single operation
to achieve lower costs
• Exploiting common use of a well-known brand name
• Cross-business collaboration to create competitively valuable resource
strengths and capabilities
Diversification
• Diversification strategies are becoming less popular because
organizations are finding it more difficult to manage diverse
business activities.
• Rapidly appearing new technologies, new products, and fast-shifting
buyer preferences make diversification difficult.
• In an unattractive industry, for example, diversification makes sense,
such as for Philip Morris, because cigarette consumption is
declining, product liability suits are a risk, and some investors reject
tobacco stocks on principle.
Related Diversification
The guidelines for when related diversification may be an effective strategy
are as follows.
1. An organization competes in a no-growth or a slow-growth industry.
2. Adding new, but related, products would significantly enhance the sales
of current
products.
3. New, but related, products could be offered at highly competitive prices.
4. New, but related, products have seasonal sales levels that counterbalance
an organization’s
existing peaks and valleys.
5. An organization’s products are currently in the declining stage of the
product’s life cycle.
6. An organization has a strong management team.
Unrelated diversification
Given below are 10 guidelines when unrelated diversification may be an
especially effective strategy.
1. Revenues derived from an organization’s current products or services would
increase significantly by adding the new, unrelated products.
2. An organization competes in a highly competitive or a no-growth industry,
as indicated by low industry profit margins and returns.
3. An organization’s present channels of distribution can be used to market
the new products to current customers.
4. New products have countercyclical sales patterns compared to an
organization’s present products.
5. An organization’s basic industry is experiencing declining annual sales and
profits.
Unrelated diversification
Given below are 10 guidelines when unrelated diversification may be an especially effective
strategy.
6. An organization has the capital and managerial talent needed to compete successfully in a
new industry.
7. An organization has the opportunity to purchase an unrelated business that is an attractive
investment opportunity.
8. Financial synergy exists between the acquired and acquiring firm. (Note that a key
difference between related and unrelated diversification is that the former should be based on
some commonality in markets, products, or technology, whereas the latter is based more on
profit considerations.)
9. Existing markets for an organization’s present products are saturated.
10. Antitrust action could be charged against an organization that historically has
concentrated on a single industry.
Defensive strategies
• retrenchment, divestiture, or liquidation (cắt giảm, bán bớt,
đóng cửa)
Retrenchment – cắt giảm
• occurs when an organization regroups through cost and asset reduction to
reverse declining sales and profits.
• Also called a turnaround or reorganizational strategy
• designed to reinforce an organization’s basic distinctive competence
• declaring bankruptcy can be an effective retrenchment strategy.
Bankruptcy can allow a firm to avoid major debt obligations and to void
union contracts.
Five guidelines for when retrenchment may be an
especially effective strategy to pursue
1. An organization has a clearly distinctive competence but has failed consistently
to meet its objectives and goals over time.
2. An organization is one of the weaker competitors in a given industry.
3. An organization is plagued by inefficiency, low profitability, poor employee
morale, and
pressure from stockholders to improve performance.
4. An organization has failed to capitalize on external opportunities, minimize
external
threats, take advantage of internal strengths, and overcome internal weaknesses
over
time; that is, when the organization’s strategic managers have failed (and possibly
will be
replaced by more competent individuals).
5. An organization has grown so large so quickly that major internal
reorganization is needed.
Divestiture – bán bớt
• Selling a division or part of an organization is called divestiture.
• It is often used to raise capital for further strategic acquisitions or
investments.
• Divestiture can be part of an overall retrenchment strategy to rid an
organization of businesses that are unprofitable, that require too
much capital, or that do not fit well with the firm’s other activities.
• A version of divestiture occurs when a corporation splits into two or
more parts.
• A version of divestiture occurs when a corporation splits into
two or more parts.
• Many large conglomerate firms are employing this strategy.
Guidelines for when divestiture may be
an especially effective strategy
1. An organization has pursued a retrenchment strategy and failed to accomplish
needed improvements.
2. To be competitive, a division needs more resources than the company can
provide.
3. A division is responsible for an organization’s overall poor performance.
4. A division is a misfit with the rest of an organization; this can result from radically
different markets, customers, managers, employees, values, or needs.
5. A large amount of cash is needed quickly and cannot be obtained reasonably
from other sources.
6. Government antitrust action threatens an organization.
Liquidation
• Selling all of a company’s assets, in parts, for their tangible worth is
called liquidation; it is associated with Chapter 7 bankruptcy.
• Liquidation is a recognition of defeat and consequently can be an
emotionally difficult strategy.
• it may be better to cease operating than to continue losing large
sums of money. (bán cắt lỗ)
Three guidelines indicate when liquidation
may be an especially effective strategy
1. An organization has pursued both a retrenchment strategy and a
divestiture strategy, and neither has been successful.
2. An organization’s only alternative is bankruptcy. Liquidation
represents an orderly and planned means of obtaining the greatest
possible amount of cash for an organization’s assets. A company can
legally declare bankruptcy first and then liquidate various divisions
to raise needed capital.
3. The stockholders of a firm can minimize their losses by selling the
organization’s assets.
#3 Strategic management in different business types
Reading: p. 155 onwards.
Reminder
You have a formal Quiz in the next session!