Which strategy tool enhances a multidivisional firms efforts to formulate strategies?

The Boston Consulting Group (BCG) MatrixThe Boston Consulting Group (BCG) Matrix and the Internal-External (IE) Matrix aredesigned specifically to enhance a multidivisional firm’s efforts to formulate strategies.(BCG is a private management consulting firm based in Boston. BCG employs about4,300 consultants worldwide.). The BCG Matrix graphically portrays differences amongdivisions in terms of relative market share position and industry growth rate. The BCGMatrix allows a multidivisional organization to manage its portfolio of businesses byexamining the relative market share position and the industry growth rate of eachdivision relative to all other divisions in the organization. Relative market share positionis defined as the ratio of a division’s own market share (or revenues) in a particularindustry to the market share (or revenues) held by the largest rival firm in that industry.Note in Table 6-5 that other variables can be in this analysis besides revenues. Relativemarket share position for Heineken could also be determined by dividing Heineken’srevenues by the leader Corona Extra’s revenues.The Internal-External (IE) MatrixThe Internal-External (IE) Matrix positions an organization’s various divisions in a nine-cell display, illustrated in Figure 6-9. The IE Matrix is similar to the BCG Matrix in thatboth tools involve plotting organization divisions in a schematic diagram; this is why theyare both called “portfolio matrices.” Also, the size of each circle represents thepercentage sales contribution of each division, and pie slices reveal the percentageprofit contribution of each division in both the BCG and IE Matrix.The Grand Strategy MatrixIn addition to the SWOT Matrix, SPACE Matrix, BCG Matrix, and IE Matrix, the GrandStrategy Matrix has become a popular tool for formulating alternative strategies. Allorga-nizations can be positioned in one of the Grand Strategy Matrix’s four strategyquadrants. A firm’s divisions likewise could be positioned. The Grand Strategy Matrix isbased on two evaluative dimensions: competitive position and market (industry) growth.Any industry whose annual growth in sales exceeds 5 percent could be considered to

Where alternative strategies are derived from

The firm's vision, mission, objectives, external audit, and internal audit; they're consistent with, or build on, past strategies that have worked well

Strategies should be ranked in order of attractiveness by all participants

1. Shouldn't be implemented

2. Possibly should be

3. Probably should be

4. Definitely should be implemented

Techniques of the input stage

Strategists to quantify subjectivity during early stages of the strategy-formulation process

How strategy is sometimes defined

The match an organization makes between its internal resources and skills and the opportunities and risks created by its external factors

Techniques of the Matching Stage

SWOT Matrix

SPACE Matrix

BCG Matrix

IE Matrix

Grand Strategy Matrix

What happens in the matching stage

Info is derived from the input stage to match external opportunities and threats with internal strengths and weaknesses

Example of an offense in the matching stage

Developing strategies that use strengths to capitalize on opportunities

Example of a defense in the matching stage

Strategies are designed to improve upon weaknesses while avoiding threats

Use a firm's internal strengths to take advantage of external opportunities

Aim at improving internal weaknesses by taking advantage of external opportunities

Uses a firm's strengths to avoid or reduce the impact of external threats

Defensive tactics directed at reducing internal weakness and avoiding external threats

Should be the starting point for discussion on how proposed strategies could be implemented as well as cost-benefit considerations that ultimately could lead to competitive advantage

What a SWOT Matrix is considered

A static assessment or snapshot in time; may overemphasize a single internal or external factor

The Strategic Position and Action Evaluation (SPACE) Matrix

Indicated whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization (4 quadrants)

2 Internal dimensions of the SPACE Matrix

Financial Position (FP)

Competitive Position (CP)

2 External dimensions of SPACE Matrix

Stability Position (SP)

Industry Position (IP)

Made up of autonomous divisions (or profit centers) of an organization

The Boston Consulting Group (BCG) and Internal-External (IE) Matrix

Designed specifically to enhance a multidivisional firm's efforts to formulate strategies

What the BCG Matrix graphically portrays

Differences among divisions in terms of relative market share position and industry growth rate

Relative Market Share Position

The ratio of a division's own market share (or revenues) in a particular industry to the market share held by the largest rival firm in that industry

What the x-axis represents on the BCG Matrix

Relative market share position

What the y-axis represents on the BCG Matrix

The industry growth rate in sales, measured in percentage terms (-20 to +20; 0.0 is the midpoint)

Divisions located in Quadrant I of the BCG Matrix

Divisions located in Quadrant II of the BCG Matrix

Divisions located in Quadrant III of the BCG Matrix

Divisions located in Quadrant IV of the BCG Matrix

Major benefit of the BCG Matrix

It draws attention to the cash flow, investment characteristics, and needs of an organization's various divisions

Downfalls of the BCG Matrix

Oversimplification; many fall in the middle and aren't easily classified, doesn't reflect whether industries are growing over time (no temporal qualities!)

Another name for the BCG and IE Matrix

Portfolio Matrices (both involve plotting in a schematic diagram)

The IE Matrix requires more information about the divisions than the BCG Matrix

2 Key Dimensions of the IE Matrix

The IFE total weighted scores on the x-axis and the EFE total weighted scores on the y-axis

2 Evaluative Dimensions of the Grand Strategy Matrix

Competitive position

Market (industry) growth

Quantitative Strategic Planning Matrix (QSPM)

The only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions

The relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved

Positive Features of the QSPM

1. Sets of strategies examined sequentially or simultaneously

2. No limit to the number examined

3. Requires strategists to integrate pertinent external and internal factors into the decision process

1. Always requires intuitive judgments and educated assumptions

2. It can only be as good as the prerequisite info and matching analyses upon which it is based

Major responsibility of strategists

To guide the development of coalitions, to nurture an overall team concept, and to gain the support of key individuals and groups of individuals

A group of individuals who are elected by the ownership of a corporation to have oversight and guidance over mgmt and who look out for shareholders' interests

The act of oversight and direction

Legal responsibilities to stockholders and society for all company activities, for corporate performance, and for ensuring that a firm has an effective strategy

Which strategy tool enhances a multidivisional firm's efforts to formulate strategies?

Which matrix is an important tool of strategy formulation?

What type of strategies would you recommend when a firm's Space Matrix?

What are the most common approaches of strategy formulation?