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STRATEGY ANALYSIS AND CHOICE

STRATEGY ANALYSIS AND CHOICE. The Nature. Strategy Analysis and Choices. To Achieve Mission & Objective. External Env ’ Analysis. Generate, Evaluate, Select Strategies. Vision & Mission. Establish Long term Objective. Internal Env ’ Analysis. The Strategy Formulation Framework.

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STRATEGY ANALYSIS AND CHOICE

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  1. STRATEGY ANALYSIS AND CHOICE

  2. The Nature Strategy Analysis and Choices To Achieve Mission & Objective External Env’ Analysis Generate, Evaluate, Select Strategies Vision & Mission Establish Long term Objective Internal Env’ Analysis

  3. The Strategy Formulation Framework STAGE – 1 : The Input Stage External Factor Evaluation (EFE) Competitor Profile Matrix (CPM) Internal Factor Evaluation (IFE) STAGE – 2 : Matching Stage Strategic Position and Action Evaluation Boston Consulting Group (BCG) Internal External (IE) Matrix Grand Strategy Matrix SWOT Matrix STAGE – 3 : Decision Stage Quantitative Strategic Planning Matrix (QSPM)

  4. SWOT Matrix Strength Weaknesses Inventory turn over up to 6,7% Average customer purchase up to $ 128 Employee morale is excellent In store promotion = 20% increase in sale Revenue up to 16% Newspaper adv expense down 10% Technical support has MIS degree Debt to total asset down 34% Software revenue down 12% Location of store hurt by new highway Total store revenue down 8% Carpet in store must be repaired Store have no Website Bathroom need refurbishing Supplier time delivery up 2 days Cust’ checkout process too slow Opportunities Population growing 10% Rival store opening 1 km away Vehicle traffic up 12% Computer user growing 8% Small business growth 10% Desire for Website up 18% Vendor average six new product Add 4 new in store promotion monthly (S4, O3) Add 2 new repair/service person (S5, O4) Send flyer to senior over age 55 (S6, O4) Purchase land to built new store (W2, O2) Up Website service by 50% (W5, O6) Launch mail out to all realtors in city (W3, O6) Best buy opening new store Local Univ offer computer repair New bypass hwy will divert traffic New mall being built nearby Vendor raising price 8% Gas prices up 14% Hire 2 more repair person and market the new service (S5, S7, T1) Purchase land to built new store (S8, T3) Raise out-of-store service call from $60 to $80 (S5, T6) Hire 2 new cashier (W8,T1,T4) Install new carpet /paint bath (W4.6, T1) Threats

  5. Strategic Position and Action Evaluation (SPACE) FS Financial Strength +6 Aggressive : B, F, H Integration Market Penetration Market Development Product Development Diversification Conservative : Market Penetration Market Development Product Development Related Diversification +5 +4 +3 +2 Competitive Advantage +1 Industry Strength CA IS -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 +7 -1 Competitive : B, F, H Integration Market Penetration Market Development Product Development Defensive : Retrenchment Divestiture Liquidation -2 -3 -4 -5 -6 Environmental Stability ES

  6. Internal Strategic Position External Strategic Position Example Factors of SPACE Financial Strength (FS) : Return on Investment, Leverage, Liquidity, Working Capital, Cash Flow, Inventory turn over, Earning per share, Price earning ratio. Competitive Advantage (CA) : Market share, Product quality, Product Life cycle, Customer Loyalty, Competition’s capacity utilization, Technological know-how, Control over supplier and distributor Environmental Stability (ES) : Technological change, Rate of Inflation, Demand variability, Price range of competing product, Barrier to entry into market, Competitive pressure, Ease of exit from market, Price elasticity of demand, Risk involve in business. Industry Strength (IS) : Growth potential, Profit potential, Financial Stability, Technological know-how, Resource utilization, Ease to entry into market, Productivity, Capacity Utilization.

  7. The Steps to Develop a SPACE Matrix Select a set of variables to define Financial Position (FP), Competitive Position (CP), Stability Position (SP) and Industry Position (IP) Assign numerical value ranging from +1 (Worst) to +7 (Best) for FP and IP dimension. Assign -1(best) to -7 (Worst) for SP and CP dimension FP and CP makes comparison to competitors, SP and IP compare to other industries. Compute an average score of FP, IP, SP and CP Plot the average scores for FP, IP, SP and CP on the axis in the SPACE Matrix Add the two scores in each x-axis and y-axis and make the resultant Draw a directional vector that reveals the strategies recommended.

  8. SPACE Matrix for a Bank TUGAS : Kerjakansecarakelompok Perhatikan data Financial Position FP, Competitive Position CP, Industry Position IP dan Stability Position SP darisebuan Bank padahalaman 216, Tabel 6-3 Tentukanbesaranvektor FP, CP, IP dan SP Tentukan resultant darikeempatvektortersebut Tentukanstrategi yang harusdijalankanoleh bank tersebut

  9. Boston Consulting Group (BCG) Cash Generation (Market Share) High Low Star Question Mark Backward Integration Forward Integration Horizontal Integration Market Penetration Market Development Product Development Market Penetration Market Development Product Development Divestiture Market Share : Sales relative to those of other competitors in the market (dividing point is usually selected to have only two three largest competitors in any market fall into the high market share region). Growth Rate : Industry Growth rate in constant dollars (dividing point is typically GNP’s growth rate) High ?? * Cash Use (Growth Rate) Cash Cow Dog Rp X Low Diversification Product Development Divestiture Retrenchment Retrenchment Liquidation Divestiture

  10. BCG Matrix Example TugasKelompok : Buatlah BCG Matrix nya

  11. The Internal-External (IE) Matrix • B, F, H Integration • Market Penetration • Market Development • Product Development The IFE Total Weighted Score Strong 3.0 – 4.0 Average 2.0 – 3.0 Weak 1.0 – 2.0 3.0 2.0 1.0 4.0 I II III High 3.0 – 4.0 3.0 IV V VI The EFE Total Weighted Score Medium 2.0 – 3.0 2.0 VII VIII IX Low 1.0 – 2.0 1.0 • Hold and Maintain • Market Penetration • Product Development • Harvest or Divest • Retrenchment • Divestiture

  12. IE Matrix Example Buatlah IE Matrix nya

  13. Model of Grand Strategy Matrix • Grand Strategy Matrix become a popular tool for formulating alternative strategies. • Grand Strategy Matrix is based on two evaluative dimension : Competitive Position CP and Market (Industry) Growth. • Growth in sales exceeds 5% could be considered to have rapid growth • Firm located in Quadrant 1 of the Grand Strategy Matrix are in excellent strategic position

  14. Model of Grand Strategy Matrix Rapid Market Growth Quadrant 1 Market Development Market penetration Product Development Forward Integration Backward Integration Horizontal Integration Vertical Integration Related Diversification Quadrant 2 Market Development Market Penetration Product Development Horizontal Integration Divestiture Liquidation Weak Competitive Position Strong Competitive Position Quadrant 4 Related diversification Unrelated Diversification Joint Venture Quadrant 3 Retrenchment Related Diversification Unrelated Diversification Divestiture Liquidation Slow Market Growth

  15. Factors that Shape Market Attractiveness Market Attractiveness Market Forces Competitive Environment Market Access Market Size Number of Competitor Customer Familiarity Growth Rate Price Rivalry Channel Access Buyer Power Ease of Entry Sales Requirements

  16. Market Attractiveness Index

  17. Market Attractiveness Index = (30% x 62) + (40% x 44) + (30% x 84) = 18.6 + 17.6 + 26.2 = 61 Very Unattractive Somewhat Unattractive Somewhat Attractive Very Attractive Unattractive Attractive

  18. Factors that Influence Competitive Position Competitive Position Differentiation Position Cost Position Marketing Position Product Quality Unit Cost Market Share Service Quality Transaction Cost Brand Awareness Brand Image Marketing Expenses Distribution

  19. Competitive Position Index

  20. Competitive Position Index = (40% x 74) + (40% x 46) + (20% x 34) = 29.6 + 18.4 + 6.8 = 55 Considerably Weak Clearly Weak Somewhat Weak Somewhat Strong Clearly Strong Considerably Strong

  21. The Quantitative Strategic Planning Matrix QSPM The Decision Stage • Step 1 : Make a list of the firm’s external opportunities/threats and Internal strength/weaknesses in the left column of the QSPM, information from EFE and IFE minimum 10 key success factor. • Step 2 : Assign weights to each external and internal factors • Step 3 : Examine the stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing. • Step 4 : Identify the attractiveness scores (AS), AS are determined by examining each key factors and asking : “Does this factor effect the choice of strategies being made ?” AS is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive and 4 = highly attractive • Step 5 : Compute the Total Attractive Scores (TAS) • Step 6 : Compute the Sum Total Attractive Scores

  22. The Quantitative Strategic Planning Matrix - QSPM PerhatikanTabel QSPM diBuku 1 hal 226.

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