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Chapter 6 Strategy Analysis & Choice

Chapter 6 Strategy Analysis & Choice. Strategic Management: Concepts & Cases 12 th Edition Fred David. Chapter Outline ( cont’d ). The Decision Stage. Strategy-Formulation Analytical Framework. Quantitative Strategic Planning Matrix (QSPM). Stage 3: The Decision Stage.

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Chapter 6 Strategy Analysis & Choice

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  1. Chapter 6Strategy Analysis & Choice Strategic Management: Concepts & Cases 12th Edition Fred David

  2. Chapter Outline (cont’d) The Decision Stage

  3. Strategy-Formulation Analytical Framework Quantitative StrategicPlanning Matrix(QSPM) Stage 3:The Decision Stage

  4. What is a QSPM Matrix? • Quantitative Strategic Planning Matrix • Quantitative Strategic Planning Matrix or a QSPM provides an analytical method for comparing feasible alternative actions. • A technique designed to determine the relative attractiveness of feasible alternative actions. -The only technique that helps pick or select the best alternative from several strategies.

  5. The QSPM Matrix • The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively select the best strategy using input from other management techniques and some easy computations. • In other words, the QSPM method uses inputs from stage 1 analyses, matches them with results from stage 2 analyses, and then decides objectively among alternative strategies.

  6. Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/Environmental Technological Competitive Weight AS Strategy 1 Strategy 2 Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems Strategic Alternatives QSPM

  7. Constructing the QSPM (1/5) • List the firm’s key internal strategic factors (strengths and weaknesse ) and key external factors (opportunities and threats) in the left column of the QSPM. • Assign weights to each key external and internal factor. These weights should be identical to the weights in the IFE and EFE. • Steps 1 & 2 are from the IFE and EFE matrix (i.e. Input Stage)

  8. Constructing the QSPM (2/5) 3. Identify alternative strategies (from Stage 2) that the organization should consider implementing. • These strategies are displayed at the top of the table.

  9. Constructing the QSPM (3/5) • Determine the Attractiveness Scores (AS) (1/2) • Attractiveness Scores (AS) in the QSPM indicate how each key strategic factor is important or attractive to each alternative strategy. • Examine each key external/internal factor, one at a time and ask the question “Does this factor affect the choice of the strategies?” • If the answer to this question is “yes”, then the strategies should be compared relative to that key factor. • The range for Attractiveness Scores is: 1= not attractive, 2 = somewhat attractive; 3 = reasonably attractive; 4 = highly attractive

  10. Constructing the QSPM (4/5) • Determine the Attractiveness Scores (AS) (2/2) • If the factor does not affect the strategy, use a “-” to indicate that the key factor does not affect the choice being made. • If you assign an AS score to one strategy, then assign attractiveness scores to the other strategies. • NEVER rate one strategy and not the other. • Never assign the same attractiveness scores to the strategies (i.e. no double 1’s, 2’s, 3’s or 4’s in a row). • Attractiveness Scores should be rational, defensible and reasonable. THEY ARE NOT GUESSES.

  11. Constructing the QSPM (5/5) • Compute the Total Attractiveness Scores. - The Total Attractiveness Scores indicate the relative attractiveness of each key factor and related individual strategy. - Total Attractiveness Scores = Weights x Attractiveness Scores • The higher the Total Attractiveness Score, the more attractive the strategic alternative or critical factor. • Compute the Sum Total Attractiveness Score. -The Sum Total Attractiveness Scores would reveal which strategy is the most attractive strategy.

  12. Can I compare more than two strategies using a QSPM? • Yes, in general, any number of alternative strategies can be included in the QSPM analysis. • It is important to note that strategies subject to comparison should be mutually exclusive if possible.

  13. Limitations Requires intuitive judgments and educated assumptions. Only as good as the prerequisite inputs. Only strategies within a given set are evaluated relative to each other Advantages Sets of strategies considered simultaneously or sequentially. Integration of pertinent external and internal factors in the decision making process QSPM Limitations & Advantages

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