INSTITUTE- University School of

Business
DEPARTMENT- MBA
Master of Business Administration
Strategic Management BAT 733

STRATEGY FORMULATION DISCOVER . LEARN . EMPOWER

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Nature and Scope of Strategic

STRATEGY External Environmental

Management

FORMULATION
Course Outcome
CO Title Level
Number Grand Strategies

CO1 A clear understanding of the key concepts and Understand

principles of strategy formulation and competitive
analysis

CO2 Developing an awareness of the impact of external Understand

environmental forces and of strategic actions by the
firm and its rivals on business and corporate strategy

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STRATEGY
FORMULATION

External Environmental: Concept of

environment, components of environment,
ETOP, QUEST, SWOT (TOWS), PEST, BCG matrix, ,
GE 9 cell model, Porter’s five forces model of
competition, Synergy and dysergy.
Grand Strategies: Stability, expansion
(diversification strategies, vertical integration
strategies, mergers, acquisition and takeover
strategies, strategic alliances and collaborative
partnerships), retrenchment, outsourcing
strategies.

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A Comprehensive Strategic-Management Model

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The Process of Generating and Selecting
Strategies
• 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
• 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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The Strategy-Formulation Analytical
Framework

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 A Comprehensive Strategy-Formulation
Framework
• 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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The Matching Stage
• 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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The Matching Stage
• SO Strategies • WO Strategies
• use a firm’s internal • aim at improving
strengths to take internal weaknesses
advantage of external by taking advantage of
opportunities external opportunities

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The Matching Stage

• ST Strategies • WT Strategies
• use a firm’s • defensive tactics
strengths to avoid directed at reducing
or reduce the internal weakness
impact of external and avoiding external
threats threats

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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

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 • SWOT Matrix (cont.)

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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A SWOT Matrix for a Retail Computer
Store

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A SWOT Matrix for a Retail Computer
Store

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The SPACE Matrix

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The Strategic Position and Action
Evaluation (SPACE) Matrix
• 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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The Strategic Position and Action
Evaluation (SPACE) Matrix
• 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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Factors That Make Up the SPACE Matrix
Axes

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Steps to Develop 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 (worst) to +7 (best) to each of the
variables that make up the FP and IP dimensions.
3. Assign a numerical value ranging from –1 (best) to –7 (worst) to each of the
variables that make up the SP and CP dimensions
4. Compute an average score for FP, CP, IP, and SP
5. Plot the average scores for FP, IP, SP, and CP on the appropriate axis in the
SPACE Matrix
6. 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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The Boston Consulting Group (BCG) Matrix

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The BCG Matrix
• 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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The BCG Matrix
• 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 Internal-External (IE) Matrix

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The Internal-External (IE) Matrix
• 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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The Grand Strategy Matrix
• Grand Strategy Matrix
• based on two evaluative dimensions: competitive position and market
(industry) growth

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The Grand Strategy Matrix

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The Grand Strategy Matrix
• 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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The Grand Strategy Matrix
• 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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 Assessment Pattern
• For assignment the student will be assessed on the following points
• 1. Content
• 2. relevance
• 3. Timely submission
• 4. Adherence to what is being asked for assignment submission

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 APPLICATIONS
• Students can use it for creating competitive advantage and strategy formulation in their respective departments.

• The students can Identify important behavioral, political, ethical, and social responsibility considerations in strategy
analysis and choice.

• It can be used by students to understand and consider the external environment factors while taking decisions

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 REFERENCES
• Text Books –
• 1) Kazmi Azar - Business Policy and Strategic Management, Tata McGraw Hill, New Delhi.
• 2) John A Pearce II, Richard B Robinson, Amita Mittal- Strategic Management formulation, Implementation and Control, Tata Mc Graw Hill.
• 3) Wheelen Thomas L., Hunger J. David and Rangaragjan Krish - Concepts in Strategic Management and Business Policy, Pearson Education,
1 Ed., New Delhi.
• 4) K.Aswathappa, Business Environment and Strategic Management, Himalaya Publishers, New Delhi
• 5) Dr. P. Subba Rao, Strategic Management, Himalaya Publishers, New Delhi.
• 6) Lawrence R.Jauch., Glueck William F. - Business Policy and Strategic Management, Frank Brothers
• 7) Cliff Bowman - Business Policy and Strategy, Prentice Hall of India.
• 8) Hitt /Manikutty, Strategic Management, Cengage Learning, New Delhi.
• Reference Material –
• 1. Strategic Management, R. Srinivasana‐PHI
• 2. Corporate Strategy, Lynch, Pearson
• 3. Strategic Management, Haberberg & Rieple, Oxford
• 4. An Integrated approach to Strategic Management, Hill & Jones, Cengage
• 5. Strategic Management, U.C. Mathur, McMillan
• 6. Strategic Management & Entrepreneurship, D.Acharya & A. Nanda, HPH

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 THANK YOU

For queries
Email: subject_code_2019@gmail.com