STRTEGY ANALYSIS AND CHOICEFIGURE B-1The Strategy-Formulation Analytical Framework

STAGE1: THE INPUT STAGE

External factorEvaluation (EFE)

Matrix

CompetitiveProfile

Matrix (CPM)

Internal FactorEvaluation (IFE)

Matrix

STAGE 2: THE MATCHING STAGE

Strengths-Weaknesses-Opportunities-Threats

(SWOT) Matrix

Strategic Position and Action Evaluation (SPACE) Matrix

Boston Consulting Group (BCG)

Matrix

Internal-External (IE) Matrix

Grand Strategy (GS) Matrix

STAGE 3: THE DECISION STAGE

Quantitative Strategic Planning Matrix (QSPM)

TABLE B-2 Matching Key External and Internal FactorsTo Formulate Alternative Strategies

KEY INTERNAL FACTOR KEY EXTERNAL FACTOR RESULTANT STRATEGY

Excess working capacity(an internal strength)

+ 20% annual growth in the cell phone industry (an external opportunity)

= Acquire Cellfone, Inc.

Insufficient capacity(an internal weakness)

+ Exit of two major foreign competitors form the industry (an external opportunity)

= Pursue horizontal integration by buying competitors’ facilities

Strong R&D expertise(an internal strength)

+ Decreasing numbers of younger adults(an external threat)

= Develop new products for older adults

Poor employee morale(an internal weakness)

+ Strong union activity (an external threat)

= Develop a new employee benefits package

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STRTEGY ANALYSIS AND CHOICE

FIGURE B-3The SWOT Matrix

STRENGTHS--S WEAKNESSES--W1.

Always leave blank

1.

List Strengths

1.

List weaknesses

2. 2. 2.3. 2. 3.4. 4. 4.5. 5. 5.6. 6. 6.7. 7. 7.8. 8. 8.9. 9. 9.

10. 10. 10.

OPPPORTUNITIES--O SO STRATEGIES WO STRATEGIES1.

List opportunities

1.

Use strengths to take advantage of opportunities

1.

Overcome weaknesses by taking advantage of

opportunities

2. 2. 2.3. 2. 3.4. 4. 4.5. 5. 5.6. 6. 6.7. 7. 7.8. 8. 8.9. 9. 9.

10. 10. 10.

THREATS--T ST STRATEGIES WT STRATEGIES1.

List threats

1.

Use strengths to avoid threats

1.

Minimize weaknesses and avoid threats

2. 2. 2.3. 2. 3.4. 4. 4.5. 5. 5.6. 6. 6.7. 7. 7.8. 8. 8.9. 9. 9.

10. 10. 10.

2

STRTEGY ANALYSIS AND CHOICE

FIGURE B-4SWOT Matrix for Carnival Cruise Lines

STRENGTHS--S WEAKNESSES--W1. Hold 34% market share 1. Major loss in affiliated2. Largest fleet of ships operations3. Six different cruise lines 2. Increased debt from building

new ships 4. Innovator in cruise travel

industry3. Not serving Asian market

5. Largest variety of ships6. Building largest cruise ship7. High brand recognition8. Headquartered in Miami9. Internet friendly with online

booking

OPPPORTUNITIES--O SO STRATEGIES WO STRATEGIES1. Air travel has decreased (9/11) 1. Increase capacity of ships to

obtain travellers from air industry (S6, O1, O3)

1. Begin serving Japan and Pacific Islands (W3, O2, O3, O4)2. Asian market not being served

3. Possible acquisition of Princess Cruise Lines

2. Display the weather of vacation locations on Web sites (S9, O4)

2. Use weather forecasting to alert Customers of potential storm during their vacation (W1, O4)4. New weather forecasting

systems available3. Offer Trans-Atlantic Cruises

(S6,O4)5. Rising demand for all-inclusive

vacation packages4. Acquire P & O Princess (S1, O3)

6. Families have increased disposable incomes

7. Marriage rates are up-more honeymoons

THREATS--T ST STRATEGIES WT STRATEGIES1. Decrease in travel since 9/11 1. Advertise Carnival’s ship

variety, brand recognition, and safety policies (S3, S7, T1, T2, T5)

1. Lower prices of cruises during hurricane season (W1, T6)2. Terrorism

3. Competition within industry 2. Research viability of entering other foreign markets (W2, W3, T8,)4. Competition among other types

of vacations2. Advertise alternate vacations that

are not affected by (S3, T5, T7)5. Economic recession 3. Offer discounts on Carnival Web

site (S9, T6)6. Chance of natural disasters7. Increasing fuel prices8. Changing government

regulations

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STRTEGY ANALYSIS AND CHOICE

FIGURE B-5 A SPACE Matrix for any corporate

FINANCIAL STRENGTH RATINGSThe bank’s primary capital ratio is 7.23 percent, which is 1.23 percentage points over the generally required ratio of 6 percent. 1.0The bank’s return on assets is negative 0.77, compared to a bank industry average ratio of positive 0.70 1.0The bank’s net income was $183 million, down 9 percent from a year earlier. 3.0The bank’s revenues increased 7 percent to $3.46 billion. 4.0

9.0

INDUSTRY STRENGTHDeregulation provides geographic and product freedom. 4.0Deregulation increase competition in the banking industry. 2.0Pennsylvania’s interstate banking law allows the bank to acquire other banks in New Jersey,Ohio, Kentucky, the District of Columbia, and West Virginia. 4.0

10.0

ENVIRONMENTAL STABILITYLess-developed countries are experiencing high inflation and political instability. -4.0The bank historically has been heavily dependant on the steel,oil, and gas industries. These industries are depressed. -5.0Banking deregulation has created instability throughout the industry. -4.0

-13.0

COMPETITIVE ADVANTAGE

The bank provides data processing services for more than 450 institutions in 38 states. -2.0Super regional banks, international banks, and nonbanks are becoming increasingly competitive. -5.0The bank has a large customer base. -2.0

-9.0

CONCLUSIONES Average is -13.0 ÷ 3 = -4.33 IS Average is + 10.0 ÷ 3 = 3.33CA Average is -9.0 ÷ 3 = -3.00 FS Average is + 9.0 ÷ 4 = 2.25Directional Vector Coordinates: x-axis: -3.00 + (+3.33) = +0.33 y-axis: -4.33 + (+2.25) = -2.08The bank should pursue Competitive Strategies.

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STRTEGY ANALYSIS AND CHOICEFIGURE B-6The SPACE Matrix

5

STRTEGY ANALYSIS AND CHOICEConservative (conglom, concen, horiz divers) FS Aggressive (farw, back, horiz integration)

+6

+5

+4

+3

+2

+1

0CA IS

-6 -5 -4 -3 -2 -10

+1 +2 +3 +4 +5 +6

-1

-2

-3

-4

-5

-6

Defensive (retrench, divestiture, liquidation) ESCompetitive (mark peni, mark deve, product

deve)

FIGURE B-7The BCG Matrix

RELATIVE MARKET SHARE POSITION

IND

US

TR

Y S

AL

ES

GR

OW

TH

RA

TE

(per

cent

age)

High1.0

Medium.50

Low0.0

High +20

Stars II

Question MarksI

Medium 0

Cash Cows III Dogs

IVLow -20

Source: Adapted from Boston Consulting Group, Perspectives on Experience (Boston: The Boston Consulting Group, 1974).

FIGURE B-8An Example BCG Matrix

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STRTEGY ANALYSIS AND CHOICE

RELATIVE MARKET SHARE POSITION IN THE INDUSTRY

INDUSTRY SALES GROWTH RATE(percentage)

High1.0

Medium .50

Low0.0

High +20

-39% -20%

2

-8%

3 Medium 0

4 -31%

-2%

5

Low -20

Division RevenuesPercent

RevenuesProfits Percent Profits

Percent Market Share

Percent Growth Rate

1 $60,000 37 $10,000 39 80 +152 40,000 24 5,000 20 40 +103 40,000 24 2,000 8 10 +14 20,000 12 8,000 31 60 -205 ,5,000 3 500 2 5 -10

Total $165,000 100 $25,500 100

FIGURE B-9The Internal-External (IE) Matrix

Grow and build 4.0

High 3.0to 4.0

3.0 Medium

2.0 to 2.99

2.0 Low

1.0 to 1.99 1.0

Hold and Maintain Harvest or divert

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THE IFE TOTAL WEIGHTED SCORESStrong

3.0 to 4.0Average

2.0 to 2.99Weak

1.0 to 1.993.0 2.0 1.0

I II III

IV V VI

VII VIII IX

THE EFETOTALWEIGHTEDSORES

STRTEGY ANALYSIS AND CHOICE

FIGURE B-10The Grand Strategy Matrix

RAPID MARKET GROWTH

WEAK COMPETITIVE

POSITION

Quadrant II

1. Market development2. Market penetration3. Product development4. Horizontal integration5. Divestiture6. Liquidation

Quadrant I

1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Concentric diversification

STRONG COMPETITIVE

POSITION

Quadrant III

1. Retrenchment2. Concentric diversification3. Horizontal diversification4. Conglomerate

diversification5. Divestiture6. Liquidation

Quadrant IV

1. Concentric diversification2. Horizontal diversification3. Conglomerate

diversification4. Joint ventures

SLOW MARKET GROWTH

Source: Adapted form Roland Christensen, Norman Berg, and Malcolm Salter, Policy formulation and Administration (Homewood, IL: Richard D. Irwin, 1976): 16-18

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STRTEGY ANALYSIS AND CHOICE

FIGURE B-11 A QSPM for Campbell Soup Company

STRATEGIC ALTERNATIVES

KEY FACTORS WeightJoint Venture in

Europe

Joint Venture in Asia

AS TAS AS TAS

Opportunities

1. One Europen currency-euro .10 4 .40 2 .20

2. Rising health consciousness in selecting foods .15 4 .60 3 .45

3. Free market economies arising in Asia .10 2 .20 4 .40

4. Demand for soups increasing 10% annually .15 3 .45 4 .60

5. NAFTA .05 - - - -

Threats

1. Food revenues increasing only 1% annually .10 3 .30 4 .40

2. ConAgra’s Banquet TV Dinners lead market with 27.4 percent share

.05 - - - -

3. Unstable economies in Asia .10 4 .40 1 .10

4. Tin cans are not biodegradable .05 - - - -

5. Low value of the dollar .15 4 .60 2 .30

1.0

Strengths

1. Profits rose 30% .10 4 .40 2 .20

2. New North American division .10 - - - -

3. New health-conscious soups are successful .10 4 .40 2 .20

4. Swanson TV dinners’ market share has increased to 25.1% .05 4 .20 3 .15

5. One-fifth of all managers’ bonuses is based on overall corporate performance

.05 - - - -

6. Capacity utilization increased form 60% to 80% .15 3 .45 4 .60

Weaknesses

1. Pepperidge Farm sales have declined 7% .05 - - - -

2. Restructuring cost $302 million .05 - - - -

3. The company’s European operation is losing money .15 2 .30 4 .60

4. The company is slow in globalizing .15 4 .60 3 .45

5. Pretax profit margin of 8.4% is only one-half industry average

.05 - - - -

Sum Total Attractiveness Score 1.0 5.30 4.65

AS = Attractiveness Score; TAS = Total Attractiveness ScoreAttractiveness Score: 1 = not attractive; 2 = somewhat attractive; 3 = reasonably attractive; 4 = highly attractive

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