Grand Strategy Matrix is one of important matrix of strategy formulation frame work. For formulation of alternative strategies, it is popular tool. In Grand Strategy Matrix there are four kinds of quadrants and an organization is placed in one of these four quadrants. In each quadrant of the matrix there is set of strategies specified on the sequential order of attractiveness that are considered by the organization. SWOT Analysis, PEST Analysis, TOWS Matrix and grand strategy matrix all are adopted for same purpose of promoting and establishing business in the market. Grand Strategy Matrix is based on two important dimensions.
All possible strategies are included in all the four quadrants. First Quadrant: The first quadrant of Grand Strategy Matrix indicates that the organization has strong competitive position & there is rapid growth rate in the market. The organization that lies in the first quadrant has the excellent strategic position. The organization of the first quadrant should concentrate on the current market and need to adopt the strategies of Market Development, New Product development & Market Penetration. Second Quadrant: The second quadrant highlights that the organization has weak competitive situation and there is fast market growth. The organization that lies in the second quadrant should evaluate its current strategy for the marketplace seriously. Although there is growing industry but the organization is not able to compete effectively. The organization of second quadrant should find out the reason that why its current strategies are not effective enough to make it competitive in the market. Moreover the organization should also try to find out the best way of change that can improve its effectiveness. It is fact that the market growth is fast in the industry so the organization of the second quadrant should consider the intensive strategy as a first option. Third Quadrant: The third quadrant of the Grand Strategy Matrix specifies that the organization has the weak competitive situation and the market growth rate is quite slow. The organization that lies in the third quadrant competes in the industry of slow growth and holds weak competitive position. The organization should seriously adopt certain drastic changes that can minimize further demise and the resulting liquidation. It is better option for the organization that it should adopt extensive asset & cost reduction. There is another suitable option that the organization should keep resources away from the current declining business & put those resources into other diversified areas. Even if all other diversified projects failed then there is last option for the organization to be liquidate itself. Fourth Quadrant: The fourth quadrant of highlights that the organization has strong competitive situation and the market growth rate is slow. The organization that lies in the fourth quadrant has strong competitive position but the industry in which the organization relates has slow growth. The organization can have suitable option o initiate diversified programs into other growth areas. The organization of fourth quadrant generates excessive cash while its internal needs are limited and therefore it has potential to become involved in horizontal, conglomerate or concentric diversification in a successful manner. Furthermore, joint ventures are also pursued by the organizations of fourth quadrant. Each quadrant contains a set of certain strategies which are discussed below. Strategies of First Quadrant: First quadrant contains the following strategies
Strategies of Second Quadrant: Second Quadrant of the Grand Strategy Matrix includes the following set of strategies
Strategies of the Third Quadrant: There are certain set of Marketing Strategies that are categorized in the third quadrant. These strategies are listed below
Strategies of the Fourth Quadrant:
Conclusion: Every organization must fall in any one of the four quadrants. The organization that lies in the first quadrant must adopt those set of strategies that are specified in that quadrant. Similarly the organization that lies in the second quadrant must adopt the given set of strategies in that quadrant. In the same manner the organizations lie in the third & fourth quadrants must follow the set of strategies of the third & fourth quadrants respectively.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes. Learning objective Grand strategy matrix is a last matrix of matching strategy formulation framework. It same as important as BCG, IE and other matrices. This chapter enables you to understand the preparation of GS matrix. This chapter also enables you to understand the last stage (decision stage) of strategy formulation frame work and also explain that how it is prepared Grand Strategy Matrix This is also an important matrix of strategy formulation frame work. Grand strategy matrix it is popular tool for formulating alternative strategies. In this matrix all organization divides into four quadrants. Any organization should be placed in any one of four quadrants. Appropriate strategies for an organization to consider are listed in sequential order of attractiveness in each quadrant of the matrix. It is based two major dimensions 1. Market growth 2. Competitive positionAll quadrant contain all possible strategies Qurdant-1 contains that company’s strong having competitive situation and rapid market growth. Firms located in Quadrant I of the Grand Strategy Matrix are in an excellent strategic position. These firms must focus on current market and appropriate to follow market penetration, market development and products development are appropriate strategies. Quadrant II Market development Market penetration Product development Horizontal integration DivestitureLiquidation Quadrant I Market development Market penetration Product development Forward integration Backward integration Horizontal integrationConcentric diversification Quadrant III Retrenchment Concentric diversification Horizontal diversification Conglomerate diversificationLiquidation Quadrant IV Concentric diversification Horizontal diversification Conglomerate diversification Joint venturesSTRONG COMPETITIVE POSITION WEAK COMPETITIVE POSITION SLOW MARKET GROWTH RAPID MARKET GROWTH 108 Qurdant-2 contains that company’s having weak competitive situation and rapid market growth. Firms positioned in Quadrant II need to evaluate their present approach to the marketplace seriously. Although their industry is growing, they are unable to compete effectively, and they need to determine why the firm's current approach is ineffectual and how the company can best change to improve its competitiveness. Because Quadrant II firms are in a rapid-market-growth industry, an intensive strategy(as opposed to integrative or diversification) is usually the first option that should be considered. Qurdant-3 contains that company’s weak competitive situation and slow market growth. The firms fall in this quadrant compete in slow-growth industries and have weak competitive positions. These firms must make some drastic changes quickly to avoid further demise and possible liquidation. Extensive cost and asset reduction (retrenchment) should be pursued first. An alternative strategy is to shift resources away from the current business into different areas. If all else fails, the final options forQuadrant III businesses are divestiture or liquidation. Qurdant-4 As above figure there are four quadrants in grand matrix that further contain various set strategies. Quardrant-1 Market development Market penetration Product development Forward integration Backward integration Horizontal integration Concentric diversification Quardrant-2 Market development Market penetration Product development Horizontal integration DivestitureLiquidation Quardrant-3 Retrenchment Concentric diversification Horizontal diversification Conglomerate diversificationLiquidation Quardrant-4 Concentric diversification Horizontal diversification Conglomerate diversificationJoint ventures 109 Conclusion Every firm fall any one four quadrants and if the firm fall in quadrant-1 it must follow the list of strategies given in it. As further if the firm falls in quarrant-2 must adopt the strategies given inquadrant-2 and so on Page 2Learning objective Grand strategy matrix is a last matrix of matching strategy formulation framework. It same as important as BCG, IE and other matrices. This chapter enables you to understand the preparation of GS matrix. The Quantitative Strategic Planning Matrix (QSPM) The last stage of strategy formulation is decision stage. In this stage it is decided that which way is most appropriate or which alternative strategy should be select. This stage contains QSPM that is only tool for objective evaluation of alternative strategies. A quantitative method used to collect data and prepare a matrix for strategic planning. It is based on identified internal and external crucial success factors. That is only technique designed to determine the relative attractiveness of feasible alternative action.This technique objectively indicates which alternative strategies are best. The QSPM uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies. That is, the EFE Matrix, IFE Matrix, and Competitive Profile Matrix that make up Stage 1, coupled with the TOWS Matrix, SPACE Analysis, BCG Matrix, IE Matrix, and Grand Strategy Matrix that make up Stage 2, provide the needed information for setting up the QSPM (Stage 3). Preparation of matrix score strategy is most feasible. Steps in preparation of QSPM 1. List of the firm's key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM. 2. Assign weights to each key external and internal factor 3. Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization should consider implementing 4. Determine the Attractiveness Scores (AS) 5. Compute the Total Attractiveness Scores6. Compute the Sum Total Attractiveness Score 111 Limitations 1. Requires intuitive judgments and educated assumptions 2. Only as good as the prerequisite inputs3. Only strategies within a given set are evaluated relative to each other Advantages 1. Sets of strategies considered simultaneously or sequentially2. Integration of pertinent external and internal factors in the decision making process Key Internal Factors Research and Development Computer Information Finance/Accounting Production/Operations Management Marketing Systems Key External Factors Economy conditions Social/Cultural/Demographic /Environmental Political/Legal/Governmental Competitive Technological Consumer attitude Strategy 1 AS TAS Strategy 2 AS TAS Strategy 3Weight AS TAS Page 3Learning objective Strategy in action means strategy implementation. This chapter guides you to understand how to implement the strategy and what problems an organization faced in order to implement strategy. This chapter also explains objective and policies. The Nature of Strategy Implementation It is possible to turn strategies and plans into individual actions, necessary to produce a great business performance. But it's not easy. Many companies repeatedly fail to truly motivate their people to work with enthusiasm, all together, towards the corporate aims. Most companies and organizations know their businesses, and the strategies required for success. However many corporations - especially large ones - struggle to translate the theory into action plans that will enable the strategy to be successfully implemented and sustained. Here are some leading edge methods for effective strategic corporate implementation. These advanced principles of strategy realization are provided by the very impressive Foresight Leadership organization, and this contribution is gratefully acknowledged. Most companies have strategies, but according to recent studies, between 70% and 90% of organizations that have formulated strategies fail to execute them. A Fortune Magazine study has shown that 7 out of 10 CEOs, who fail, do so not because of bad strategy, but because of bad execution. In another study of Times 1000 companies, 80% of directors said they had the right strategies but only14% thought they were implementing them well. Only 1 in 3 companies, in their own assessment, were achieving significant strategic success. The message clear - effective strategy realization is key for achieving strategic success. Successful strategy formulation does not guarantee successful strategy implementation. It is always more difficult to do something (strategy implementation) than to say you are going to do it (strategy formulation)! Although inextricably linked, strategy implementation is fundamentally different from strategy formulation. Strategy formulation and implementation can be contrasted in the following ways: differ greatly between manufacturing, service, and governmental organizations. Management Perspectives In all but the smallest organizations, the transition from strategy formulation to strategy implementation requires a shift in responsibility from strategists to divisional and functional managers. Implementation problems can arise because of this shift in responsibility, especially if strategy-formulation decisions comeas a surprise to middle- and lower-level managers. Managers and employees are motivated more by 113 perceived self-interests than by organizational interests, unless the two coincide. Therefore, it is essential that divisional and functional managers be involved as much as possible in strategy-formulation activities. Of equal importance, strategists should be involved as much as possible in strategy-implementation activities. Management issues central to strategy implementation include establishing annual objectives, devising policies, allocating resources, altering an existing organizational structure, restructuring and reengineering, revising reward and incentive plans, minimizing resistance to change, matching managers with strategy, developing a strategy-supportive culture, adapting production/operations processes, developing an effective human resource function and, if necessary, downsizing. Management changes are necessarily more extensive when strategies to be implemented move a firm in a major new direction. Managers and employees throughout an organization should participate early and directly in strategyimplementation decisions. Their role in strategy implementation should build upon prior involvement in strategy-formulation activities. Strategists' genuine personal commitment to implementation is a necessary and powerful motivational force for managers and employees. Too often, strategists are too busy to actively support strategy-implementation efforts, and their lack of interest can be detrimental to organizational success. The rationale for objectives and strategies should be understood and clearly communicated throughout an organization. Major competitors' accomplishments, products, plans, actions, and performance should be apparent to all organizational members. Major external opportunities and threats should be clear, and managers' and employees' questions should be answered. Top-down flow of communication is essential for developing bottom-up support. Firms need to develop a competitor focus at all hierarchical levels by gathering and widely distributing competitive intelligence; every employee should be able to benchmark her or his efforts against best-inclass competitors so that the challenge becomes personal. This is a challenge for strategists of the firm. Firms should provide training for both managers and employees to ensure they have and maintain the skills necessary to be world-class performers. Annual Objectives Objectives can be set at two levels: (1) Corporate level These are objectives that concern the business or organization as a whole Examples of “corporate objectives might include: • We aim for a return on investment of at least 15% • We aim to achieve an operating profit of over £10 million on sales of at least £100 million• We aim to increase earnings per share by at least 10% every year for the foreseeable future (2) Functional level E.g. specific objectives for marketing activities Examples of functional marketing objectives” might include: • We aim to build customer database of at least 250,000 households within the next 12 months • We aim to achieve a market share of 10% • We aim to achieve 75% customer awareness of our brand in our target marketsBoth corporate and functional objectives need to conform to the commonly used SMART criteria. The SMART criteria Measurable - an objective should be capable of measurement – so that it is possible to determine whether(or how far) it has been achieved Achievable - the objective should be realistic given the circumstances in which it is set and the resourcesavailable to the business. Relevant - objectives should be relevant to the people responsible for achieving themTime Bound - objectives should be set with a time-frame in mind. These deadlines also need to berealistic. 114 Establishing annual objectives is a decentralized activity that directly involves all managers in an organization. Active participation in establishing annual objectives can lead to acceptance and commitment. Annual objectives are essential for strategy implementation because they (1) Represent the basis for allocating resources (2) Are a primary mechanism for evaluating managers? (3) Are the major instrument for monitoring progress toward achieving long-term objectives? (4) Establish organizational, divisional, and departmental priorities. Considerable time and effort should be devoted to ensuring that annual objectives are well conceived, consistent with long-term objectives, and supportive of strategies to be implemented. Approving, revising, or rejecting annual objectives is much more than a rubber-stamp activity. The purpose of annual objectives can be summarized as follows: Annual objectives serve as guidelines for action, directing and channeling efforts and activities of organization members. They provide a source of legitimacy in an enterprise by justifying activities to stakeholders. They serve as standards of performance. They serve as an important source of employee motivation and identification. They give incentives for managers and employees to perform. They provide a basis for organizational design. Clearly stated and communicated objectives are critical to success in all types and sizes of firms. Annual objectives, stated in terms of profitability, growth, and market share by business segment, geographic area, customer groups, and product are common in organizations. Annual objectives should be measurable, consistent, reasonable, challenging, clear, communicated throughout the organization, characterized by an appropriate time dimension, and accompanied by commensurate rewards and sanctions. Too often, objectives are stated in generalities, with little operational usefulness. Annual objectives such as "to improve communication" or "to improve performance" are not clear, specific, or measurable. Objectives should state quantity, quality, cost, and time and also be verifiable. Terms such as "maximize," "minimize," "as soon as possible," and "adequate" should be avoided. Annual objectives should be compatible with employees' and managers' values and should be supported by clearly stated policies. More of something is not always better! Improved quality or reduced cost may, for example, be more important than quantity. It is important to tie rewards and sanctions to annual objectives so that employees and managers understand that achieving objectives is critical to successful strategy implementation. Clear annual objectives do not guarantee successful strategy implementation but they do increase the likelihood that personal and organizational aims can be accomplished. Overemphasis on achieving objectives can result in undesirable conduct, such as faking the numbers, distorting the records, and letting objectives become ends in themselves. Managers must be alertto these potential problems Policies Changes in a firm's strategic direction do not occur automatically. On a day-to-day basis, policies are needed to make a strategy work. Policies facilitate solving recurring problems and guide theimplementation of strategy. Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals. Policies are instruments for strategy implementation. Policies set boundaries, constraints, and limits on the kinds of administrative actions that can be taken to reward and sanction behavior; they clarify what canand cannot be done in pursuit of an organization's objectives. For example, Carnival's new Paradise ship has a no-smoking policy anywhere, anytime aboard ship. It is the first cruise ship to comprehensively ban smoking. Another example of corporate policy relates to surfing the Web while at work. About 40 percent of companies today do not have a formal policy preventing employees from surfing the Internet, but software is being marketed now that allows firms to monitor how, when, where, and how long various employees use the Internet at work. Policies let both employees and managers know what is expected of them, thereby increasing the likelihood that strategies will be implemented successfully. They provide a basis for management control, allow coordination across organizational units, and reduce the amount of time managers spend making decisions. Policies also clarify what work is to be done by whom. They promote delegation of decision making to appropriate managerial levels where various problems usually arise. Many organizations have apolicy manual that serves to guide and direct behavior. Policies can apply to all divisions and departments (for example, "We are an equal opportunity employer"). Some policies apply to a single department ("Employees in this department must take at least one training and development course each year"). Whatever their scope and form, policies serve as a mechanism for implementing strategies and obtaining objectives. Policies should be stated in writing whenever possible. They represent the means for carrying out strategic decisions. |