STRATEGY ANALYSIS AND

CHOICE

Dosen : Dr. Ir. Hariadi Ismail, M.Sc.

 Fakultas Ekonomi dan Bisnis
School Economics and Business The Nature
Telkom University

Strategy Analysis and Choices To Achieve Mission & Objective

External Env’
Analysis

Vision & Establish Long Generate, Evaluate,

term Objective Select Strategies
Mission

Internal Env’
Analysis

2 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business The Strategy Formulation Framework
Telkom University

STAGE – 1 : The Input Stage

External Factor Competitor Profile Internal Factor

Evaluation (EFE) Matrix (CPM) Evaluation (IFE)

STAGE – 2 : Matching Stage

Strategic Position and Boston Consulting Group Internal External (IE) Matrix Grand Strategy Matrix
SWOT Matrix Action Evaluation (BCG)

STAGE – 3 : Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

3 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business SWOT Matrix
Telkom University
Strength Weaknesses
1. Inventory turn over up to 6,7% 1. Software revenue down 12%
2. Average customer purchase up to $ 128 2. Location of store hurt by new highway
3. Employee morale is excellent 3. Total store revenue down 8%
4. In store promotion = 20% increase in sale 4. Carpet in store must be repaired
5. Revenue up to 16% 5. Store have no Website
6. Newspaper adv expense down 10% 6. Bathroom need refurbishing
7. Technical support has MIS degree
7. Supplier time delivery up 2 days
8. Debt to total asset down 34%
8. Cust’ checkout process too slow
Opportunities
1. Population growing 10%
2. Rival store opening 1 km away
3. Vehicle traffic up 12% 1. Add 4 new in store promotion monthly (S4, O3) 1. Purchase land to built new store (W2, O2)
4. Computer user growing 8% 2. Add 2 new repair/service person (S5, O4) 2. Up Website service by 50% (W5, O6)
5. Small business growth 10% 3. Send flyer to senior over age 55 (S6, O4) 3. Launch mail out to all realtors in city (W3, O6)
6. Desire for Website up 18%
7. Vendor average six new product

1. Best buy opening new store

1. Hire 2 more repair person and market the new
2. Local Univ offer computer repair
service (S5, S7, T1)
3. New bypass hwy will divert traffic 1. Hire 2 new cashier (W8,T1,T4)
2. Purchase land to built new store (S8, T3)
4. New mall being built nearby 2. Install new carpet /paint bath (W4.6, T1)
3. Raise out-of-store service call from $60 to $80
5. Vendor raising price 8%
(S5, T6)
6. Gas prices up 14%

Threats

4 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Strategic Position and Action Evaluation (SPACE)
Telkom University

Financial
FS Strength
+6
Conservative : +5 Aggressive :
1. Market Penetration +4 1. B, F, H Integration
2. Market Development 2. Market Penetration
+3
3. Product Development 3. Market Development
Competitive 4. Related Diversification +2 4. Product Development
Advantage +1 5. Diversification
Industry Strength
CA IS
-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 +7
-1
Defensive : -2 Competitive :
1. Retrenchment 1. B, F, H Integration
-3
2. Divestiture 2. Market Penetration
-4 3. Market Development
3. Liquidation
-5 4. Product Development
-6

Environmental
Stability ES

5 Creating the great business leaders

Example Factors of SPACE

Internal Strategic Position External Strategic Position

Financial Strength (FS) : Environmental Stability (ES) :
Return on Investment, Leverage, Liquidity, Working Capital, Technological change, Rate of Inflation, Demand variability,
Cash Flow, Inventory turn over, Earning per share, Price Price range of competing product, Barrier to entry into
earning ratio. market, Competitive pressure, Ease of exit from market,
Price elasticity of demand, Risk involve in business.

Competitive Advantage (CA) :

Industry Strength (IS) :
Market share, Product quality, Product Life cycle, Customer
Loyalty, Competition’s capacity utilization, Technological Growth potential, Profit potential, Financial Stability,
know-how, Control over supplier and distributor Technological know-how, Resource utilization, Ease to entry
into market, Productivity, Capacity Utilization.
The 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 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
3. FP and CP makes comparison to competitors, SP and IP compare to other industries.
4. Compute an average score of FP, IP, SP and CP
5. Plot the average scores for FP, IP, SP and CP on the axis in the SPACE Matrix
6. Add the two scores in each x-axis and y-axis and make the resultant
7. Draw a directional vector that reveals the strategies recommended.
SPACE Matrix for a Bank

TUGAS : Kerjakan secara kelompok

1. Perhatikan data Financial Position FP, Competitive Position CP, Industry Position IP dan Stability Position SP
dari sebuan Bank pada halaman 216, Tabel 6-3
2. Tentukan besaran vektor FP, CP, IP dan SP
3. Tentukan resultant dari keempat vektor tersebut
4. Tentukan strategi yang harus dijalankan oleh bank tersebut
 Fakultas Ekonomi dan Bisnis
School Economics and Business Boston Consulting Group (BCG)
Telkom University

Cash Generation (Market Share)

High Low

1. Backward Integration
2. Forward Integration
3. Horizontal Integration 1. Market Penetration
4. Market Penetration 2. Market Development Market Share : Sales relative to those of other
High 5. Market Development 3. Product Development competitors in the market (dividing point is usually
6. Product Development 4. Divestiture
Cash Use (Growth Rate)

selected to have only two three largest competitors

Star Question Mark 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
Cash Cow Dog
Rp rate)
X
Low 1. Diversification 1. Retrenchment
2. Product Development 2. Liquidation
3. Divestiture 3. Divestiture
4. Retrenchment

9 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business BCG Matrix Example
Telkom University

Tugas Kelompok : Buatlah BCG Matrix nya

Division Sales (MilyardRp) % Sales Profit (Juta Rp) % Profit Market Share Growth Rate (%)
1. Victoria Secret 5,139 51,5 799 68,0 0,8 10
2. Bath & Body Works 2,556 25,6 400 39,0 0,4 05
3. Express 1,749 17,5 12 1,2 0,2 00
4. Limited Stores 0,493 4,9 4 0,1 0,5 -0,5
5. Henri Bendel & Mast 0,042 0,5 -188 -18,3 0.02 -10
TOTAL 9,979 100 1,027 100

10 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business The Internal-External (IE) Matrix
Telkom University

• B, F, H Integration The IFE Total Weighted Score

• Market Penetration
• Market Development Strong Average Weak
• Product Development 3.0 – 4.0 2.0 – 3.0 1.0 – 2.0
3.0 2.0 1.0
4.0
High
3.0 – 4.0 I II III
3.0
The EFE Total Weighted Medium
Score 2.0 – 3.0
IV V VI
2.0

Low VII VIII IX

1.0 – 2.0
1.0

Hold and Maintain Harvest or Divest

• Market Penetration • Retrenchment
• Product Development • Divestiture

11 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business IE Matrix Example
Telkom University

Division Sales (MilyardRp) % Sales Profit (Juta Rp) % Profit IFE Score EFE

I 100 25.0 10 50 3,6 3,2

II 200 50.0 5 25 2,1 3,5
III 50 12.5 4 20 3,1 2,1
IV 50 12.5 1 5 1,8 2,5

TOTAL 400 100 20 100

Buatlah IE Matrix nya

12 Creating the great business leaders

 Fakultas Ekonomi dan Bisnis
School Economics and Business Model of Grand Strategy Matrix
Telkom University

• 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

13 Creating the great business leaders

 Rapid Market
Growth

Quadrant 1
Quadrant 2 1. Market Development
1. Market Development 2. Market penetration
2. Market Penetration 3. Product Development
3. Product Development 4. Forward Integration
4. Horizontal Integration 5. Backward Integration
5. Divestiture 6. Horizontal Integration
6. Liquidation 7. Vertical Integration
Weak 8. Related Diversification Strong
Competitive Competitive
Position Position
Quadrant 3 Quadrant 4
1. Retrenchment 1. Related diversification
2. Related Diversification 2. Unrelated Diversification
3. Unrelated Diversification 3. Joint Venture
4. Divestiture
5. Liquidation

Slow Market
Growth
Factors that Shape Market Attractiveness

Market
Attractiveness

Market Competitive Market

Forces Environment Access

Market Size Number of Competitor Customer Familiarity

Growth Rate Price Rivalry Channel Access
Buyer Power Ease of Entry Sales Requirements

15
Market Attractiveness Index
Market Forces Relative
Attractiveness Rating Attractiveness Score
Factor Importance : 30% Importance
Market Size 40% 80 32
Growth Rate 30% 60 18
Buyer Power 30% 40 12
Total 100 62

Competitive Env’ Relative

Attractiveness Rating Attractiveness Score
Factor Importance : 40% Importance
Price Rivalry 50% 40 20
Ease of Competitor Entry 30% 40 12
Number of Competitor 20 60 12
Total 100 44

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 Market Access Relative
Attractiveness Rating Attractiveness Score
Factor Importance : 30% Importance
Customer Familiarity 40% 80 32
Channel Access 40% 100 40
Sales/Service Requirement 20% 60 12
Total 100 84

Market Attractiveness Index = (30% x 62) + (40% x 44) + (30% x 84)

= 18.6 + 17.6 + 26.2 = 61
Market Attractiveness

Very Somewhat Somewhat Very

Unattractive Unattractive Unattractive Attractive Attractive Attractive

0 20 40 60 80 100

17
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
Competitive Position Index
Differentiation Position Relative
Attractiveness Rating Attractiveness Score
Factor Importance : 40% Importance
Product Quality 40% 80 32
Service Quality 30% 60 18
Brand Image 30% 80 24
Total 100 74

Cost Position Relative Attractiveness Rating Attractiveness Score

Factor Importance : 40% Importance
Cost of Good Sold 70% 40 28
Marketing & Sales Exp’ 20% 60 12
Overhead Expenses 10% 60 6
Total 100 46
 Marketing Position Relative
Attractiveness Rating Attractiveness Score
Factor Importance : 20% Importance
Market Share 40% 40 16
Brand Awareness 30% 40 12
Distribution 30% 20 6
Total 100 34

Competitive Position Index = (40% x 74) + (40% x 46) + (20% x 34)

= 29.6 + 18.4 + 6.8 = 55
Competitive Position

Considerably Clearly Somewhat Somewhat Clearly Considerably

Weak Weak Weak Strong Strong Strong

0 20 40 60 80 100
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,
The Quantitative 2 = somewhat attractive, 3 = reasonably attractive and 4 = highly attractive
Strategic Planning
Matrix QSPM • Step 5 : Compute the Total Attractive Scores (TAS)
• Step 6 : Compute the Sum Total Attractive Scores
The Quantitative Strategic Planning Matrix - QSPM
Strategic Alternative
Key Factors Weight
Strategy 1 Strategy 2 Strategy 3

External Factors

Economy

Political / Legal / Gov’

Social / Cultural / Demogr’

Technological

Competitive
Internal Factors
Management

Marketing

Finance / Accounting

Production / Operation

MIS

Perhatikan Tabel QSPM di Buku 1 hal 226.