Grand Strategy Matrix

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 Dimensions

Grand Strategy Matrix is based on two important dimensions.

 Market Growth
 Competitive Position
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.

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.

TOWS MATRIX

The TOWS MATRIX is an acronym of the words: Threats, Opportunities, Weaknesses and
Strengths.

The TOWS Matrix is an effective technique that emphasize on the external opportunities and
threats while analyzing the internal strengths and weaknesses of a company. The TOWS Matrix
helps businesses to identify their strategic options. An organisation gets the opportunity to make
the most of its strengths and get around its internal weaknesses and learn to deal with them
properly. Externally, an organisation learns to carefully look for market opportunities and
recognise possibilities. And they learn how to control and overcome potential threats.

The TOWS MATRIX does not only provide a list of strengths ,weaknesses ,threats and
opportunities but works as a matching tool that helps to make a pair of internal and external
factors to bring out better solutions in the current scenario of a company. The
marketers/managers do not only evaluate the four strategies but strives how to match together all
the external and internal factors to execute them in a best possible way.

According to Michael Watkins of Harvard Business Review , by focusing on the external factors
i.e. the threats and opportunities at first can lead to a more productive outcome that elucidate
what’s happening in the external settings rather to lay emphasis on the internal capabilities of a
company.

THE TOWS MATRIX can be explained as the following:

1- STRENGTHS:
Those attributes that makes the company stronger against its competitors and can be effective to
achieve the desired objective. For example, a company who has the highest market share or
produce the highest quality of a product against its rivals.

2- WEAKNESSES:
Those internal factors that can be risky for the company to achieve success in the future. For
example: A company who possess an outdated technology and lacks innovation in products.

3- OPPORTUNITIES:
Those external conditions that can be helpful towards the attainment of the objective. For
example: the new economic growth or the social changes in the environment might be an
advantage for a company.

4- THREATS:
Those external settings that could be risky and harmful towards achieving the objective. For
example: Changes in the consumer buying patterns or the competitor may come up with a
product which has been more in demand.

The TOWS MATRIX helps to identify the strategic alternatives for a company that works as a
matching tool by constructing four types of strategies such as:

- THE SO STRATEGY:
This is also known as Maxi –Maxi Strategy where a firm utilizes most of its internal strengths in
order to grab the right external opportunities. For instance: A firm whose financial position is
quite strong and posses low market share is able to introduce many innovative products in the
market by making investment in the Research & development Department of the firm.
Mercedes Benz takes advantage of the external demand of their lavish vehicles and makes right
use of the technical skills and quality of their products.

- THE WO STRATEGY:
The WO STRATEGY is also known as Mini- Maxi Strategy that can be used to overcome the
weaknesses of a company by taking advantage of the opportunities, For instance: A firm who
lacks skilled workers can utilize the opportunity by updating new technology in order to increase
production. The internal weaknesses of any firm can also be improved by recruiting and training
employees through learning additional technical skills.

A company who faces a decline in the financial sector can avail the opportunity of merging with
a multinational company.

- THE ST STRATEGY:
The ST Strategy / Maxi-Mini Strategy is where a company through its strengths can avoid any
kind of external threats. Any organization can refrain from external threats by avoiding any
copied ideas, innovation in products of another organization. In a case with an organization that
possess good quality of products but is facing threats against competitors who offers low priced
products can adopt ST strategy by mass production of the products, therefore it will reduce the
unit cost of production.

- THE WT STRATEGY:
[large]The WT Strategy Or Mini- Mini Strategy are adopted by firms who needs to reduce the
level of weaknesses and avoids any external threats at the same time This can be considered as a
defensive technique in a situation where a company whose financial position is at the critical
stage and the demand of its product getting reduced, the only possible chance to sustain itself in
the market is to adopt a retrenchment strategy or decides for merger with an another company.

However, The WT Strategy is difficult to implement in a situation with a company whose

distribution channel tends to be weak, if it gets improved by chance, in that case it will be able to
remove many external threats easily.

Following are the steps to construct a TOWS Matrix:

1- You need to identify and make a list of all the existing strengths of the organization.

2- Identify and list down the most important weaknesses of the organization.

3- List down all the external threats that are faced by the organization.

4- Similarly, make a list of all the opportunities that can be advantageous for the organization.

5- Now, to implement the SO strategy in the SO cell, you need to match the appropriate
internal strengths with external opportunities.

6- In the same way, match the right internal weaknesses with external opportunities and type
the correct WO strategy in the WO cell.

7- Similarly, make a match of internal strengths with external threats to type the right ST
Strategy in the respective ST cell.

8- Match all internal weaknesses with external threats to construct the appropriate WT strategy.

The TOWS MATRIX is based on the fact as how a strategy can be implemented, it does not
claim which strategy can work best to put into action. While creating the matrix, it’s important to
denote each strategy with a notation as (S1, O2) which represents rationalization for each
strategy that is being adopted

QSPM

The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate
alternative set of strategies. The QSPM incorporate earlier stage details in an organize way to
calculate the score of multiple strategies in order to find the best match strategy for the
organization.

The QSPM comes under the third stage of strategy formulation which is called “The Decision
Stage” and also the final stage of this process. The best thing about QSPM is that it never insist
the strategist to enter the information on assumptions, it extract the information from stage 1 The
Input Stage and stage 2 the the matching stage.

FORMAT OF QUANTITATIVE STRATEGIC PLANNING MATRIX

There are four main columns in QSPM, the left column list down the key internal and external
key factors which are same as in EFE and IFE matrix. Adjacent column to key factors is Weight
(relative importance of the factor) which hold the numeric value obtained from EFE and IFE
matrix weight column. The next to weight is AS stands for attractive score assign priority to key
factors using the numeric value 4 for most importance and 1 for least importance and the last
column TAS (Total attractive score) is the value calculated by multiplying weight by AS. One
thing important to note for each strategy separate AS and TAS value added in the table, weight
remain same for all set of strategies mentioned in QSPM. The topmost shows the strategies are
compared in the QSPM matrix, below mentioned table illustrate the structure of QSPM matrix.

STEPS TO DEVELOP QUANTITATIVE STRATEGIC PLANNING MATRIX

(QSPM)
Step 1
Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in
the left column of the QSPM. This information should be taken directly from the EFE Matrix
and IFE Matrix. A minimum of 10 external critical success factors and 10 internal critical
success factors should be included in the QSPM.

Step 2
Assign weights to each key external and internal factor. These weights are identical to those in
the EFE Matrix and the IFE Matrix. The weights are presented in a straight column just to the
right of the external and internal critical success factors.

Step 3
Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization
should consider implementing. Record these strategies in the top row of the QSPM. Group the
strategies into mutually exclusive sets if possible.

Step 4
Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative
attractiveness of each strategy in a given set of alternatives. Attractiveness Scores are determined
by examining each key[linkunit] external or internal factor, one at a time, and asking the
question, “Does this factor affect the choice of strategies being made?” If the answer to this
question is yes, then the strategies should be compared relative to that key factor. Specifically,
Attractiveness Scores should be assigned to each strategy to indicate the relative attractiveness of
one strategy over others, considering the particular factor. The range for Attractiveness Scores is
1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. If
the answer to the above question is no, indicating that the respective key factor has no effect
upon the specific choice being made, then do not assign Attractiveness Scores to the strategies in
that set. Use a dash to indicate that the key factor does not affect the choice being made. Note: If
you assign an AS score to one strategy, then assign AS score(s) to the other. In other words, if
one strategy receives a dash, then all others must receive a dash in a given row.

Step 5
Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the product
of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row. The Total
Attractiveness Scores indicate the relative attractiveness of each alternative strategy, considering
only the impact of the adjacent external or internal critical success factor. The higher the Total
Attractiveness Score, the more attractive the strategic alternative (considering only the adjacent
critical success factor).

Step 6
Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy
column of the QSPM. The Sum Total Attractiveness Scores reveal which strategy is most
attractive in each set of alternatives. Higher scores indicate more attractive strategies,
considering all the relevant external and internal factors that could affect the strategic decisions.
The magnitude of the difference between the Sum Total Attractiveness Scores in a given set of
strategic alternatives indicates the relative desirability of one strategy over another.

LIMITATIONS OF QSPM
A limitation of the QSPM is that it can be only as good as the prerequisite information and
matching analyses upon which it is based. Another limitation is that it requires good judgment in
assigning attractiveness scores. Also, the sum total attractiveness scores can be really close such
that a final decision is not clear. Like all analytical tools however, the QSPM should not dictate
decisions but rather should be developed as input into the owner’s final decision.

ADVANTAGES OF QSPM
A QSPM provides a framework to prioritize the strategies, it can be used for comparing
strategies at any level such as corporate, business and functional.The other positive feature of
QSPM that it integrate external and internal factors into decision making process.A QSPM can
be developed for small and large scale profit and non-profit organizations.

Ansoff matrix deals with the companies external market scenario as well as the product portfolio
which the firm has. The matrix is divided in two quadrants – The product quadrant and the
market quadrant. The Product quadrant on the X axis is further divided into
Existing products and New products. The market scenario on the Y axis is divided into existing
markets and new markets. Thus the Ansoff matrix divides a firm on the basis of the products it
has – existing products or new products, as well as the markets it is in – existing markets or new
markets.

ANSOFF MATRIX

Market Penetration: Existing Products in Existing Markets

Market Penetration is about selling more of the company’s existing products to existing markets.
To penetrate and grow the customer base in the existing market, a company may cut prices,
improve its distribution network, invest more in marketing and increase existing production
capacity. Brands such as Coca-Cola and Heineken are known for spending a lot on marketing in
order to penetrate their markets. In addition, they try to maximize the use of distribution channels
by making attractive deals with a large variety of distributors such as supermarkets, restaurants,
bars and football stadiums for example.

Product Development: New Products in Existing Markets

Product Development is about developing and selling new products to existing markets.
Companies could for example make some modifications in the existing products to give
increased value to the customers for their purchase or develope and launch new products
alongside a company’s existing product offering. A classic example of product development is
Apple launching a brand new iPhone every few years. Other examples can be found in the
pharmaceutical industry where companies such as Pfizer, Merck and Bayer are heavily investing
in Research and Development (R&D) in order to come up with new and innovative drugs every
now and then.

Market Development: Existing Products in New Markets

Market Development is about selling more of the company’s existing products to new markets.
This strategy is about reaching new customer segments or expanding internationally by
targeting new geographic areas. If a company’s product is doing exceptionally well in one
market, why not try to enter a new market with the same products? This is what for example
IKEA has done over the past few decades in order to become one of the biggest furniture
retailers in the world. IKEA started off expanding to markets relatively close in terms of culture
as to its home country (Sweden) before targeting more challenging geographic areas such as
China and the Middle-East. The Eclectic paradigm (also known as OLI Framework) is a great
tool to determine how to enter foreign markets.

Diversification: New Products in New Markets

Diversification strategies are about entering new markets with new products that are either
related or completely unrelated to a company’s existing offering. Diversification in turn can be
classified into three types of diversification strategies. Concentric/horizontal diversification (or
related diversification) is about entering a new market with a new product that is somewhat
related to a company’s existing product offering. Conglomerate diversification (or unrelated
diversifcation) on the other hand is about entering a new market with a new product that is
completely unrelated to a company’s existing offering. A great example of a conglomerate is
Samsung, which is operating in businesses varying from computors, phones and refrigerators to
chemicals, insurances and hotel chains. Finally. vertical diversification (or vertical integration)
means moving backward or forward in the value chain by taking control over activities that used
to be outsourced to third parties like suppliers, OEMs or distributors.

The Ansoff Matrix is a great framework to structure the options a company has in order to grow.
Market Penetration is the least risky of all four and most common in day-to-day business.
Diversification is the most risky since a company starts entering a completely new and
unfamiliar market with a new and unfamiliar product. However, if a company manages to
successfully enter several unrelated markets, it has the advantage of having a well-balanced
product portfolio which actually decreases the total risk.

EMERGENT STRATEGY
Emergent strategy is a strategy that emerges from all over the company, over time, as the environment
changes and the organization shifts and adapts to apply its strengths to a changing reality. Emergent
strategy is an organic approach to growth that lets companies learn and continually develop new
strategies over time based on an ongoing culture of hypothesis and experimentation.

The term “emergent strategy” was introduced in the 1970s by Henry Mintzberg (1978).

An emergent strategy is essentially an “unplanned strategy,” this meaning a course of action that is
perceived by the organization as strategic only as it takes place or even afterwards.

The emergent approach focuses on five organisational features during the change process, which is
organisational structure, organisational culture, management behaviour, patterns of power and politics,
and organisational learning.

Hence, it is more suited to instigating positive, transformational organisational change such as

diversification or restructuring.

It also has the added benefit of helping to reduce resistance to change as it allows time to build
employee support while the strategy is taking shape.

Succesful organisations design and choose strategies to maximise their profits, providing
continuous and lucrative growth in a competitive market. The strategies that focus on the aims
and objectives of the company are defined as deliberate strategies.

Research on organisations’ growth has always played a vital role in strategic management.

Henry Mintzberg, the Canadian theorist at MacGill University, suggests emergent strategies
evolve from streams of behaviours and the actions of an organisation over a period of time,
which would give the organisation the flexibility of changing their ideas and reacting to issues
and challenges. This results in a change to their behavioural pattern and actions based on the
feedback from the implemented strategies.
Mintzberg believes few strategies are a mixture of deliberate and purely emergent. He has
categorised and classified five types of strategies: Emergent, Intended, Deliberate, Realised
and Unrealised. Intended strategies are predesigned in the process of negotiations, however
not all intended strategies are realised strategies. Deliberate strategies focus on the intention of
actions, content, and emphasise the detailed actions of an organisation’s goals with less outside
influence at the operational level.

Mintzberg’s ideas support emergent strategies, as it allows for a change to ideas and actions
based on business challenges. These types of strategies are more likely to be successful in
sustaining and gaining lucrative business. Changing strategies at the early stages of operations
in order to decrease risk factors makes sense rather than waiting till the end result.