Question

What is the purpose, advantages, and disadvantages of each of the following matrices:

SWOT- Strength, Weaknesses, Opportunities, & Threats

SPACE- Strategic Position and Action Evaluation

BCG- Boston Consulting Group

IE- Internal/External

GS- Grand Strategy

QSP- Quantitative Strategic Planning

Which do you think is/are the strongest of these? Why?

Cite your sources in APA

Answer 1

What is the purpose, advantages, and disadvantages of each of the following matrices:

SWOT- Strength, Weaknesses, Opportunities, & Threats :

It is the tool used for audit and analysis of the overall strategic position of the business in market. The key purpose is to identify the strategies which creates the company specific business model that will align the organization resources & capabilities in a better manner to the needs of environment in which the company operates.

Advantage:

• versatility: Used to structure strategic planning brainstorming sessions which facilitates the business alternatives. it is helpful in assessing vendors, technologies and product markets.
• Builds organization’s strengths
• Reverse its weakness
• factor identification: allows the firm to become familiar with the their internal and external situations or factors which are favorable and unfavorable to their goals.
• Wide application: Used across a variety of organizational requirements. It makes analysis as a staple element in different business planning in order to include, but not limited to feasibility studies, product development, analysis of possible sources of competitive advantage, strategic planning, opportunity analysis and marketing strategy.
• Simplicity: does not need technical skills or special training for using this tool. Simplicity makes SWOT as inexpensive.

Disadvantages:

• No weighting factors: The analysis leads to four individual lists of strengths, weaknesses, opportunities and threats, The tool does not provides the mechanism to rank the significance of one factor versus another. So it is difficult to determine the amount of any one factor impact on goals.
• Ambiguity: This tool is a a one dimensional model which divides each problem attribute as a strength, weakness, opportunity or threat. However a factor can be both a strength and opportunity or a strength and a weakness or there is a chance that opportunity can also be threat. So the tool does not provide the mechanism to deal with this threats.
• Validity: Analysis considers information available at particular moment of time & may become updated immediately. So analysis may lead business decision based on the irrelevant or unreliable data.

SPACE- Strategic Position and Action Evaluation:

It is important stage 2 matching tool. It is used to analyze the organization based on four dimensions two internal

dimensions, namely Financial Strength (FS) and Competitive Advantage (CA), and two external dimensions, namely Industry Strength (IS) and Environmental Stability (ES). These four factors are important for the organization strategic position and helps to determine the how well the firm is performing in its given industry.

Advantages:

• Defines the company financial position
• Defines company's competitive position
• Defines company stability position
• Defines company industry position

Disadvantage:

• Inaccurate figures may lead to mismanagement of the organization.
• Does not capture all the information needed to determine the firms actual competitive position.
• Entry of new competitor or industry may change the firms industry position.
• Unanticipated changes in the technology & economy.

BCG- Boston Consulting Group

Advantages:

• It is helpful for the managers to evaluate balance in the firm's current portfolio of stars, cash cow , question Marks and dogs.
• It is easy to understand & use. One does not necessary to have any special skills to understand this concept. The cash cow and stars are two quadrant of matrix which are ideal for the company & question marks and dog are the two quadrant which the firms should try to avoid due to risk involved in the both scenarios.
• It is applicable for the large firms which seek experience effect & volume.
• it provides the foundation for the management to decide & prepare for the future.
• It helps to identify the opportunities for the company , because once dog and question marks quadrants are removed the company is left with cash cows and stars quadrants , Based on the firms cash position & risk involved the company can go for star business which has high scope for growth & at the same time need more investment or company may go for cash cow business Which provides the good cash inflow with less investment.
• This matrix helps to remove the weak areas of the business.

Disadvantages:

• link between market share and profitability is not strong
• It neglects the effects of synergies between business units.
• It is too simplistic approach for complex situations , thus it will not provide ideal solutions for every situation.
• Sometimes Dogs can earn even more cash as Cash Cows.
• No middle path: There is no middle path which is necessary that business is high growth or less growth as some business can also be medium growth , For such business this matrix does not offer any solution.

IE- Internal/External

This tool is very important when considering the portfolio management. It is similar to BCG matrix & used in combination to better analyze internal and external factors of the company. IE matrix is a continuation of the EFE matrix and IFE matrix models.

Advantages:

• It tells us company should pursue strategies focused on increasing market penetration and product development.
• Easy to understand. The input factors are clearly understood & there will not be any confusion over the terms used for the matrices, for everyone inside or outside the company.
• Easy to use. It is easy to understand & use. One does not necessary to have any special skills to understand this concept
• It focuses on the key internal and external factors. Unlike some other analyses, the IFE and EFE only highlight the key factors that are affecting a company or its strategy.
• Multi-purpose. This tools can be used to build ,GE-McKinsey matrix SWOT analysis, IE matrix or for bench-marking.

Disadvantages:

• Easily replaced. IFE and EFE matrices can be replaced almost completely by other analysis tools such as SWOT analysis , PEST analysis, competitive profile matrix etc.
• It will not help directly to strategic formulation. Both analyses only identify and evaluate the factors but do not help the company directly in determining the next strategic move or the best strategy. Other strategy tools have to be used for that.
• Too broad factors. SWOT matrix has the same limitation and it means that some factors that are not specific enough can be confused with each other. Some strengths can be weaknesses as well.

GS- Grand Strategy

Advantages:

• Sets of strategies considered simultaneously or sequentiallyy
• Integration of pertinent external and internal factors in the decision making process

Disadvantages:

• Requires intuitive judgments and educated assumptions
• Only as good as the prerequisite inputs
• Only strategies within a given set are evaluated relative to each other

QSP- Quantitative Strategic Planning

Advantages:

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.

Disadvantages:

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.

The SWOT Matrix, SPACE Matrix, BCG Matrix, IE Matrix, QSP and Grand Strategy Matrices are similar in that all are matching tools in stage two of the strategy formulation framework. These analytical tools differ, in that they focus on different variables. Also, the BCG and IE Matrices generally apply only to a multi divisional firm, whereas the TOWS, SPACE, and Grand Strategy Matrices are applicable to all organizations