S.W.O.T. AND S.P.A.C.E. ANALYSIS

Strategy analysis framework

The IFE and EFE needs already be available in order to decide which strategy to pursue further – in order to best create more value for their customers and thereby gain competitive edge.

The possible strategies are more specifically:

• Swot Matrix

• Space Matrix

• Grand Strategies

QSPM (quantifiable strategic planning Matrix) The strategic manager has the option of choosing specific strategies by using a quantifiable method.

Stage 1: Input stage

EFE & IFE Matrix

Stage 2: Matching stage

Swot & space Matrix

Stage 3: Decision stage

QSPM – Not applicable

The three strategic analysis matrixes:

As stated earlier, the vision, mission statement, external and internal analyses of the organisation’s environment and the long term goals provide the basis for the various matrixes that follow. The same people responsible for and taking part in these processes should take part in the strategy analysis and choice. Its important to ensure that all individuals involved in this process have all the relevant information from the previous stages at their disposal, with special emphasis in the IFE and EFE

Swot matrix:

The old way op just plotting down S.W.O.T is a great brainstorming idea – the only issue is organisations tend to have way more S + O than W + T which is only human nature, The TOWS SWOT Matrix is more descriptive and in dept., it forces the organisation to see S + W as internal to the company and O + T as external to the market. It’s also important to keep in minimal, no more than 5 of each (SWOT)

Strengths, weaknesses, opportunities and threats identified in the earlier stages of the strategic management process. The steps in constructing a SWOT is as follows…

The most important internal S & W of the organisation found in the IFE. S = with the highest rating. W with the lowest rating (highest weight)

The most important external O & T of the organisation found in the EFE. O = with the lowest rating. W with the lowest rating.

Match internal W with External O and record the possible strategies (WO) – supply options the organisation has related to specific S and O and use the codes to specify (S1, O3, O4)

Match internal S with External T and record the possible strategies (ST) – supply options the organisation has related to specific S and T and use the codes to specify (S1, S3, O1, O4)

Match internal W with External T and record the possible strategies (WT) – supply options the organisation has related to specific W and T and use the codes to specify (W1, T1, T2)

After completion of the Matrix you will have 4 sets of strategies SO – WO – ST – WT (There is no perfect strategy but they should be carefully discussed and evaluated)

Always keep in mind

• SO: strategies use the organisation’s internal strengths to take advantage of the external opportunities that exist

• WO: strategies are trying to improve the organisation’s weaknesses by taking advantage of the external opportunities

• ST: Strategies again use the organisation’s internal strengths to try and avoid possible external threats.

• WT: Strategies are very defensive by nature and are aimed at reducing internal weakness and avoiding external threats.

The matrix gives viable options for the organisation to use, but there is no rules saying it must be used and in a certain way – For each of these alternative strategies, it’s important to identify a grand strategy – this gives the organisation an idea of what other implications there are. SO usually use growth and development strategies, WT usually defensive ones, WO & ST differ from aggressive to defensive strategies, depending on the specific factors chosen.

SPACE matrix:

This is an acronym for Strategic Position and Action Evaluation. It consists out of 4 quadrants (Aggressive, Conservative, defensive and competitive) These quadrants are made by crossing two axes. The first two scales represent two internal dimensions, namely: * The financial Strength (FS) and * Competitive advantage (CA). The other two scales represent the two external dimensions: * Environmental stability (ES) and * Industry strength (IS).

Same as the SWOT the information gained from the IFE and EFE is used for the SPACE matrix, but those used in the SWOT is the main ones that will be used in the SPACE but not all of them will be used, only those that are relevant.

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When SPACE suggests aggressive the following strategies might be feasible:

• Concentrated growth

• Market penetration / development

• Product development

• Vertical integration

• Horizontal integration

• Concentric diversification

• Conglomerate diversification

When SPACE suggests conservative the following strategies might be feasible:

• Market penetration / development

• Product development

• Concentric diversification

When SPACE suggests defensive the following strategies might be feasible:

• Concentric diversification

• Divestiture

• Turnaround

• Liquidation

When SPACE suggests Competitive the following strategies might be feasible:

• Vertical integration

• Horizontal integration

• Market penetration / development

• Product development

• Any of the corporate combinations (joint ventures; str alliances; consortia)

The Grand strategy Matrix:

The advantage of the Grand strategy Matrix is that an organisation need not be positioned in this matrix in a certain quadrant only; if it has more than one division or unit, the others could also be plotted on this matrix, thus distinguishing between different business units in the same organisation. Its based on 2 dimensions (Competitive position & Market growth)…

The matrix also consist of 4 quadrants (I, II, III, IV) The two axis represent the dimensions. The x – axis: represents the competitive position

All that the organisations has to do is measure whether its in rapid or slow market growth and plot that on the matrix, and then analyse weather it’s in weak or strong position currently in its industry and also plot that.

Quadrant I: this quadrant represents an excellent strategic position. Organisations in his positions should not move away from their current competitive advantages unless they are too heavily involved with a single, dominant product – when concentric diversification would be a good option. The other most feasible strategies to pursue would be product development and market development / penetration. If the organisation has the necessary resources, vertical and horizontal integration are also advisable.

Quadrant II: These organisations are competing in a strongly growing market but they do not have a particularly strong position compared with their competitors. Internal growth should be the first option (product development and market development / penetration), but if the organisation does not have any distinctive competencies, then horizontal integration would be advisable. Sometimes defensive strategies such as divesting to provide funds for other strategies could be pursued as well.

Quadrant III: These organisations compare in a slow – growing industry and also have a weak competitive position. Before liquidation is the only strategy available, divestiture, such as asset reduction or retrenchment, might be a viable strategy, alternatively, diversifying their product range could be an option.

Quadrant IV: These organisations are in the unique situation of showing a strong competitive position but in a slow – growing market. They will immediately have to pursue any of the diversification strategic options or even opt for a partner in a corporate combination, such as a joint venture.

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