3. Strategic Alternatives

8/9/2019 3. Strategic Alternatives

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Unit 3: Strategic Alternatives/Options/Choice/Selection

Concept of Strategic Alternatives/Options: Strategic alternative refer to identify the alternativestrategies that organization might pursue, it serves at the basis for making the choices of

direction that a firm adopts in order to achieve its objectives and provides basic future direction

to the organization. The strategic alternatives are sometimes used as strategic choices andstrategic option. They enhance managers to identify strategic option. For the strategic option the

business should analyse strength and weakness and threats and opportunities. t the same time

organization economic, personnel, administration, products market and pricing policies should beanalysed. Strategic options are the alternative directions and methods available for formulating

the organization!s strategy. This phase develops strategic alternatives or options. "rganization

should develop the strategic alternatives to link between organization!s strength and weakness

with environmental opportunity and threat. nalysis of strategic options seeks to determine thealternative courses of action that could best enable the firm to achieve its mission and objectives.

Strategic alternative is a choice between three options which may depend on the particular

situation of the organization.

Identify Strategic Options/Alternatives:

a# Generic strategies: is the bases in which an organization might seek to achieve lasting position or survive in the competitive environment. $t is called generic simply because it can be

persuade by almost all companies. %any scholars have employed different business strategy

into different situation as generic strategies. $t consists of &a# 'rand strategies( they arestability, e)pansion, retrenchment and combination strategies. &b# market oriented strategies(

they are low cost leadership product differentiation and focused strategies. They can also be

based on strategy clock.

b# Direction of strategy: is the bases in which an organization might choose to develop genericstrategies. They are available to the organization in terms of market coverage, products and

competence base of the organization. $t is directed towards( &a# protect*build: it can be throughconsolidation or penetration in home market. &b# product development: it develops new products for home market &c# %arket development: it offers e)isting products in new markets.

&d# +iversification: $t is going away from e)isting market and products. $t can be related or

unrelated.c# Methods of strategy development: shows the methods by which the directions of strategies

might be achieved. The methods of strategy development can be&a# $nternal development:

developing new products new markets. &b# %ergers c-uisitions: taking over ownership

of other organizations.

: Grand Generic Strategy: 'rand generic strategies at corporate level. They provide basic

future direction to the organization. They are based on business definition and pace of effort. $tcan be:

a! Sta"ility strategies: Stability grand strategy is strategy that an organization pursues when it

continuous to serve the public in the same product or serve, market, and functional sectors asdefined in its business definitions. $f the e)isting product or market condition is satisfactory then,

this type of strategy is selected. They do not want to go over a new activity. This strategy

highlights the non acceptance of new strategy. The e)isting strategic options are continued. t


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this time the environment is also seem stable, no movement, and no new opportunities. So, they

don!t want to change their strategy. Sometimes, it may be very dangerous for organization.

"! #$pansion strategy: ew products, market and functions are added. The pace of activitiesincreases. The product is in the growth stage of product lifecycle. /)pansion is through increased

market share and production capacity. This aim is high growth through diversification

integration, cooperation and globalization. /)pansion strategy is followed, when an organizationsubstantially broadened the scope of its customer, group customer functions and alternative

technologies.

c! %etrenchment strategy: This strategy is persuading in threatening environment. 0roducts,markets and functions are reduced. The pace of activities decreases. The product is in the decline

stage of product lifecycle. The cash flow is negative. 1etrenchment is aimed through reduced

market share, dropping the product lines and markets and investment. The aim is contraction of

activities through turn around, sale of portion of business, li-uidation and increasing cash flows.'enerally it is not preferred because of managers capabilities may be -uestioned.

d! Com"ination strategy: 2ombination grand strategy is followed when an organization adopts

a mi)ture of stability, e)pansion and retrenchment, either at the same time, in its different

business or at the different time in the same business with the aim of improving it performances.The organization has several strategy business units &S34#. $t simultaneously uses combinations

of stability, e)pansion and retrenchment strategies to different parts of the organization. "ld products, markets and functions are continued, dropped and e)panded. 0roduct lifecycles are in

different stages. The aim is to improve performance. The combination can be simultaneous

se-uential or both.

&: Mar'et("ased Generic Strategies: %arket based generic strategies are concerned with

competing successfully in the market by providing superior value to customers, they are S34

divisional level strategies. $t strategies can be based on cost, differentiation and focus and alsosought and type of market target. $t consists of:

)i* +o,(Cost +eadership Strategy: The focus of this strategy is on cost. 5ow6cost leadership

means low overall costs. 5ow6cost means lower prices relative to competitors. This strategy aimsto achieve low costs relative to competitors. The organization becomes the industry!s lowest cost

provider of products. $t finds ways to reduce costs by reducing waste. This strategy appeals to a

broad segment of price6sensitive buyers. Standardized products are offered. There are two waysto reduce costs, control cost driver and revamp value chain.

)ii* -road Differentiation Strategy: This strategy focuses on differentiation. +ifferentiation

aims to establish uni-ueness of a brand relative to competing brands in the perception of

consumers. $t is making products different from competitors! products. $t incorporatesdifferentiating product features that are valued by customers. They cause customers to prefer a

firm!s brand over the broad over the brand of rivals. 2ustomer perceives superior value in

differentiation. They are not sensitive to price.

)iii* -est(Cost .rovider Strategy: This strategy aims at giving customers more value for

money. $t strives to have the lowest cost with good -uality relative to rivals. 0roducts with

comparable attributes are offered. The provider has resources and competencies to combine lowcost with attractive features.

3est cost provider strategy is a hybrid strategy. $t balances low cost with product

differentiation. The market target is value conscious customers. This strategy is appealing to

price6sensitive buyers who prefer product differentiation.


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)iv* oc0sed/Mar'et 1iche Strategies: The focused strategies concentrate on a niche of the

market. iche is a narrow piece of the total market. $t is identified by dividing a market segment

into sub6segments. $t consists of fairly small groups of customers whose needs have not beenwell served. They re-uire special attention. The market is narrow but well6defined. $t can be

defined as demographic characteristics, geographical uni-ueness, specialized re-uirements and

special product attributes.

2ools to "e 0sed to Ded0ct Strategic Alternatives(3: Three have been many tools available for

deducting the environment. The selection of the best alternatives also re-uires for proper evaluation through these tools. These tools educate about future trends and events. For our study,

we focus the following tools:

! SO2 Analysis: S7"T is an acronym used to describe the particular strengths, weakness,

opportunities and threats that are strategic factors for a company. +uring the analysis of variousalternatives, S7"T plays great role for appropriate evaluation of each alternative. mong the

many tools, S7"T is an important tool for evaluation.

S7"T analysis is a systematic identification of internal strengths and weakness of a

business and e)ternal opportunities and threats facing the business. This analysis helps toformulate the strategies that reflect the best match between them. The best matching may be the

potential strategic alternative among the various alternatives. $t is based on the logic that aneffective strategy ma)imizes a business strengths and opportunities but at the same time

minimizes its weaknesses and threats. The objective of S7"T analysis is to provide a

framework to reflect organizational capabilities to avail opportunities or to overcome threats presented by the environment. The S7"T matri) is an important matching tool that helps

managers develop and analyze strategies. The S7"T matri) is also called T"7S matri).

)a* Strength )S*( Strengths is the basic capabilities of the organization in which it can be used to

gain competitive advantages. $t is a distinct competence of an organization which gives the

competitive advantage. +uring the strategic alternative analysis, some of the factors related tothe strengths of an organization need to be analyzed with respect to each alternative:

7ell developed strategy

Strong financial condition

8uman resource competencies

Strong brand name*image*reputation

Strong advertising

3road market coverage

)"* ea'nesses )*: $t is the basic limitation or constraint of the organization which creates

competitive disadvantages. $t is the deficiency in resource, skills, capabilities and knowledgewhich negatively affect the performance of an organization. Following are some of the e)amples

of weaknesses. 7eak marketing plan

o clear strategic direction

7eak financial position

$nade-uate human resources

"bsolete technology

5oss of brand name


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umerous /nvironmental "pportunities

2ritical $nternal 7eaknessSubstantial $nternal Strengths

%ajor /nvironmental Threats

2ell 9Supports turnaround oriented strategy

2ell Supports ggressive Strategy

2ell ;Supports

+iversification Strategy

2ell <Supports +efective Strategy

Fig: Four =uadrants of S7"T nalysis

1aising manufacturing cost etc.

)c* Opport0nities )O*: $t is the favorable conditions in the organization!s e)ternal environmentwhich enables its strength in its position. $t provides competitive advantages to the firm

e)ploiting organization!s strength in relation to its competitors. /)amples of the opportunities of

an organization are:

/)panding new geographical areas*new market segment +iversify the business

c-uisition of rivals

lliance or joint venture

/)pand core business

/)ploit new technologies

Serving additional customer groups

)d* 2hreats )2*: $t is an unfavorable condition of the organization!s e)ternal environment which

causes risk for or damage to the organization!s positions. The e)amples of the threats of an

organization are: 'rowing power of customers and suppliers

>een competition

2hange in consumer taste. Fashion, likes etc.

1ise of new or substitute product

$ncrease in industry rivalry

1aising labor costs

ttack on core business etc.

Application of SO2 analysis: S7"T analysis provides a logical framework guidingsystematic discussions of the business situation, formulation of alternative strategies and the

choice of strategy. n opportunity observed by one e)ecutive may consider the potential threat

by another one. Similarly, the strength in one angle to the manager may be the weakness fromanother perspective. 8owever, the systematic S7"T analysis analyzes all aspects of a firm!s

situation and provides a dynamic and useful framework for formulation and selection of strategy.

The opportunities and threats of the organization are systematically compared to internal

strengths and weaknesses through S7"T analysis. $t helps to develop structured approach toidentify four distinct patterns between the firms! internal and e)ternal situations as shown in

figure.


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Cell : This is the most favorable situation. The firm has several environmental opportunities

and has numerous strengths which encourage pursuing such opportunities. $n this situation, it is

better to follow growth oriented strategy as an aggressive strategy to e)ploit the numerous

opportunities.

Cell &: This is the situation where the firm has key strengths but faces unfavorable environment.

$n this situation, strategists should use current strengths to build long6term opportunities using

key strengths. The firm has to diversify the business for long6term opportunities.

Cell 3: $n this situation, the firm faces impressive market opportunities but is constrained byseveral internal weaknesses. 3usiness in this condition is like low market share although it

competes in high growth industry. The firm has to focus to eliminate internal weaknesses to pursue market opportunities.

Cell 4: $t is the least favorable situation in which the firm faces major environmental threats and

critical internal weaknesses. This condition clearly calls to strategists to reduce involvement inthe product market e)pansion. $t also suggests that firm either defined or withdraw the business

to secure another business opportunity.

;. .#S2 Analysis/%emote #nvironment: 0/ST analysis refers to the systematic analysis of the macro environmental forces, such as, political6legal, economic, socio6cultural and

technological forces influencing the organizations capability to work in the future and to pursue

its strategy to compute in the market. $t provides enough back ground to formulate andimplement a good strategy. Such environmental factors are usually beyond the firm!s control and

sometimes present themselves as threats. 8owever, changes in the e)ternal environment also

create new opportunities. The environmental forces are also interacting together and creatingmore pressures to change our organizations in the society. 0/ST comprises the four forces.

0/ST analysis helps identify future opportunities and threats to the organizations. n

opportunity is a favorable condition in the environment. $t enables and organization to consulate

and strengths its strategic position. Threats are an unfavorable condition in the environment. $tcreates risk and causes changes to the organizations strategic position. 0/ST analysis indicates

which environmental forces are affecting the organization and which of them are the most

important. The impact differs according to the nature of the organization.

Components of .#S2 Analysis(4:

! .olitical 5legal:6a 0olitical forces:6 They are represented by political system, institutions and philosophy. The

government formulates policies and regulations regarding human resource management. The

policies regarding e-ual employment opportunities, -uotas in employment for woman,


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disadvantaged and indigenous people affect ac-uisition aspect of human resource management.

'overnment agencies act as regulatory agencies. They minimum wage of workers.

b 5egal forces:6 it consists of laws, rules, regulations, court cases, and institutions. 5abour lawsgenerally protect the interests of employees.

&! #conomic forces:(

a /conomic forces:6'lobalization:6 $t refers to borderless trade through e)tension of operations in several

countries. The human resources in a global organization have also assumed global

dimensions.

+emographics:6 $t is concerned with human population and its distribution. The forces

consist of population size, growth, age mi), urbanization and migration.

/conomic health:6 The level of income, the stage of business cycle, inflationary pressures

and fiscal policies of the government affect the compensation of employees. /conomicgroupings, such as /uropean 4nion and S12 facilitate cross border mobility of human

resources.

" +a"o0r Mar'et orces:6 labour forces is a geographical area within which people looking

for work interact with employers looking for people. $t can be two types: Tight labour marketand loose labour market.

3! Socio(c0lt0ral forces:(

a Social forces:6

• Social orms: They affect attitudes and e)pectations toward organization and the work itself.

2hanging social values have significant implications for 81%.

• 5ife style: $t is a person!s pattern of living reflected in his activities, interests and opinions.

2hanges as life styles have resulted in shorter work weeks, fle)ible working hours and work athome patterns of work.

b 2ultural forces: 2ulture is the comple) whole of knowledge, customer, traditions, values,

religion, language and works of art and architectures. $t is created by society and is handed

down from generation to generation.4! 2echnological forces:(

Technology makes work more efficient. $t consists of skills, methods, systems and e-uipment.

utomation, computerization, digitalization, robotics, informatics, and artificial intelligence haveall affected the field of human resource.

a 5evel of technology:6 $t can be labour based or capital based and appropriate or

sophisticated. b Technological change: The speed of technological change dislocates employees by

eliminating old jobs, creating new jobs and increasing professionalization of jobs.

3! ive orces Analysis/Competitive Analysis/ .orter6s 7 orce Model:

nalyzing this model, we can say that high force among five factors result as a threat because they are likely to reduce profits. low force in contrast can be viewed as an opportunity

because it may allow the company to earn greater profits. strategist should analyze anyindustry by rating each competitive force as high, medium or low in strength. The five forces of

industry competition are mentioned below.

I! 2hreats of 1e, #ntrants: ew entries to an industry bring new capacity to gain more marketshare and substantial resources. Therefore, they are threats to the e)isting firms. The threat of

entry depends on the presence of entry barriers and reactions that can be e)pected from e)isting


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competitors. $f entry barrier is not tightened, more threats e)ist from new entrants and vice versa,

entry barriers further depends in the following factors:

i. /conomies of scaleii. 0roduct &brand# differentiation

iii. 2apital re-uirements

iv. Switching costv. ccess to distribution channels

vi. 'overnment policy

II! 2hreats of s0"stit0tes: Substitute products and services are those products which may appear to be different but satisfy the same needs as another product. For e)ample, Fa) is a substitute for

Fed/). 'as central heating system is in competition with solid fuel system. The main threat

posed by substitutes is that they limit the price for products. Tea can be considered as a substitute

for coffee. 0lastic container producers competing with glass, paperboard etc. the presence of substitute products puts a ceiling on the price that can be charged before consumers will switch

to the substitute product. 2ompanies can reduce the risk of substitute by building in switching

costs through added product or service benefits meeting buyers! needs.

III! -argaining po,er of "0yers/c0stomer/cons0mer: 3uyers can e)ert bargaining power over a supplier!s industries by forcing its prices down, reducing the amount of goods they purchase

from the industry, demanding better -uality for the same price. 7hen customers are concentrated buy in volume, their bargaining power represents a major force affecting the intensity of

competition in an industry. 1ival firms may offer e)tended warrantees or special services to gain

customers loyalty whenever the bargaining power of consumers is substantial. 3argaining power of consumers is also higher when the products being purchased are standards.

I8! -argaining po,er of s0ppliers: $t refers to the situation where suppliers force the firms to

pay higher prices. The bargaining power of suppliers affects the intensity of competition in an

industry, especially when there is a large number of a supplier, when there are only a few goodsubstitute raw materials or costly raw materials. $t is often in the best interest of both suppliers

and producers to assists each other with reasonable prices, improved -uality, development of

new services, just in time deliveries and reduced inventory cost, thus enhancing long term profitability for all concern.

8! %ivalry among e$isting firms: 1ivalry among competitive firms is usually the most powerful

of the ? competitive forces. $t takes place between the organizations that make similar productsand services and sell them in the same market. The strategies persuade by firm can be

successful only to the e)tent that they provide competitive advantage over the strategies persuade

by rival firms. 1ivalry occurs because one or more competitors either feel the pressure or see the

opportunities to improve the position.

#val0ation of Strategic Alternatives(3: The criteria used for evaluation of strategic alternatives

are:

9 S0ita"ility(&: $t is concerned with environmental fit of the strategic alternative. $t also

provides the rationale to a strategy. $t indicate whether the strategic alternative make sense in

relation to environmental circumstances. $t is also a basic of -ualitative assessment concernedwith testing out the rational of strategy and is useful for screening options. The assessment of

suitability consists of ; stages. &a# /stablishing the rational: @arious tools and techni-ues are

used to establish the rational which describes the ideas whether they are good or not some of

these tools are lifecycle portfolio matri), positioning, value chain analysis and portfolio analysis.


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&b# Screening "ptions: Suitability of a specific strategic option is relative to other available

options. The methods used for understanding suitability are ranking, decision tree and scenarios.

9& Accepta"ility(3: $t is concerned with the e)pected performance outcomes of a strategicalternative. $t is strongly related to people e)pectations and therefore the issues of re-uire careful

analysis. The criteria for acceptability of strategic alternative are

)a* %et0rn(3: /)pected return from specific strategic options is assessed. The variousapproaches to analyze return are

&i# 0rofitability analysis: $t assesses financial return to investment. The tools used for this

analysis are return on capital employed, pay back period, and discounted cash flow&ii# 2ost benefit analysis: $t assesses the overall economic impact of strategic options. This

analysis attempts to put a money value of all the costs and benefits of strategic options.

&iii# Shareholder value analysis: $t assesses the impact of strategic options in generating

shareholders value. The shareholder value is the total shareholder return.

)"* %is's: $t involves probably estimate about robustness of strategic options. The level of risk is

important for acceptability of strategic options. ew product development carries high level of

risks. The approaches for analyzing risks are.

&i# Financial ratio projection, &ii# Sensitivity analysis &iii# Simulation modeling &iv# 8euristic &v#+ecision matrices:

)c* Sta'eholder : $t provides political dimensions to the organizations acceptability of a strategicalternative. The approaches of stakeholder are &i# stakeholder mapping &ii# game theory.

93 easi"ility(3: $t is concerned with availability of resources and competencies to deliver

strategic alternatives. $t determines an option implement ability and work ability in practice. $tassesses the organizations capability to make the strategic alternatives succeed. The approaches

for available to understand feasibility are

&a# Funds flow analysis: $t assesses financial feasibility. $t forecasts the funds re-uired and the

likely resources of funds for strategic alternatives.&b# 3reak even analysis: $t studies costs volume profit relationships to assess financial feasibility.

This analysis identifies 3/0 when revenue e-ual costs.

&c# 1esource deployment analysis6;: $t identifies need for resources and competencies forspecific strategic alternatives. $t is used to judge &i# sufficiency of current resources and

competencies to pursue a strategic options.

&ii# eed for uni-ue resources and competencies to sustain strategic advantages.

S2%A2#G; S#+#C2IO1 M#2


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3oth internal and e)ternal stakeholders influence a particular strategy selection because the

relative importance of these stakeholders varies over time. For e)ample, consumer!s

knowledge of different companies! offerings through internet browsing has increased their power considerably.

2he SO2 Matri$: The S7"T analysis is also called T7"S matri). $t is an importantmatching tool that helps manager develop < types of strategies. S"&strength6"pportunities#

Strategies, 7"&7eaknesses6"pportunities# strategies, ST &Strength6Threats# Strategies, and

7T&7eakness6Threats# Strategies. %atching key e)ternal and internal factors is the mostdifficult part of developing a S7"T matri) and re-uired and there is no one best of matches.

SO Strategies uses a firm!s internal strengths to take advantage of e)ternal opportunities. ll

managers would like their organizational to begin a position in which internal strengths can be

used to take advantages of e)ternal trends and events.; O Strategies aim at improving internal weakness by taking advantage of e)ternal

opportunities. Sometimes key e)ternal opportunities e)ist, but a firm has internal weakness that

prevent it from e)ploiting those opportunities. For e.g. there may be high demand for electronic

devices to control the amount and timing of fuel injection in automatic engines &opportunities#, but a certain auto parts manufacturer may be lack the technology re-uired for producing these

devices &weakness#. "ne possible 7" strategy would be to ac-uire this technology by forminga joint venture with a firm having competency in this areas. n alternative 7" strategy would

be to hire and train people with the re-uired technical capabilities.

9 S2 Strategies use a firm!s strength to avoid to reduce the impact of e)ternal threats. This doesn!tmean that a strong organization should always meet threats in the e)ternal environment.

8owever, when an e)cellent firm &strength# couldn!t complete with the alliance firm. 1ival

firms that copy ideas innovations, and patented products are a major threat in many industries.

This is still a major problem for 4.S. firms selling products in china.< 2 strategies are defensive tactics directed at reducing internal weakness and avoiding e)ternal

threats. organization faced with numerous e)ternal threats and internal weakness may

indeed be in precarious &insecure# position. $n fact, such a firm have to fight for its survival,merge, retrench, declare bankruptcy or choose li-uidation. There are eight steps involved in

constructing a S7"T matri).

i list the firm!s key e)ternal opportunities.

ii 5ist the firm!s key e)ternal threats

iii 5ist the firm!s key internal strength

iv 5ist the firm!s key internal weakness

v %atch internal strength with e)ternal opportunities and record the resultant S" strategies in theappropriate cell.

vi %atch internal weaknesses with e)ternal opportunities, and record the resultant 7" strategies.

vii%atch internal strength with e)ternal threats and records the resultant ST strategies.

viii %atch internal weaknesses with e)ternal threats, and record the resultant 7T strategies.

2ools for Strategies Selection ).ortfolio Analysis*: The tools for strategy selection are:

. -CG Matri$ )-oston Cons0lting Gro0p Matri$*: $t was developed by 3oston 2onsulting

'roup, 4S in the mid CDEs. 32' is designed specifically to enhance a multidivisional firm!sefforts to formulate strategies. The concept tells the position each business has within the ;

divisional matri). $t means 3'% reveals differences among division in terms of relative market

share positions and industry growth rate. %arket share is the share in relation to the largest


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competitor. %arket growth is the annual market growth rate. $t is considered as the best single

indicator of the market strength. They both affect cash flow. The growth rate is the projected rate

of sales growth for the market served by a particular business whereas market share is usuallye)pressed as the ratio of business!s market share divided by the market share of the largest

competitor in that market. The 32' matri) is divided into < cells which can be described as:

)a* Stars: Stars represented the organization!s best long run opportunities for growth and profitability. This is the position where is high market share and high market growth rate. The

firms in this state are the leaders in their business and generate large amounts of cash. They

re-uire substantial investment to maintain and e)pand their dominant positions in a growingmarket. The appropriate strategies for the firms could be forward and backward integration,

market development and joint etc.

)"* Cash Co,s: 2ash cows are low growth but high market share products or divisions because

of their high market share, they have low costs and generate cash. $t is called cash cows becausethey generate cash in e)cess of their needs they are often milked. %any of today!s cash cows

were yesterday star. 2ash cow dividends should be managed to maintain their strong position.

0roduct development or concentric diversification may be attractive strategies for strong cash

crows. 0roduct development or concentric diversification may be attractive strategies for strongcash cows. 8owever, as a cash cows division becomes weak, retrenchment or divestiture can

become more appropriate.

)c* =0estion Mar's: The business units in the -uestion marks have a low relative markets share

position. et they complete in a high growth industry. 'enerally thee firms cash needs have high

and their cash generally is low. These businesses are called -uestion marks because theorganization must decide whether to strengthen them by pursuing an intensive strategy or sell

them.

)d* Dogs: such divisions of the organization have low relative market share position and

complete in a slow or no market growth industry. 3ecause of their weak internal and e)ternal positions, these businesses are often li-uidated or divested through retrenchment. 7hen a

division first becomes a dog, retrenchment can be the best strategy to pursue because many dogs

have bounced back, after trough assets and cost control to become viable division.

+imitations of -CG Matri$:

• %arket share and market growth are not the sole dimensions of profitability.

• Suitability for large multi product companies only.

• 3usiness is not only classified as high ad low. $t can be classified into high, medium and low

which are missed in 32' matri).

• ccurate measurement of market share and market growth rate can be a problem.

• Some companies with low market share can generate superior profitability and cash flow funds

with strategies based on differentiation, innovation or market segmentation.

;! G# Matri$: '/ ine cell matri)es have been developed to overcome the limitations of < cell

matri). This concept was developed by general electric company. This matri) uses relationship between market attractiveness and competitive position. $t focuses on the attractiveness of S34s.

The indicators of these ; dimensions are:

! Mar'et Attractiveness: ll strengths and resources relating to marketing. Size, growth,customer satisfaction levels, commitment, price levels, profitability, technology, government

regulations, economies of scale, seasonality, overall possibility, social, political factors.


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&! Competitive .ositions: 2omposition of several factors. They include market share, customer

loyalty*brand reputation, share growth, profit margin, distribution network, promotional

effectiveness, technological capability, organization and management, 1 + performance, product -uality services, productive capacity and efficiency and per unit costs of productions.

'/ matri) is divided in C cells. Successful S34s in '/ matri) re-uire high market

attractiveness and strong competitive positions. The matri) further can be divided into 9 zones. Cell > &> 4 )Invest/Gro,*: Strategic business units in these cells are successful. They should be

given priority in portfolio &i.e. invest and grow#. %ore investment should be allocated for

growth.; Cell 3> 7>? )Gro,/+et go*: S34s in these cells have medium success and attractiveness. They

should be included on selective basis for investment. $t means the company should pursue

selectivity and manage for earnings.

9 Cell @> >B )

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3. Strategic Alternatives