GROUP MEMBER NAMES

Muhammad Asad Siddiqui

Zafar Rabbani 59686

Noureen Mirza 59208

SUBJECT : “STRATEGIC MANAGEMENT”

PRESENTATION TOPIC

“INTERGRATION AND MATRICES”

STRATEGY: a plan of action designed to achieve a long-term or overall aim the art of planning and directing overall military operations

and movements in a war or battle.

Strategic Management:Strategic management involves the formulation and implementation of the major goals and initiatives taken by a company's top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.

TYPES OF STRATEGIES

Integration

Vertical

Horizontal

Intensive

Market Penetration

Market

Development

Produc

t Development

Diversification

Related

Unrelated

Defensive

Joint Ventur

es

Divestiture

/Liquidation

WHAT IS INTEGRATION?Integration is the act of bringing together smaller components

into a single system that functions as one.

Vertical Integration

Forward

Backward

FORWARD INTEGRATIONForward integration is a business strategy that involves a form of vertical integration whereby business activities are expanded to include control of the direct distribution or supply of a company's products.

Example:• If Intel acquires Dell, it is a forward integration because

it is an acquisition of a manufacturer by a supplier.• If Dell acquires a distributor of computers such as

BestBuy, it will again be a forward integration since it is an acquisition of a distributor by a manufacturer.

BACKWARD INTEGRATION:Backward integration is a form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it will result in improved efficiency and cost savings. Backward integration might cut transportation costs, improve profit margins and make the firm more competitive.Examples of Backward Integration:• A clothing manufacturer may purchase one of its suppliers of

fabrics to lessen the cost of raw materials.• A bank which sells insurance buys an insurance company.

GUIDELINES FOR FORWARD INTEGRATION

• Present distributors are expensive, unreliable, or incapable of meeting firm's needs

• Availability of quality distributors is limited• When firm competes in

an industry that is expected to grow markedly• Organization has both capital and human resources needed

 to manage new business of distribution• Advantages of stable production are high• Present distributors have high profit margins

GUIDELINES FOR BACKWARD INTEGRATION

• When present suppliers are expensive, unreliable, or incapable of meeting needs.

• Number of suppliers is small and number of competitors large.

• High growth in industry sector.• Firm has both capital and human resources to manage 

new business.• Advantages of stable prices are important.• Present supplies have high profit margins.

HORIZONTAL INTEGRATIONHorizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain. A company may do this via internal expansion, acquisition or merger. The process can lead to monopoly if a company captures the vast majority of the market for that good or service.Example of Horizontal Integration:• The Standard Oil Company's acquisition of 40

refineries. • An automobile manufacturer's acquisition of a sport

utility vehicle manufacturer.• A media company's ownership of radio, television,

newspapers, books, and magazines.

GUIDELINES FOR HORIZONTAL INTEGRATION• When an organization can gain monopolistic characteristics in a

particular area or region without being challenged by the federal government for "tending substantially" to reduce competition

• When an organization competes in a growing industry• When increased economies of scale provide major competitive ad

vantages• When organization has both the capital and human talent needed

 to successfully manage expanded organization• When competitors are faltering due to lack of managerial

 expertise or a need for particular resources that an organization possesses; note that horizontal integration would not be appropriate if competitors are doing poorly because overall industry sales are declining

THE EXTERNAL ASSESSMENT

THE EXTERNAL FACTOR EVALUATION (EFE) MATRIX

External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions.

The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing.

EFE MATRIX KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORES

OPPORTUNITIES:      

(1)- ROWAN COUNTRY IS GROWING 8% ANNUALLY IN POPULATION 0.05 4 0.2

(2)- TDB UNIVERSITY IS EXPANDING 6% ANNUALLY 0.08 3 0.24

3)- MAJOR COMPETITOR ACROSS TOWN RECENTLY CEASED OPERATIONS 0.08 2 0.16

(4)-DEMAND FOR GOING TO CINEMA GROWING 10 5 ANNUALLY 0.07 3 0.21

(5)- TWO NEW NEIGHBORHOODS BEING DEVELOPED WITH IN 3 MILES 0.09 4 0.36

(6)- DISPOSABLE INCOME AMONG CITIZEN GRE 5% IN PRIOR YEAR 0.06 1 0.06

(7)- UNEMPLOYMENT RATE IN COUNTRY DECLINED TO 3.1% 0.03 3 0.09

THREATS:   

 

(8)- TREND TOWARS HEALLTHY EATING ERODING CONCESSION SALES 0.12 2 0.24

(9)- DEMAND FOR ONLINE MOVIES AND DVDS GROWING 10% ANNUALLY 0.06 3 0.18

(10)- COMMERCIAL PROPERTY ADJACENT TO CINEMAS FOR SALE 0.06 4 0.24

(11)- TDB UNIVERSITY INSTALLING AN ON CAMPUS MOVIE THEATER 0.04 2 0.08

(12)- COUNTRY ABD CITY PROPERTY TAXES INCREASING 25% THIS YEAR 0.08 2 0.16

(13)- LOCAL RELIGIOUS GROUPS OBJECT TO RATED MOVIES BEING SHOWN 0.04 3 0.12

(14)-MOVIES RENTED FROM LOCAL BLOCKBUSTER STORE UP12% 0.08 0 0

(15)-MOVIES RENTED LAST QAURTER FROM TIME WARNER 15% 0.06 4 0.24

TOTAL 1.00 2.58

Developing an EFE matrix:• List factors: The first step is to gather a list of external factors.

Divide factors into two groups: opportunities and threats.• Assign weights: Assign a weight to each factor. The value of each

weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important. One or hundred means that the factor is the most influential and critical one.  The total value of all weights together should equal 1 or 100.

• Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how effective the firm’s current strategies respond to the factor. 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are industry-specific. Ratings are company-specific.

• Multiply weights by ratings: Multiply each factor weight with its rating. This will calculate the weighted score for each factor.

• Total all weighted scores: Add all weighted scores for each factor. This will calculate the total weighted score for the company.

THE COMPETITIVE PROFILE MATRIX (CPM)

Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry.

CPM shows the clear picture to the firm about its strong points and weak points relative to its competitors.

The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies. The best thing about CPM that it includes your firm and also facilitate to add other competitors make easier the comparative analysis.

COMPETITIVE PROFILE MATRIX

COMPANY A COMPANY B COMPANY C

CRITICAL SUCCESS FACTORS WEIGHT RATING SCORE RATING SCORE RATING SCORE

ADVERTISING 0.20 1 0.2 4 0.8 3 0.6

PRODUCT QUALTITY 0.10 4 0.4 3 0.3 2 0.2

PRICE COMPETITIVENESS 0.10 3 0.3 2 0.2 1 0.1

MANAGEMENT 0.10 4 0.4 3 0.3 1 0.1

FINANACIAL POSITION 0.15 4 0.6 2 0.3 3 0.45

CUSTOMER LOYALTY 0.10 4 0.4 3 0.3 2 0.2

GLOBAL EXPANSION 0.20 4 0.8 1 0.2 2 0.4

MARKET SHARE 0.05 4 0.2 4 0.2 3 0.15

TOTAL 1.00 1 3.3 2.6 2.2

Creating a CPM:• In the first column list down all the key success factors of industry

(usually from 6 to 10).• In the second column, assign weights to each factor ranging from

0.0 (not important) to 1.0 (most important). Greater weights should be given to those factors which have greater influence on the organizational performance. The sum of all weights must be equal to 1.

• Now rate each factor from 1 to 4 for all the firms in the analysis, Here rating 1 represents major weakness, rating 2 shows minor weakness. Similarly rating 3 shows minor strength while rating 4 represents major strength.

• Calculate weighted score by multiplying each factor’s score by its rating.

• Find the total weighted score of all the firms by adding the weighted score for each variables.

THE INTERNAL ASSESSMENT

THE INTERNAL FACTOR EVALUATION (IFE) MATRIX

Internal Factor Evaluation Matrix is a popular strategic management tool for auditing or evaluating major internal strengths and internal weaknesses in functional areas of an organization or a business. 

IFE matrix also provides a basis for identifying or evaluating relationships among those areas.

IFE MATRIX WEIGHT RATING WEIGHTED SCORES

INTERNAL STRENGHTS      

(1)- LARGEST MANUFATURER IN THE MARKET 0.10 4 0.4

(2)-SUPPLIER MAJOR AIRLINES 0.12 4 0.48

(3)- GOOD REPUTATION AND IMAGE 0.04 3 0.12

(4)-CLOSE PROXIMITY TO THE AIRPORT 0.08 4 0.32

(5)-STRONG MANAGEMENT TEAM 0.04 3 0.12

(6)-INCREASING CASH FLOW 0.05 3 0.15

(7)-LOYAL EMPLOYEES 0.04 3 0.12

(8)-ACCESS TO CHEEP AND RELIABLE FINANCING 0.03 4 0.12

(9)-HISTORY OF MINMAL SERVICE COMPLAINTS 0.04 3 0.12

(10)-FINANCIAL RATIOS. 0.04 4 0.16

INTERNAL WEAKNESSES   

 

(1) SATURATED MARKET 0.10 1 0.1

(2) SENSITIVE TO OIL PRICES 0.15 2 0.3

(3) LITTLE DIVERSIFICATION 0.08 2 0.16

(4) ABSENCE OF STRATEGIC PARTNER 0.04 1 0.04

(5) LIMITED ACCESS TO INTERNATIONAL MARKETS 0.05 1 0.05

TOTAL 1.00 2.76

Creating an IFE Matrix:

• List key internal factors (10-20)o  Strengths & weaknesses• Assign weight to each (0 to 1.0)o  Sum of all weights = 1.0• Assign 1-4 rating to each factoro  Firm's current strategies response to the factor• Multiply each factor's weight by its ratingo  Produces a weighted score• Sum the weighted scores for eacho  Determines the total weighted score for the organization• Highest possible weighted score for the organization

is 4.0; the lowest, 1.0. Average = 2.5