Chapter 11

Evaluating and Choosing Strategic Alternatives

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Objectives

understand why strategy evaluation (prior to implementation) is of critical importance, even in cases where the required strategic direction is apparently self-evident

describe and implement a range of general evaluative criteria

use a range of common corporate strategy evaluation models,

apply the principles of strategy evaluation to alternatives facing any given organisation.

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia3

Strategy evaluation criteria

consistency and compatibility

value-adding activities

support

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Evaluating Corporate Strategy Alternatives

Quadrant 1 Strategies 1. Consolidation 2. Vertical integration 3. Related diversification 4. Do nothing

Quadrant 2 Strategies 1. Consolidation 2. Horizontal diversification 3. Divestment 4. Liquidation

Quadrant 3 Strategies 1. Related diversification 2. Unrelated diversification 3. Joint venture 4. International

Quadrant 4 Strategies 1. Withdrawal 2. Diversification 3. Divestment 4. Liquidation

Strongcompetitive

position

Attractive market

Unattractive market

Weakcompetitive

position

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Strategies for Public Sector Organisations

Str

ong

serv

ice

cap

abili

ty

Weak

service capab

ilityIncreasing long term public need

Decreasing long term public need

Use strong position to negotiate for increased

funding. Maintain or build service capability.

Build skills, systems, structures and culture to improve client service.

Lobby strongly for increased funding on the

the basis of the high quality of services

provided to clients and increase client base.

Look for new activities which will attract greater funding and provide more

opportunity for staff development and

motivation

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Corporate strategy evaluation models 1

Boston Consulting Group (BCG) product portfolio matrix

balancing the BCG portfolio matrix

General Electric Business Screen

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BCG product portfolio matrixBCG product portfolio matrix

Relative Market Share

Mar

ket G

row

th R

ate

Stars

Cash Cows

? Marks

Dogs

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia8

Balancing the BCG portfolio matrix

Relative Market ShareM

arke

t Gro

wth

Rat

e

Stars

Cash Cows

? Marks

Dogs

Cashmovement

ProductMovement

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General Electric Business Screen

Competitive strength

Mar

ket a

ttra

ctiv

enes

s High

Medium

Low

Strong Medium Weak

Highoverallattractiveness

Mediumoverallattractiveness

Lowoverallattractiveness

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia10

Corporate Strategy Evaluation Models 2

A.D. Little business profile matrix

directional policy matrix

alternative method for allocating priority to strategies

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A.D. Little Business Profile MatrixC

omp

etit

ive

pos

itio

n

Stage of industry maturity

Embryonic Growth Maturity Ageing

Dominant

Strong

Favourable

Tentative

Weak

Strategic Management 4e., Viljoen & Dann © 2002 Pearson Education Australia12

Directional Policy Matrix

Cash

Prospects for sector profitability

Unattractive Average Attractive

Weak Disinvest Phasedwithdrawal Double or quit

Average PhasedWithdrawal

Custodialgrowth Try harder

Strong generation Growth Leader

Company’scompetitivecapabilities

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Alternative method for allocating priority to strategies

Priority 1 Priority 2

Priority 3 Priority 4

Strategies that are important to our

stakeholders

Strategies that are less important to our

stakeholders

Strategies that we will be able to

implement well

Strategies that we will not be able to

implement well