Strategic Business Management | Robert Reed | Skillshare

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Strategic Business Management

teacher avatar Robert Reed

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Taught by industry leaders & working professionals
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Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

16 Lessons (2h 2m)
    • 1. Intro to Input Stage

    • 2. Strategic Management Key Terms

    • 3. Porter's Five Forces and Generic Strategy

    • 4. External Factor Evaluation Matrix

    • 5. Internal Factor Evaluation Matrix

    • 6. Competitive Profile Matrix

    • 7. Intro to Matching Stage

    • 8. Grand Strategy Matrix

    • 9. SPACE Matrix

    • 10. Boston Consulting Group Matrix

    • 11. Internal External Matrix

    • 12. SWOT Matrix

    • 13. Quantitative Strategies Planning Matrix

    • 14. Resource notes

    • 15. Putting It All Together

    • 16. Course Summary

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About This Class


Strategic Planning is the way in which businesses answer the BIG QUESTIONS  and choose optimal business strategies. For example, strategic planning allows business to decide between researching new products or improving existing products. It can help businesses decide whether to focus on expanding online sales or opening more physical stores.  This is a three-stage course that is designed to mirror the three stages of strategy formulation.  Strategic planning is an essential component of any business education, and it is a capstone course in many graduate and undergraduate business programs.  As such, this course assumes that you have prior business experience and is NOT intended to be a student's first business class.

Topics Covered:

  • Internal Factor Evaluation Matrix (IFE)

  • External Factor Evaluation Matrix (EFE)

  • Porter's Generic Strategies

  • Five Forces Analysis

  • Grand Strategy Matrix

  • Strategic Planning and Action Capabilities Evaluation Matrix (SPACE)

  • Boston Consulting Group Matrix

  • Internal-External Matrix

  • Strengths Weaknesses Opportunities and Threats Matrix (SWOT)

  • Quantitative Strategies Planning Matrix

  • Research project flowchart

About the Instructor

Robert Reed is a current Masters of Business Administration candidate and veteran with four years of service in the 82nd Airborne Division of the United States Army. He holds a B.A. in Economics and has served as a student tutor for three years.

Meet Your Teacher

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Robert Reed


Welcome! I am a veteran and current MBA Candidate. Teaching and tutoring are passions of mine. My first job in college was tutoring other students. I love seeing the magical moment when an idea finally "clicks." When I am not working, I enjoy gardening, inline skating, and playing the harmonica.

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1. Intro to Input Stage: Hello, everyone, and welcome back. Now for the next few videos, we're going to be talking about the input stage of strategy formulation. And before we start, I just wanted to go back and put things in perspective where we are in the broader strategic management process. So within the strategic management process, we have formulation, implementation and evaluation. Now, if you remember these three stages, we're going to be focusing on this course on the formulation stage. That's where we come up with different strategies and suggest strategies that the business can use. We're not worried so much about how we're actually going to implement those strategies on the day today, inner workings of the business or were not really going to be focusing on evaluating how successful are strategies were were strictly focused on formulating coming up and generating the best strategies for our business. So within this formulation phase, there are three sub phases there the input phase, the matching phase Andy decision face. So what does this mean? The input phase is really the foundation of the basically the whole strategic management process because we're assessing our strengths and our weaknesses. I'm sure some of you have heard the phrase garbage in garbage out before. If we give bad data to the input stage, the rest of the process is going to be messed up. So it's very important that we have good inputs, the matching stages, where we're going to take or strength or weakness is and match them against appropriate strategies for the organization. And then, lastly, the decision phase. We're going to choose which strategy we want to pursue. So the input face, What is it? The input phase is giving us a baseline. It's saying Okay, this is where we are in terms of strengths, weaknesses. It's summarizing the strengths and weaknesses and it's it's really the foundation. I can't stress that enough because the work that we do in the input stage is going to pay huge dividends later on. So what will we learn in the next year? Videos. We're going to be learning about the internal factor evaluation matrix, which is a good way of measuring or strengths and weaknesses that we control as an organization. Thanks such as how diversified is our product portfolio? What is our reputation again? These are things that we can control. We will also look at the external factor evaluation matrix very similar to the internal factor evaluation matrix. But it's things that are being on or control, but that's still impact of business. So if we're a business that deals internationally tariffs or taxes or currency fluctuations , these would all be considered as part of the external factor evaluation matrix. And then, lastly, once we had, the internal and external factors will start looking at the competitive profile majors. Now. This is where things are going to start to get interesting, because we're going to be stacking or strengths and weaknesses up against those of your competitors. So just to summarize input stage is very important. It's going to form the basis for the rest of the process. I hope you found the video useful, and I will see you in the next lesson. 2. Strategic Management Key Terms: Hello, everyone. Today my goal is to help you learn a little bit about strategic management and maybe clear up some of the misunderstandings that you may have. Now, first off, we need to distinguish strategic management from every day, day to day management. You know what a normal manager does? They assigned shifts, they interact with customers. They tell employees What what station? On an assembly line they need to work on, right. They run the business or organization on a day to day basis. Now, if you've ever had someone ask you where do you see yourself in 10 years? That's an example of a strategic question. Why? Because first off, you have to say, Wow, where do I want to be in 10 years? Okay, so that's your vision. Then you have to come up with objectives to get there. So you say. Well, in 10 years, I want to be a millionaire. So that means four years from now I need to graduate from college, right? And then you start building up to this future and state so really strategic management. Strategic planning is really just helping an organisation determine where it wants to be at some point in the future. Now let's continue. There's some basic, some definitions we need to cover. And I know the definitions can be boring. So just stick with me for about two or three minutes while we cover these definitions. And then once we cover, the definitions will jump into a real world example of strategic planning using the U. S. Army. So hopefully you'll learn a little bit about strategic planning. Maybe a little bit about the army as well. And hopefully you'll understand that concept a little bit better at the end of the video. So what are the basics? The basics of strategic planning, strategic management? They can be used interchangeably. A vision, a mission, long term objectives, strategy, annual objectives and policies. Now, right now, this just sounds like a bunch of terms. But don't worry, we will clear all of that up. First off, what is a vision? The vision is the first step in the strategic plan process. It's a single sentence that articulates what on organization is all about. Who are we right? So if you want to think about a vision, this is why does the organization why does it exist? So if I was on optometrist, right, I could have some catchy little slogan like, My vision is your vision, right? So that's saying it's very broad. I'm not saying I'm going to do laser eye surgery. I'm not saying I specializing contacts or that I'm going to cater to adults or Children. I'm just saying, Hey, I deal with vision. That's what I do now. Ah, mission. Here's where things start to get narrowed down. So what you'll notice is with strategic planning, we start very broad and we narrow down. So the vision is over, all right? And then our mission is our enduring purposes. Okay, What are we here for? What are we doing? And yes, that does sound very similar to the vision. But here's the key difference. People mix up the vision and the mission, but they're quite different. So a mission defines the scope or organization. It's differentiates us from other organizations, right? So the vision just says, Hey, we deal with vision, right? And then the mission statement might say we seek to provide high quality glasses, contacts and laser eye surgery to our clients. Right? It's defining the scope. What kind of areas that we operate in right now, in order to achieve our mission, we're going to set long term objectives now. The key thing is that a long term objective is Mawr. Then one year and what we're looking for are specific results. So again, remember, everything's narrowing down vision, very broad mission. It is still broad, but it's narrowing it down, saying, Okay, this is the spectrum in which we're going to operate, and a long term objective is a specific thing. So our mission statement might be to be the best consumer products company in the world, right? And then a long term objective might say, Okay, we want to get 50% of the market share in North America, right? It's specific. It gives us direction, right? We could say, Okay, well, what is the best consumer company? Well, that's our mission. But our objective says, Hey, getting 50% market share right? That's something that gives us a basis for planning a basis for action because it's measurable and it's a clearly stated objective. Now, how do we achieve these long term objectives? We achieve them through strategy. So going back to the example we wanted our mission. Being the best consumer products company in the world are long term. Objective is hit 50% market share in North America, and the way that we're going to do that is through diversification or acquiring computing firms. Right? There's a different a couple different ways. We could do this, but that's the strategy Now. Annual objectives are just like long term objectives in that they're measurable, realistic, everything like that. But they're less than one year, so let's switch and use a different example. Suppose we have a bakery and the goal is to increase sales 10% this year. That is an annual objective because it's less than a year, and the way that we can a choose achieve that is through policies. So what policy is a means to achieve an annual objective? It's just like a strategy, except it's applying to things that are less than a year. So the company, the bank ri could say, OK, we're going to have a sale every every second Friday, right? So every every second Friday of every month, we're going to have a sale, and that's going to help us reach. Okay, so now we've got all the definitions out of the way. Let's actually get into an example. Now here we have strategic planning alignment, and that's basically just a fancy term to say. Everything we do should support our vision, right? So our missions and support the vision or long term objectives should hope accomplish the mission. The strategy should help us accomplish with long term objectives. Everything supports everything else, basically. So let's just minimize this power point really quick. We will leave this pulled up and then we're going to just hop right over here to the Army vision and the Army mission. Now, remember what the vision is. The vision is the broad over arching statement for organisation's existence. Now here's the thing. Look at this Army vision statement here, and what's the first thing you notice? This is very big. So the thing is, companies do not always follow textbook definitions, right? So the Army wrote a whole paragraph for its vision statement, right, And that's fine. But I think that using or terminology be mission statement, even though they're calling it a mission, is actually a better example of a vision. So let's let's just call this mission statement We're going to call that for purposes, that vision. So the Army vision is to deploy, fight and win our nation's ward by providing land dominance across a spectrum. Okay, so what is this saying? It's remember, this is very broad. We're going to provide land dominance. What is land dominance? Well, we're going to provide it right, because that's our vision. Now, if we want to start getting Mawr direct Mawr into things, what we can say is, OK, what is our mission? And remember, what is the mission doing? It's limiting the scope of organization, so land dominance is very broad. Let's just go through the Army mission. Now the Army of 2028 will be ready to deploy, fight, win decisively against any adversary, anytime, anywhere in a joint, combined multi domain, high intensity conflict. So right, we're limiting. We're saying, OK, we're going to fight in a joint environment. That means we're going to be fighting with The Marines are gonna be helping us. We're gonna work with the Air Force. We might work with the Navy some. So we're saying OK, we need to be able to work with these other uniformed services as well, a combined a multi domain, high intensity conflict rights were saying, Hey, we might be happen to fight adversaries that have technology just like we do again. It's It's defining the scope of our organization. We know Hey, we need to prepare toe work with the Air Force with the Navy. We need to prepare to fight enemies that have technology like we do now. Here's where it really starts to narrow down. The Army will do this through. So we're saying we're going to do this through this This and this right through the employment of modern manned and unmanned ground combat vehicles, right, aircraft sustaining systems, weapons coupled with robust combined arms formations and tactics. And then we get down and centered on exceptional leaders and soldiers. Unmatched Lee. Probably. Right. So they're saying, Hey, vision laying, dominance, mission. We're going to achieve this land dominance. They're using aircraft to using soldiers through through the training, everything like that, Right? So we're getting a little bit narrower now. What's a long term objective? Well, we can scroll through this this publication here, but what I want to do is I want to pull up this thing about exceptional leaders and soldiers, right? So if way scroll down just a little bit, we see that one of these long term objective is leadership. The Army will prioritise development and promotion of smart, thoughtful and innovative leaders of character who are comfortable with complex city and capable of operating from the tactical to strategic level. So basically, the Army's long term objective is having a highly qualified group of men women that are willing to serve that can accomplish their jobs. So that's a long term objective. And we see that that long term objective supports because, remember, the mission statement says, Hey, we need good leadership. And the long term jacket says, OK, we can get good leadership by recruiting, training, good soldiers. So that's a long term objective. Now, how are we going to do this? Well, the Army has several recruitment strategies, right? So we're going to we're going to recruit in a certain way, right? So if you've ever, if you've been in the U. S. If you went to high school, you know, the recruiters come to your high school, they they have a certain way that they approach you, right? They might start off the conversation. They might give you a little goody bag of Army supplies. That's a strategy. In some instances, the Army will be at any time. There's a career fair. They'll have a recruiter there. If there's a state fair, they'll have a recruiter there. So that's part of their strategy now. As we get down into the annual objective, remember, the annual objectives is a one year thing. So a couple months ago, the Army and will go to a pulp, a publication that I was working on here. The Army recently set a goal of growing its active component to $500,000 now 500,000 soldiers. So this is an annual objective, right? And then how is it going to do this? Well, this is a specific, measurable objective that supports the vision and then supports the long run objective. The Army breaks this longer term goals into short milestone, so these annual objectives grow the Army to 500,000 soldiers. How are we going to achieve it? Remember, policies are the things that achieve an annual objective cell that might be okay. At every recruiting station, we expect you to make 10 phone calls a day. I expect you toe have two soldiers sign up every month. You will go to at least 50% of the high school football names, right? Anything really is a policy that's helping them accomplish that annual objective. So I know this video is getting a little bit long, but let's basically recap using the example. The broad Army vision is to win wars on land. Basically, right. How are we going to do this? Well, we're going to have highly trained soldiers were going toe, have aircraft. We're gonna have all this stuff. So when the nation's worst, we need highly trained soldiers. So for that, we're going to set a long term objective of training and recruiting soldiers. How are we going to do that? What? We're going to do it through the way we interact with them. We're going to tailor or recruiting message. We're going to think about the things that motivates people to join, and then we're going to try to portray that image to them. Okay, very good. We still need a specific goal, and that's going to be our goal of hitting 500,000 soldiers by, let's say, the end of the year. How are we going to get 500,000 soldiers by the end of the year? Well, every single recruiter across the country is gonna call 10 people every day. They're gonna goto half of the high school football games, and they're going to go to at least four job fairs per year to recruit potential candidates . Right? So, in summary, a good strategic plan, a well managed company, everything is going to support something else. So every policy that we institute is going to support an annual objective. Any annual objective is going to support a longer term objective. And our objectives need to support our mission and vision. So everything comes together. I know the video is a little bit longer, but hopefully all found it useful. And I will see you next time. 3. Porter's Five Forces and Generic Strategy: Hello, Welcome back. Today we're going to be covering the five forces analysis and the generic strategies. Now both of these were important. The five forces analysis is really going to help us answer the question. Who has the power in a given market? And the generic strategies is going to help us come up with a broad general strategy that's going to die the firm with the rest of its strategic planning process. So let's start right off with five forces analysis. As I said, this is an overview of the industry as a whole were really trying to say Who has the power in the industry? Do the consumers have more power to? The producers have more power, and we're going to do this by looking at five specific factors. Substitute products, firm rivalry, supplier power, consumer power and the threat of new competition. So let's use this example, and this is a five horses analysis pointing Procter and Gamble Company. Let's start right off with the bargaining power of consumers. Now, in this specific analysis, we've estimated that bargaining power consumers is low. Why is that what we think of the kind of products Procter and Gamble offers its consumer staples. It's things such as razors or cleaning products for your house. There's a large number of buyers for these products. So what does this mean? Well, the more buyers there are, the less power each individual buyer has. So if we're selling our products and consumer doesn't like them, if they don't buy our products, it's really not that big of a deal. It is just wonder to consumers. Now, let's flip this around and say that we're a defense contractor and we manufacture aircrafts and tanks for the military. In this example, the government is the only number one buyer. So if we don't get that government contract, if we don't get that order, we're going to lose a large amount of money. So supply the the bargaining power of the consumers is really depend on how many of them there are and how much power they have. The same thing could be said if we are a farmer and we're selling to one Lord grocery chain right, we're selling to about one consumer, so they have a lot more power. Then, if we were selling our products individually at a farmer's market and there's a lot of different consumers now. We also have the potential development of substitute products. This is important because if we're offering a product and or price goes up or consumers don't like it, they can't substitute. They can go to a different product. So off the example that's really used a lot with this is hot dogs and hamburgers. You know, if you're having 1/4 of July party, if the stores out of hot dogs, then you can simply buy hamburgers. And for the most part, hot dogs and hamburgers are interchangeable for most people. Now, the Mawr amount of substitute products there are the less power that we're going to have as a company because consumers don't like our products. They can simply switch to another. Product born in power of suppliers determines how much power suppliers have over our production. So let's suppose that we are an electron ICS company, and one of the inputs that we used in our process is computer chips. Now, if there are hundreds of computer chip companies, then they don't really have a lot of power. We don't like the price with one. If they don't give us good purchasing terms, we can simply use another. But if there's only one or maybe two suppliers of computer chips, they have a lot of power because they can dictate the terms of the person agreement. If we don't have those computer chips, we can't make our product. And because there's so few firms producing these computer chips, each of them has a large degree of power potential entry of new competitors. Now we know that the market environment is always changing. Companies are leaving the business companies air coming into the business. And from our point of view, the higher the barriers to entry. That's going to protect us a little bit from new competition. It's going to give us more power. And then lastly, we have the rivalry among firms. The more firms there are, there's going to be more competition. But the fewer firms there are, this competition is going to be more in the form of a oligopoly or duopoly. So let's look at this in a concrete perspective instead of in abstracts. We're looking at Procter and Gamble. How much power to consumers have? Well, not a lot, because remember, Procter and Gamble is selling products that everyone across the world needs. Everyone needs laundry detergent or cleaning products or beauty products cosmetics. So because they're selling to such a wide audience that consumers have relatively low power , which is a benefit to Procter and Gamble now, the threat of substitute price is a little bit confusing with Procter and Gamble because on the one hand, there really is no substitute for laundry detergent. But consumers could switch to a different brand instead of using time they could use all instead of using time. They could use wool life or some other detergent. But at the same time, they can't really go away from detergent as a whole. So if I was assessing this, I would say that the threat of substitute products is medium. We could have consumer switch away from or products to our competitors, but they're not going to completely stop using products in general. Now, with Procter and Gamble, the power off suppliers is relatively low. Specifically, Procter and Gamble has standard pricing agreements that limit the power of the suppliers. And here's the big thing. There's a large number off suppliers, so they're all competing for that business, which it did, is giving Procter and Game one advantage because they can pick and choose who they want to do business with. The potential entry of new competitors is relatively low now. A new company could start at any time, However, there's a few barriers to entry. The help Procter and Gamble maintain its position Number one. As you become a bigger company, you have economies of scale. You can negotiate because you're the big purchase or you can negotiate terms with your supplies. You have a wars distribution network in a manufacturing process that enables you to manufacture things at a lower cost. All of this creates an advantage for companies that are already established again. This is a strength for Procter and Gamble now. Rivalry among competing firms for Procter and Gamble is very high. They compete with a number of different companies, such as Unilever, and then they also compete with smaller. So Procter and Gamble competes in five different segments. Beauty, health care, Holman, fabric care, baby care, feminine care. There's fun, broad segments that competing in now Unilever or Colgate will compete in many of these same segments. But and this is what makes the competition so intense within Procter and Gamble's beauty segment, for example, it has multiple different sub products, and there's different companies that compete just against the sell products, even though they don't compete in the whole category at large. So there's a large degree of competition. A large number of firms have variety of firms, and again, remember, you can easily switch toothpaste or you can easily switch laundry detergent. So because consumers can switch to our competitors that easy, it means that there's a very high level of competition now. Another thing that Michael Porter came up with was the general strategies, and what the general strategies does is it basically says, Okay, a firm can focus on four different things. It can focus on differentiating itself by having a higher quality product, or it can focus on lower costs. It can focus on a broad market, or it can focus on Tater into a small niche market. Now the interesting thing about this generic strategies matrix is that there's really not a wrong answer. A lot of these strategies are successful, so really, from the firm's perspective is simply needs to decide watch strategy that wants to pursue, and again this is going to depend on the market on a variety of circumstances. But let's just go through this and see how a variety of different strategies could all be successful if they're properly intimate, implemented. So let's start off in the top. The first point. We're going to focus on differentiation, and we're going to focus on the broad market. So this would be an example of a company that's selling to a large number of customers and is trying to out compete its competitors not by being the lowest cost producer, but by saying OK or products or a little bit better, or products have something that distinguishes them and makes them better than our competitors. Now, if we were to pursue this strategy, we want to focus on research, developing new products, developing new products features, and we would focus very heavily on marketing. We were trying to be showing the customers that our product is better than our competitors now if we still focus on the broad market, But instead of focusing on differentiation, we could also focus on lower costs. So here we're not or product is good. We're not turning out bad products, but we're just not trying to be the absolute best pencil. We're not trying to make the best automobile. We're saying we're going to give you a good product, unusable product, but we're going to differentiate ourselves by offering it at the lowest cost. You're gonna be getting the best value for your money with our product now. If we moved down to a narrow focus again, we're still focusing on this. Lower costs, but instead of catering to the broad market, were zooming in on a very small niche market. So let's suppose that Wal Mart is an example of the low cost, broad focus market, right? It's trying to cater to as many people as possible with the promise of lower costs. Now let's suppose that this cost focus with a narrow focus. He is a is a smaller store, right? So perhaps it's a local farmers market right there. They're tailoring to a smaller segment of the population, but there's still focusing on that low cost, and again, the strategy here is going to be the same. We're going to focus on reducing costs. Were going to improve our logistics so we can get these products cheaper. We're going to focus on lean manufacturing for a manufacturing organization. We're going to try to minimize waste and get our costs down as much as possible. Now, last night, we have the differentiation focus with a narrow focus. And you could think of this in terms of a health food store right there differentiating themselves from their competitors by giving organic food by giving non GMO food fair trade food Right there they're saying Okay or a product is better than our competitors, but they're not competing for the Lord markets, saying that they're not competing with the Walmarts or the Third Cities. They're competing for that narrow focus, and they're competing based on product differentiation. So again here they're going to focus on innovative giving, new products, new features, unique marketing. Same wider product is the best Now, sometimes you'll also hear the stuck in the middle strategy. Now stuck in the middle. Strategy is really a failure for a company to fully embrace any specific strategy. And if you remember, really any of these strategies could work. There's examples of companies that are employing each of these strategies and doing very well. For example, Walmart. As we said low cost but broad focused. A lot of these health food stores differentiation and narrow focus, so really, any of these strategies can work. But a stuck in the middle approach is really a good way to not make any progress and kind of just be stuck not not making any progress as a company. This is not where you want to be now. Typically, people think that we want to have a balanced. But this is not the case, because let's think about it from this perspective. If we're trying to differentiate ourselves as a high quality product and then we go back and we said, Well, not only every high quality, but we're also a low cost product. Consumers are gonna be confused. They're gonna say, Well, are you a high quality product? Or you a low cost product because to be a local low cost product were necessarily going to have to eliminate some of the features. And again the same thing with the broad focused versus the narrow focus. If we're consuming confusing our customers, if we're not really articulating a clear strategy, we're going to be stuck in the middle. We're not gonna have a clear distinctive advantage. So in conclusion, both the 545 forces analysis and the general strategies or very broad based strategy tools but five forces analysis is helping us understand the industry as a whole. Who has the power? Is this an attractive industry for us to enter? And then the generic strategies is really a choice that a firm has to make what we're going to focus on being a low cost producer. But we're going to be focused on high quality products, or we're going to take her to the broad market, or we want to really zoom in and try to cater to a specific, profitable beach. I hope you found the video useful, and I'll see you in the next lesson. 4. External Factor Evaluation Matrix: hello and welcome back in today's lesson. We're going to be continuing with the input stage, looking at the external factors evaluation matrix. Now, if you remember from the last lesson, we talked about the internal factor evaluation matrix and we said that it has ranks and we have weights and we have different factors that we're looking at. The internal factor evaluation Mary Matrix is very similar. If you understood the 1st 1 you'll understand the 2nd 1 because it's almost the same thing . The difference is that the external factor evaluation matrix We're looking at things that are outside the organization's control but nevertheless impact the organization success. So let's just go ahead and jog our memory. Remember, it's weighted from 0 to 1, with zero being not important at all, and one being the only important thing. A rank of one is a major weakness all the way up to four, which is a major strength. So let's back out of here really quick and we will zoom in so we can look at this external factor evaluation matrix. Now, remember what I said about the internal factor evaluation matrix. There is a large amount of subject Yvette E. There's room for different experts. Toe have different opinions on what's a strength, what's a weakness and how many that you should have. Now. Generally, you'll see about 10 strengths. 10 weaknesses. But obviously the model can handle more or less. So let's look at some of the strengths here. We have a growing demand in an emerging market, and let's just go ahead and clear all of this out here because we want to. We want to be able to fill some of these in ourselves. So right here we have growing demand in an emerging market that again, that's something that we don't control. Let's suppose that we offer a technology product. We have a new video game system. We can't control demand in the emerging market, but that's still going to affect us because people are gonna want to buy our consuls. We have a tax credit again. That is something completely out of our control. But let's suppose we manufacture solar panels or remanufacture electric vehicles. Sometimes the government will give consumers a tax credit to purchase these things Now, obviously, if they get a tax credit, it's going to encourage them to purchase our product, and then we have changing consumer attitudes. So recently, vegetarianism veganism has been increasing in popularity. And there's a lot of companies that are making meat that has really made with plant material. So again, this is they don't control these consumer attitudes, but it's something that will increase demand for their product. So let's go ahead and remember, the weights are from 0 to 1, with zero being completely unimportant and one being the only thing that matters. So growing demand in emerging markets and again for two companies. This could be weighted differently for us. We're going to say that it's a 20.15 a tax credit. Now let's suppose that we do solar panels. There is a large tax credit for solar, So let's go ahead and say that we're gonna give that a 0.25 Now, remember, when you're doing this matrix in real life, it's very unlikely that you're going tohave any factor above really above about a 0.3. Because if you think about it, that would mean that 33% of your business success depends on that one factor. So just keep that in mind when you're doing it for real, just for the example. It doesn't really matter, but just make sure you're thinking about that. Changing consumer attitudes will give a point. One. Weaknesses. Currency instability. Now this is a big one. If we are a multinational business and we're doing were buying raw materials from Asia were manufacturing in the U. S. And then we're exporting to Europe. Right? Changing currency can affect our business dramatically. So let's give that a weight of point to tariffs now tariffs or something that's always changing. Sometimes they're going up sometimes countries air, lowering them and trying to make them go away. But right now we're going to consider that a weakness, because when tariffs go up, we have a harder time selling our products abroad. We have a harder time importing raw materials to make our products, So let's give that a 0.15 and new competitors again. We can't control new competitors. But let's suppose that in the past year, so we've had a large number of new competitors into the market, we're going to again give that 8.15 Now, remember, this is just the weights. So this is saying how important is this factor to the success of an organization. It's not saying anything at all about how good or organization is with regards to this specific thing. That's where the rating comes in. Now remember, the rating is from one being a major weakness toe. Four being a major strength. And again, if you're listing something in the strength column, it obviously has to be a 3 to 4. You can't have it up here in this green area and then give your company a one because that would make it a weakness. So growing demand in the emerging market. Let's let's go ahead and let's give that a three will give the tax credit. Remember, if we're doing solar, that's gonna be huge. Let's go ahead and give the changing consumer attitudes of three currency instability. We're going to say that that's not a huge issue, because it's gonna be relatively stable for our business. Tariffs were going to give that a one because tariffs could kill or business, and then let's go ahead and give a to to the threat of new competitors. Now this points us at a 2.6, and remember, it's the exact same as the Internal Matrix. A 2.5 is going to be average for us as a business. So let's let's just change this a little bit to get a result where we're not doing that well, we're going to get rid of the tax credit. We're going to decrease its importance. Were going to say that currency instability is really important. And look, all of this stuff changes to reflect that were now operating below average on the external factors. So let's let's go back to the slide show just really quick so we can summarize here. And remember, external factors are things that we can't control. So if you're having trouble determining whether a factor should be in the internal matrix or the external matrix, just just ask yourself that question, okay? Is this something that the business can control? Yes or no? So keep that in your mind, remember, it is weighted, it is ranked. So the weights are from 0 to 1. The ranks are from 1 to 4, and then again, it is subjective. So you're not going to have the exact same answers for strengths and weaknesses is I would have you're not gonna have the same strengths and weaknesses that your classmate would have as long as you can justify those. And as long as they make intuitive sense, you'll be good. So I hope that helps you evaluate the external factors. I hope you found the video useful, and I will see you in the next lesson. 5. Internal Factor Evaluation Matrix: Hello and welcome back. Today we're starting the very first phase of the input phase of strategy formulation, and we're going to be doing this using the internal factory evaluation matrix. Now, what is the internal factor? Evaluation matrix? The internal factor evaluation matrix evaluates the factors that we we can control within the organization. So these are things that we can control and change about our organization, and that's important to remember Now. The way that this works is that different factors are waited and then they are ranked. So what does this mean? A weight of zero is an unimportant factor. So the fact that we have corporate pizza parties every third Friday right, that's really unimportant for the organization's a whole now. Ah, factor. That's all important means that if we do this, it's the only thing that matters. So as we go through the Matrix, you're going to see that in reality, we're not gonna list any factors that are a zero, and we're not going to list any factors. That or one now. Usually you will not have a single factor that's greater than a 0.3. And don't worry, we'll go through this when we're doing the matrix itself. Now what do the ranks mean? The ranks are assigned from 1 to 4, with one being a major weakness and for being a major strength. So let's back out of this power point really quick. And then let's actually look at an internal factor evaluation majors. So let's let's go ahead and zoom in here So you guys can see this a little bit better on internal factor evaluation agents, and we've made it look pretty. But you can do this very simply on Excel or open office. Whatever you have. Internal factor evaluation Matrix is the title now on the four left. We have key internal factors. Remember, these are things that we can control things such as a diversified portfolio. If we are a large company, the fact that we offer a lot of different brands and compete in a lot of different markets could be a strength, our brand reputation. Obviously, we know the importance of having a strong brand image and then a distributor network. This means that we can put our products into consumer's hands through or retailers are distribution agents, and you could think of many, many more and the actual factors that you include could depend on the specific company. So Procter and Gamble might have a different set of strength than Toys R Us or Subway or something like that. Right now, the weaknesses again, these are going to depend on the organization. They could include bad public relations. So suppose our company is known as a really bad polluter. They're not very environmentally friendly. That could be a negative issue. Management issues. Perhaps one of our managers or the CEO was fired, right? Something bad happened. Declining profit margin again. The important thing to remember is these are all internal things, right? So we're not talking about tariffs. We're not talking about changing Consumer preferences were talking about internal things that we can control as an organization. So let's just go through. This is an example. We have our strengths and our weaknesses. Now, remember, I said, we need to assign a weight to each of these, so the more weight we give something that says it. Okay, let's suppose we have diversified portfolio and we give it a weight of 0.1. Now, the way that I have set up the spreadsheet is it's automatically going to keep track of our total. Because, remember, it can only get upto one, because one is the definition of That's everything that matters for us to succeed as an organization. So there we have 0.1 for the diversified portfolio. Now let's say that our brand reputation is a point to, or distributor network is a point to. Now let's suppose that we have really bad public relations. I mean, our company is just a polluter, very bad. So they're gonna be a 0.3 that indicates that this is three times more important than, let's suppose are bad management issues, right? So the higher the weight is now again, the weight has nothing to do with how we rate on the scale, right? This is just okay at a generic organization, how important would brand reputation be right now, the rating or the rank is how we as an organization, are actually doing so. Let's suppose a diversified portfolio for us, we're doing awesome. So we're gonna give ourselves a 0.44 Sorry. Brand reputation were not the best, but we still do have a good brand, and we do have a decent distributor network Now here's the important thing. Remember, a strength is a four or three. So if you list something as a strength the Onley ratings that you can give or a 43 so you can't lift something is a strength and then come up here and give it a one or two because that would be contradicting yourself. So we have that in place. Bad public relations. Now remember, as a weight, this is very important. But let's suppose that as an organization we are not that bad, but CSR corporate social responsibility were not that bad at polluting. So we're gonna give ourselves a two, which is only a minor weakness management issues. We're going to say that we have a major weakness and a major, we're going to give ourselves a minor weakness of a declining profit margin. So right now we're at a 2.5. Now, the way that this matrix works is you can see here that we were scoring ourselves right on a scale of 1 to 4. So if all the weights remember all the ways at upto one, if everything we had was a weakness or lowest score would be a one if all everything we had was a major strength or highest score, be a four. So 2.5 is right in the middle. This indicates that our organization is really just right in the middle of the road. But let's go back. And let's suppose that we have a great brand reputation and a great distributor network. Now we're in a 2.9 right, so we're above average. So one more thing that I want to go over is how these actual calculations work now. A wait. Times of rating gives you a weighted score, and you can see that this weighted score is going to change. So three times 30.1 is three, or if we leave, it is a 41 times point for is obviously 410.0.4. So as we go through here, each of these is its own individual weighted score, and then we simply some. We do the auto some function to get the total score, so I hope that clears up the internal factor evaluation matrix. Remember, you can put much more than three strengths and three weaknesses. Typically, you see about 10 strengths. 10 weaknesses for a total of 20 items But again, you can adjust this and the model is set up in such a way that it accounts for that. Just remember, 2.5 is always going to be average. So let's just hopped back really quick and let's go ahead and finish up in conclusion, the internal factor evaluation matrix. And this is key. Remember that this is factors inside the organization. What we can actually control it is weighted by the importance of the factors. And then we rank ourselves on how we're doing as a company, so we could have a really important factor that we're not doing well on, or we could have a really important factor that we are doing well on. And then, lastly, I want to point out that this is subjective, right when you consider a strength or a weakness might be different than someone else. If I told you to come up with 10 strengths for Procter and Gamble, you would probably come up with a 10 different ones than I would, so it is subjective. But you should do your best to try to understand the internal strength and weaknesses of the organization. The internal factor evaluation matrix is a great tool that will help you do that. I hope you found the video useful, and I will see you in the next lesson. 6. Competitive Profile Matrix: Hello, everyone, welcome back today. Are we continuing to learn about strategic management and strategy formulation? Now we're still in the input stage. If you remember last time we talked about the internal factor evaluation matrix and the external factor evaluation matrix. Now these were very useful. But today we're going to learn something that I think you're going to enjoy much more. That is the competitive profile metrics called the CPM. Now why is this matrix important? What's important because it's really the first time that we're comparing or company against other companies. Now it's an externally focused matrix. That means we're looking at external factors were using critical success factors. It's waited and ranked very similar to the i f e and E f. So let's just back out of this really quick and let's go to an example here. So what we have here is a blank template for a competitive profile matrix, and we see that we have critical success factors. We have wait, we have rating and we have score so critical success factors, these air anything, and there could be any number of critical success factors that are important to our organization success so Let's just think about a few of them. We have perhaps advertising, right? Perhaps we have a very strong advertising department. Perhaps we have exclusive distributor's right. This could be we. We have a distributor agreement. We have the most extensive distribute ER network. So whatever products we can produce, we can easily send it to retailer. So basically, the critical success factors are anything that's going to enable us to succeed. So let me just shoot fill in a few more here so that we can have some items to compare. We're going to go with. We're going to say we have a technology innovation. We have a low cost manufacturing process that allows us to sell our products cheaper and who That will be good for us. For now. Now, once we've identified the critical success factors and again, when you're doing this for real, you're gonna have many more than just four of these. But we're just trying to keep this simple. So when you do this, you're going to have to assign a weight to each of these. Now, remember, zero is not important at all. So if you have a critical success factor and you assign it a weight of zero. That means that it's completely irrelevant whether the organization does this or does not do this. So the maximum weight is a one. Now remember, one is like all important. If you do something that's waited one, your organization is the best ever. So you're really never going to give a weighting of one. And in general, no factor should really be waited above a 0.3, because that would show that it's very, very high at the expense of other factors. So let's assign a weight of 0.12 are advertising their a good advertising department, and it's fairly important exclusive distributors. Now remember, I said, We're not going to assign a weight of above 0.3, but we are just going to do it here just so we can go through the mathematics since we only have for these critical success factors. So right now we're at a 0.6 and remember the total weight Can Onley be a 0.1? It has to be exactly. It can be over 0.1, and it can't be less than 0.1. So let's just go ahead and put total and here and we can find total by using the auto some . So it tells us right now where 2.6 and we will give each of these a weight of point to which brings us to a total of one. So our weights are good. Now, what we need to do is we need to rate the company competitively. So what does this mean? If you remember when you were doing your internal factor evaluation and your external factor, you're simply Dave the company one through four, with one being a major weakness for being a major strength. This time we're not doing that. We are ranking the company, so someone has to be the winner. Someone has to be the loser. So we're going to say that the rating we're going to use Procter and Gamble, Colgate and then Unilever. So, advertising, we're going to give Procter and Gamble a rating of one. We will give Colgate at three, and we will give Unilever a two and again right now. We're really just putting these numbers in here. That don't mean anything in real life. But if you were doing this analysis yourself, you would try to find out okay, which one of these has the better advertising department? Which one has the best distributor network? Because these numbers are going to be very important. So let's say that Procter and Gamble has the best distributors. Colgate is kind of in the middle. Unilever has the worst technology again. We're gonna give Procter and Gamble a three. We'll give, you know, lever A to Colgate a two and then, you know, leave her one. And then let's go down here to the low cost manufacturing process again. We're gonna give Procter and gamble it to Unilever. We will give them a one. Colgate will give a one and then you leave her. We will give them the three. So now we have or critical success factor. We have assigned a weight to the critical success factor, and we've rated each company. Now what we need to do is calculate a score, and the way that you do this is simply by multiplying the wait times the rating. Okay, so when said equals weight, and then we're going to say times the rating and again, remember, you can simply, with Cal car, open office or excel, you simply drag this down and it does all of the calculations for you. Same thing with this. We're going to do the rating, times the weight. We want to do the rating times the way. So let's make sure I get this right here. The rating, times the weight. We will go ahead and drag that down. And I'm sorry if this seems a little bit tedious. I'm really just wanting you guys to know exactly how this process works so you can create these spreadsheets by yourself. So lastly, but rating and then times the weight and we will go ahead and drag this down and then remember the formula for the auto. Some We will just do that for all of these. We don't need the ratings. We want to do it for the score. So let's back out of that auto. Some the scores auto some the scores, and lastly, we will auto some. This score Now, What this does is it allows us to compare the company. So we're taking a bunch of different internal or external factors, different weights, different critical success factors, and we're comparing them against other companies. So this is really the first chance that we're getting to kind of stack up against the competition and see where our company stands. Now let's go back to the slide show very briefly. And what what's the interpretation of the CPM? The interpretation is that it shows the strength and it shows the weaknesses. So if we think back to The Matrix, remember that we only assign a rating on importance off 0.1 for the advertising. So even if we were relatively weak in advertising, we know that it wasn't that important relative to having that distributor network, right? So not only does it show strengths and weaknesses, but it shows the importance of those strengths and weaknesses. So if we're doing really well in something that's very important, that's good for us. If we're doing really well and something that's not so important, then we really want to focus our efforts to working on the things that matter again. This is the competitive profile matrix. It's the last matrix that we will be covering in the input stage of strategy formulation. In the next, videos will be moving on to the matching stage. I hope you found this useful, and I will see you in the next lesson 7. Intro to Matching Stage: Hello. Welcome to the matching stage of strategy formulation. Now the matching stage is very interesting because this is where we take all of the inputs , the research that we've done in the previous stages and translated into actual strategies that the firm can use to enhance its competitive position. So the first matrix that we're going to use is the grand strategy matrix, and this looks at the market growth right, as well as an industries competitive position to determine what kind of strategies they should pursue. Perhaps they should focus on market development, market penetration, selling off underperforming ports of the business joint ventures. This is something that the grand strategy majors will allow us to demonstrate. Another matrix that will be using in this section is the strategic position and action evaluation matrix. Now, this is a long word, but it's typically just said as the space matrix. And when we're using this space matrix, we're going to look at four different factors to suggest whether a company should pursue an aggressive strategy, a conservative strategy, a competitive strategy or defensive strategy. Now, in the actual lesson, you'll learn all about the different strategies and why a company should choose one strategy over the other. We'll also look at the SWAT matrix now slot strength sands for strengths, weaknesses, opportunities and threats. And we're actually going to dig a little bit deeper into the swamp Matrix and Joe to covering specific strategies that maximize our strengths while minimizing our weaknesses. We can choose different blends of strengths and weaknesses, depending on whether we're trying to accentuate our strengths or cover up or weaknesses and mitigate those weaknesses as a firm. Swap Matrix is one of my favorite planning tools, and I think that you'll really enjoy that lecture as well. Now those three matrices that we've talked about our General Matrix, therefore the firm as a whole, but with the Boston consulting group Matrix were looking at divisions with in a firm. So we'll be looking at supposed firm has three different divisions toys, electron, ICS and automobiles. Right with this matrix, what we can do is we can look on a division basis. We can say which of these are underperforming, which are doing really well. And what should we do about that? Should we sell them off? Should we attempt to reinvest money and really try to compete, or should we just get rid of this and focus on our core competencies as a business? The Boston Consulting Group Matrix is great for that and another matrix that will uses the internal external matrix. Now, what this Matrix does is it looks at all of the firm's internal strengths and weaknesses and all of the external threats and opportunities, and again, it does this on a I segment level. So if we have three general classes of products we make will be able to see which products are going to fade into which specific strategy. So all in on this section, we're going to look at three Matrix that are going to give us a general strategy for the firm. And then we're going to look at two matrices that are going to give us recommendations for the firm on a segment level. So what product divisions should do within a firm? In conclusion, this is going to be, in my opinion, one of the most interesting sections of the course because we're actually generating strategies. I hope you find the section useful, and let's start learning 8. Grand Strategy Matrix: welcome back to the course on strategy formulation. Today we're looking at the Grand Strategy matrix, which is an interesting tool that compares a stretch for a company based on one external Agnes axis of market growth rate and one internal axis of a firm's competitive position. So what does this look like, really? It's the same matrix that we've looked at before with the X and Y coordinates. But on the Y axis we have rapid market growth and slow market growth. That would be our external factors. And then on the X axis, we have the strong competitive position and the weak competitive position that would be, or internal position, the thing that we can control about our company. Now, the way that this works is we really have to make a little bit of a judgment call about a strong competitive position or weak competitive position, and then rapid market growth versus slow market growth. So again, as an analyst as a strategist, this is something that you're going to have to try to do your best estimate so you could compare your company to similar company. So if I was doing an analysis on Procter and gamble. I would compare Procter and Gamble's competitive position to Colgate Palmo, Palm Oil or Unilever, or perhaps Johnson and Johnson or something like that. So I'm really just trying to see where my company fits in terms of competitiveness. I could look at market share. I could look at financial statements, but I'm trying to estimate to the best of my ability now, with rapid market growth again, this is going to depend on how you want to define it. But look at how sales are increasing for the big firms or if you're looking, if you have access to certain websites, they will tell you the growth for the agriculture industry or the growth for the automobile industry. In any case, you're going to have to make a decision. So let's start off in quadrant run. And let's suppose that after all of your analysis, you decide that you're looking at a company that's has a strong competitive position and is in a rapid growth market. So this could be a technology company. For example, what strategies would you recommend for that company? Well, based on the grand strategy matrix, you could recommend a few strategies market development market penetration. So market penetration you would be trying to gain more sales will be trying to take over market share within that environment. Product development Again. Remember, this is a rapid growth industry, so if you develop a new product, the industry is growing. You can capitalize on that and make more money. You're also going to have a strong competitive position to allow you to successfully launch that new product. Forward integration, horizontal integration. Horizontal integration is acquiring similar firms. So you are a technology company. You require a firm that does a similar thing toe what you already do. Related diversification. Now related diversification means that you are diversifying, but you're doing it with a product that's related to what you already offer. So justice An example. If you made a gaming console supposed like Xbox or PlayStation, something like that, you could branch off and do something similar to that. You could do a portable gaming console. You might do some form of a computer, something where you can use your current expertise because whatever you're doing is already working for you. That's why you have that strong competitive position. So you're going to just branch off of that a little bit. Nothing too drastic. Now, let's suppose that the market is growing very rapidly, but you don't have a strong competitive position. So again, we could still use the example of the technology sector you're in. The technology sector is growing rapidly, but you do not have a strong position. What can you do? Well, that would put you in quadrant two. And with that we see a little bit of the same. You can still focus on market development. Market penetration. Why is that? Because you're trying to launch a new product. You're trying to strengthen your position. So you're trying to g o from that week, Competitive position to a stronger position. But we also have some different things that we can do in this quadrant as well. We can pursue divest er and liquidation. So dive Esther means that we're going to take a business unit, a part of the firm that's not doing that well, and we're going to sell it off, right? So we're going to get rid of a whole unit or perhaps even the whole business. Now, liquidation means that we're selling things just for scrap. Basically, so if we can sell a machine, were selling machine. If we can sell plant property equipment, we're going to be selling that off. So it's is the same thing. Either way, we're getting out of the industry. So you really have to make a call as an analyst because in Quadrant two, if the markets growing rapidly, you could say we're going to stick with this and we're gonna turn it around. We're gonna focus on market development and market penetration. That's perfectly fine. Or if you want to say, Hey, I know the markets growing, we're not that strong. I think it's better to call it quits. You can do that also, within this quadrant now moving on. This is where you do not want to be a week competitive position in a market that's not growing, so the market's not growing. There's really no sense sticking it out in this market because even if you improve your competitive position, the markets still not going to be growing that fast. So this this is a very unattractive position to be in. But what are some of the strategies that your company could pursue? Well, they could pursue retrenchment now entrenchment ISS selling off ports of the business that are not doing well to focus on your core offering. So let's suppose that again, where a technology company we're offering PC's were offering gaming consoles and then we're offering televisions, maybe our televisions air doing really well but our gaming consoles or not. So we would sell those off. We would focus on our core business of televisions related diversification. Again, this is similar to what we talked about in Quadrant one. It's taking the things that we do well and again, we're not doing many things well, because we have a weak competitive position. But whenever we are doing well, we want to try to launch similar products, things that we can use that experience unrelated Diversification is branching out into something completely different. So we're not doing good at what we are. What? We're gonna try something completely different. Divest your liquid a liquidation of the exact same as we discussed in Quadrant two and then , lastly, we have quadrant, for this is where we have a strong competitive position. But the industry is not growing that strong. It's not growing that fast, and really, this reminds me a lot of the cash cows that you'll talk about in the Boston Consulting Room matrix. So whenever we get to the Boston Consulting Group Matrix, just just remember this Quadrant four from the Grand Strategy Matrix. Anyway, Quadrant four were competitive. We're doing well, but the industry just not is not growing. So what we can do again related diversification. We're taking the things that we do well, and we're trying to branch out into something similar unrelated diversification. Again, we have that strong competitive position. We have a lot of manufacturing know how we have technological expertise, but maybe we're going to diversify into something that is a little bit faster growing. So we're going to try to maybe branch out from technology to appliances or something like that. And then, lastly, we could pursued joint ventures. Now, joint ventures sometimes get confused with a partnership. The difference is that a joint venture is created for a specific time for a specific purpose. So it's somewhat like doing a group project. In school. You you come together for your group projects, you complete the project and then you go your own ways. You're not taking classes after that together. You're not necessarily graduating together. You just come together for that one specific purpose. So in conclusion, the grand strategy matrix gives a general strategy that the organization should pursue. It gives a lot of different alternatives, depending on the circumstances. And it's ultimately up to the strategist, the business leader, to decide which route that they want to take. I hope you found the video useful, and I will see you in the next lesson. 9. SPACE Matrix: Hello and welcome back. Today we're continuing with the matching stage of strategy formulation, and we're looking specifically at the strategic position and action evaluation matrix from the rest of the video will simply be calling it the Space Matrix. Now, what does this space matrix allow us to do? Well, if we skipped for to slide, what it allows us to do is it allows us to put a firm into one of four broad categories. Now, depending on these Broadhead awards were going toe have specific strategies that might be a good fit for that firm. So let's go back and look a little bit at how this matrix is constructed. Well, First off, this is a general matrix, so it's going to give guidance for the firm as a whole. And it's evaluating two sets of external factors in two sets of internal factors. Industry attractiveness and stability. And we'll talk a little bit more about those when we get to the example. But keep in mind that this is a X Y graph. Basically, it's the Cartesian coordinate system, so industry attractiveness is going to be rated from 0 to 7. Stability is going to be rated from zero to minus seven. Competitive advantage is going to be rated from zero to minus seven, and financial strength is rated from 0 to 7. If it sounds a little bit confusing right now, don't worry, because the example will clear all of that up. So here's an example of the space matrix, and I simply put some dots on the Matrix to demonstrate where this company lies with regards to its industry position, its financial position, its competitive position and its stability position. Now let's zoom in and see where these things come from. So we have a basic spreadsheet, and what you're going to do is you're going to come up with the four cat of the big boys, the financial position, competitive position, stability, position and industry position. Now, each one of these, you're going to have to use your own judgment to come up with some of the factors. But some of the factors that I would suggest using for the financial position you want to look at the company's internal finances. So what is the return on assets? What is their return on investment? Do they have a lot of debt? Do they have a lot of cash flow. What's their price to earnings ratio? So what you're really trying to do here is you're looking just at the company itself. What does its finances look like? What's the income statement? What's the balance sheet Now again? Remember, this is rated from zero to a positive seven. So keep in mind that about a 3.5 is going to be in the middle. And the way that you're going to score this is remember, 3.5 is average. So in your assessment, if the company has average debt levels compared to its competitors, you would score. That is a 3.5. If they have low levels of debt, you might give them a 45 If they have no debt, you might give them a seven. If they are drowning in debt, you might give them a one. Remember, you can't give them a negative score, so just consider 3.5 is your average. Anything less than that is a little bit worse. Anything above is a little bit better moving on to competitive position. Now here. What we're looking at is how the the businesses competing relative to its peer. So do we have a large amount of customer loyalty do or products out compete? Do our products do better than our competitors Do we have some unique manufacturing process ? Do we have economies of scale? Those kind of things are going to fit within the competitive position. So financial position is mainly balance sheet stuff like that competitive position is anything related to the actual production to the product itself. Now, stability position refers to the industry in general. Is it an industry where there's a lot of technological change? Is there a high rate of inflation? Is there competitive pressure? What are the barriers to entry? Because remember, high barriers to entry are going to keep out a lot of new competitors, and this is scored from zero to minus seven. So minus 3.5 on this example is going to be the midpoint. So if there is very high barriers to entry, if there is a very slow rate of change, if there's a lot of things that are keeping competition out of the market and the market is very stable, we're going to be scoring closer to a zero or a one or a zero or a minus one or minus two. So in this sense for stability, position and competitive position, the negative number you wanted to be a smallest possible. So ah, minus one is better than a minus seven. And then, lastly, we have industry position. This is the growth potential of the the industry what we're looking at here, and it's a little bit different because it can seem similar to the stability position. But what we're looking at is, how is this market going to grow for us? Is it gonna be a market that's growing, or is it a market that's in decline? Right. So if I'm making oldies music, the market for that is going to be declining. If I'm making technology electron ICS, the market for that is going to be increasing, So stability position, industry position are very similar, but just make sure that you keep them a little bit separate, and as we continue, the overall score will be the sum of all of the individual components. So, for the financial position, we have a three or six a six of five of five, and then we end up with a four Were simply averaging them all together to get the total financial position, score the total competitive position, score the total stability position and the total industry growth position. Now what we're going to do is we're going to plot each of these on the Matrix, so the financial position were at about a 4.9 on the graph. It looks a little bit higher, but it should be right on that five p stability position. Where to? Minus 2.4. The industry position where two plus 3.2 and the competitive position where the minus 2.4. This is simply plotting its basic plotting of Cartesian coordinates. So you plot that now. Here's what we're going to do. We're going to connect these dots and we can shade this in with a I used to like to use gold, and I use a little bit of a transparency effect so that you can see the possible outcomes of strategies that would be good for this company to pursue. So we could see that based on the strengths, weaknesses, the industry position, the company should not be pursuing competitive or defensive strategies because most of that gold area is in the aggressive and conservative strategies. That's the general areas that it should be pursuing. But more importantly than that we can calculate a blue arrow. So this is calculating basically a vector that shows what strategies that companies should pursue and the way that we're going to do that. We're going to find the average of the competitive position and the industry position, and we have minus 2.4 plus A 3.2 gives us an X coordinate of 0.8. Or why coordinate is going to be the average of financial position and stability position, which is going to be 2.5. So again, this is simple geometry X y plotting in accordance. So on the X axis, we're going to move over 2.8, and then we're going to go up on the Y axis 22.5. We're then going to draw this line from the origin to that point we plotted, and that's going to show us the specific strategies to pursue. Now what does aggressive strategies? What is a competitive strategy? What is a conservative strategy? Each of these strategies is going to be a little bit different and it's going to come from the company's financial position, the stability position, the industry position and the competitive position. So an aggressive strategy is going to be something where we're trying to gain mortgage share. We're trying to push our competitors out of the market. We're trying to boost up our own position. We're going to be looking to innovate, right, so this could be innovating through a new product. This could be innovating through a new delivery method. We could cover our competitors move so any any advances that our competitors tries to make . If they offer two day shipping, we're gonna offer two day shipping. If they offer free returns, we're gonna offer free returns. This is the most aggressive strategy and were able to carry the strategy out because we have a good financial position. So we have money we have. Resource is, and it's also worthwhile because there's a lot of expected growth in the industry position . Now, if we look at a conservative position, we're going to try to develop an advantage. We're going to try to diversify, so we're still competing. But we're not as aggressive, and the reason why is because we still have those financial resource is. But overall, the industry isn't going to be as competitive. It's not going to be growing as much right, so it doesn't get the same time and attention that are aggressive. Strategy does. Now, as we move into the defensive strategy, we're going to be in this locations for two reasons. Number one. We don't have a very strong competitive position, so we're not the leading firm. We do not have the leading mortgage here. We don't have the best products. We don't have consumer loyalty in the brand image. Also, the industry itself is going to be low instability. So it's It's just not a very attractive industry, and we're not doing very good at it. In this situation, we can either retrench and remember that retrenchment ISS selling off unproductive areas and focusing on our core business. Or we could simply liquidate. We could say, you know what? We don't want to be in this industry. It's not very profitable. We're just gonna move on and do something else. And then lastly, we come to the competitive quadrant now within the competitive quadrant. We we were in this quadrant because the industry is attractive, the industry is growing, but at the same time it's very unstable. So what we could do? We could partner with a strong financial firm so we could partner with the financial firm. We could reduce our costs. We could focus on profitable expansions. And maybe a better way to look at the space matrix is that you have two sets of competing variable. So, in a sense, financial position is compensating for an unstable industry. So as the industry becomes more unstable, we need more of a stronger financial position to compensate for that as if were not that competitive in an industry. But the industry is growing very rapidly. We still might be in the aggressive quadrant. Even though we're not doing good, the industry can grow. So we're willing to accept that, by contrast, if we're doing really well in the industry, but the industry is just not growing, we still might find ourselves in the conservative quadrant, so it's really that interaction between the growth of the industry and our position, and then the stability of the industry and our financial position. In conclusion, the space matrix has a lot of different variables. There are a lot of things going on, but the basics that you should take away from this is it gives a general strategy. It compares the company's financial position, the industry growth, the competitive position and the stability of the industry to recommend a broad general strategy. I hope you found the video useful, and I will see you in the next lesson. 10. Boston Consulting Group Matrix: Hello and welcome back. Today we're continuing with the matching phase of strategy formulation, and we're looking at the Boston Consulting Group. Matrix, now Boston Consulting Group is a very large consulting firm that helps companies develop their own strategies. And one of the tools that they've implemented is the BCG matrix. Now, briefly, before we get started, what this matrix does is that helps a company determine what its most profitable segment, ISS. So let's suppose a company offers dog food, Taff Food and Bird for Justus. An example. The company can use this matrix to determine which of these is there better performing sector and develop strategies based on their specific sectors that they work. And so on the X axis of this matrix, we have relative market share. So what percentage of the market share belongs to our company? And then on the Y axis, we have the industry growth rate. So is this a rapidly growing industry? Is this industry falling in sales, or is it remaining about neutral? And then, within the different quadrants of the matrix, you'll notice circles that are different in size, and then they also have a different slice of the pie. So this represents how much revenue each different segment generates for the company. And it also represents what portion of the company's total profits. Don't worry. We will cover everything in the video now. I'll be honest. This is probably going to be one of the most information filled videos in the class. It's going to be probably the hardest to wrap your head around, so don't worry if you have to go back and go through this two or three times. Because again, the BCG matrix is very information heavy. So it's covering a lot of information. Is, as I said, a portfolio analysis tool. So we're comparing different segments of the same company as we mentioned. It has two axes, the relative market share of the market growth, and then the circles and the slices of pie represent relative earnings and profits. So what? How does this help us? What does it really do for us? Well, it classifies each segment into one of four different categories, and again it's going to put it in one of these four categories, or you could have it right in the middle. But you're really going to try to push it into a category so you can get a strategy recommendation now. The first thing is, the question works. Now a question mark is a company that has a very high growth rate, but we're not the market leader. We don't have a lot of market share. So this is a question mark because the industry is growing really fast, so it could become very profitable for us if we were to gain market share. So that's why it's a question work, because we we could gain market share and we really have to decide. OK, are we going to hold or are we going to fold? Are we going to go all in and invest in this segment of the market, or are we going to stop or money here and try to send it somewhere else to a different segment? Now with the stores, these are our best performers. We have a large amount of market share, and we also have a high industry growth rate. So not only do we have the largest market share, but because the industry's increasing these air going to keep generating mawr and more money for us. Now, the cash tales are something where we have a large market share, but the industry isn't really growing that fast, so the industry has been around a long time with leader. But again, it's not growing so fast. So although it is, it's lucrative. It's not going to increase in the coming year. So, really, with the cash cows, we just want to maintain our position for a long as possible. Now the dogs or the worst. This is where we don't have a large market share, and the industry is not going to increase. So for the most, pork companies air going to divest or sell off or liquidate the dogs simply because they're not the market leader and the market isn't going to increase anytime soon. So now let's look at the specific strategies, specific ways that you could deal with a question mark. You could focus on market penetration, more for development, divest ER or product development. So market penetration, market development and product development are all aggressive strategies. They're saying, OK, we're gonna try to turn this question work into a store. It's in a high growing industry. Now we want to gain market share, whereas divest er, you're saying OK, we're just gonna stop spending money here. Now. Let's take a look at the stores the stores remember. We're trying to maintain and expand the competitive advantage. This is where we want to focus so we could do integration. We have for a zonal integration where we could acquire similar firms. We could pursue vertical integration where we acquire either the inputs to our process. We could develop new products to try to capitalize on this market with the cash towns. Remember, they are very attractive to us because they're generating that income. We have a large market share, but the drawback is they're not really going to grow, so we're not going to invest a ton of money into them. We're going to focus on diversification, retrenchment, dive, Escher product development and one thing that I do want to point out. And this is the dogs are a good example of this retrenchment. Divest er and liquidation. What do these mean? Dive, Esther Means were selling the organization as a whole. So we're going to divest or cat food segment, right? It's completely gone. We're just selling the whole business and everything. We're getting rid of it. Liquidation is just selling what we can. So if I can shoot, sell a machine here, a building here, we're really just getting rid of things for cash value. Whatever we can do. Retrenchment is a little bit different because we're still holding on to the business, but we're selling specific parts. We're trying to focus on the core aspect, so we might sell a specific part of the cat food business. But keep other ports. Now that we've covered the overview of the BCG matrix, let's look at a few calculations. What are you going to need to construct this matrix where you're going to need to know the relative market share? So let's go through the calculation on this. Let's suppose that there are three companies that make laundry detergent and we have sales of tied all and we'll light. We have the unit share. And how do we find the relative share? Well, it's simply or market share divided by or best competitors. So for Woolite, we're going to divide that 25 by 125. So tied is the number one competitors, so we'll light gets compared to tide. All gets compared to tide now tied. When we go to Tide, it already is the market leader. So it gets compared. Remember to its next nearest competitors. So 125 divided by all, which is 50. So keep this in mind when you're doing your relative market share calculations. The market leader, the number one firm is always going toe have greater than one, and it's going to be the only firm that has greater than one. So whoever has the most market show is always gonna have that higher value. Now let's look at some quick calculations for the industry growth rate. How do you determine the industry growth, right? Well, you can look on websites. A lot of websites. You have to pay money and they'll give you an industry analysis, so they'll say Okay. Over the next five years, the cosmetics industry is supposed to grow 3%. That's an easy way to do it, and it's very good now. If you don't have access to these sites, you can look at income statements for the industry leaders. So let's suppose I was trying to estimate the growth rate for the automobile industry. I could look at Ford GM and then Fiat Chrysler and say OK, on average out of these three companies, each of them has grown revenue 3% over the last five years, Right, that that could be something that I could try to do. But if I'm doing that, I want to be very specific. So if I'm looking at a company such as Procter and Gamble and I'm trying to look at their cosmetics line or their beauty care line, I don't want to compare them to Colgate or Unilever. I want to look specifically at the product lines. So I would compare Procter and Gamble's beauty care line to Estee Lauder or Avon, right? I wouldn't compare. Even though it's under Procter and Gamble. I wouldn't compare it to Colgate or Unilever. You want to compare segment to segment as specific as possible to construct the BCG matrix . You will also need the percent of revenue and the percent of income. And where can you find this? You can usually find this in a company's annual reports, so they will say this is taken from Procter and Gamble's website. It's free, it's publicly available and they say OK, our beauty chair segment was 19% of our sales, 23% of our Net Arctic. So it's very easy to find that now the size of the circle remember, the serval size represents the proportion of revenue, so the larger circle on the left is $500. The smaller on the right is $250. The slice represents the proportion of profit. And again, if we go back to the example of Procter and Gamble, you'll see that beauty care with 19% of sales. But it was 23% of net earnings, so this could be a little bit different. You could have a larger circle, but a smaller proportion of profit. Right? As long as you stick with what the company tells you, you will be good. Now let's go through an example. I know this has been a long time already. Like I said, this is gonna be one of the hardest video. So let's construct an example of a Boston consulting group matrix here. I've already come up with the relative market share for three separate categories and the industry growth rate. We also know the percentage of revenue and percentage of profits So remember, we're going to construct our matrix with relative market share along the X axis. The midpoint is gonna be halfway. So anything more than 0.5 relative market share is going to be on left side. Anything on the right is going to be less than 0.5 industry growth. Right now, this really depends. Zero is always going to be in the middle. But some people will have the Y axis go up to 10. Some people will have to go up to 20. It doesn't make a difference as far as the interpretation. It's really just a difference of the scale. So keep that in mind. Let's determine the size of our circles. Remember, we're going to tie the size of the circle to the percentage of revenue with the percentage of sales. So cosmetics is going to be 65%. It's gonna be the biggest. Home care is gonna be 15% and then health care is going to be 20%. Now that percentage of profits remember that's going to determine the slice of the pie. So we see in the top circle it's going to be about 55% the middle Circle's gonna be 15 and then we will have 30% of profits coming from that health care segment. Now let's put everything together we have or circle of cosmetics. It's generating. What was it that it's generating? It's generating 65% of the revenue and 55% of the sales. That's the circle. Once we built the circle, we don't have to worry about revenue or sales anymore. Once the circles are built, you don't have to worry about them now. We're just focusing on the relative market share in the industry growth rates. So we've constructed our circle. We see that the relative mortgage shares 0.7 and the industry growth rate is 5%. So this is going to make it a store. Remember, stores are the most attractive for us. The home care segment again 0.1 on the relative market share, and it's in a negative growth industry. So that's going to put it in the category of the dogs and then, lastly are health care segment is going to be a question work. We could possibly move it to become a star if we really heavily invested and tried to develop products or we might just decide to sell it and be done with this segment. In conclusion, the BCG Matrix Boston Consulting Group is a very information heavy matrix. There's to access, but even within the circles we have two different variables that were representing, so you can convey a lot of information in a very small matrix. It does generate specific strategy. So, you know, if you have a store, there's going to be specific strategies. Remember, we said we can integrate. We can develop new products, right? You know, if you have dogs, you're going tohave certain strategies divesting retrenchment, liquidation. So it puts a segment into a category and then, based on that category, offer specific recommendations. Now, some of that still depends on the strategist, because remember those question works. The Boston Consulting Room Matrix is going to say, OK, you could double down and try to invest in this, or you could get rid of it. But what you actually decide to do, how you interpret that comes down to the strategist Cole. Like I said, I know this was one of the more difficult topics to cover, but I hope you found the video useful, and I will see you in the next lesson. 11. Internal External Matrix: Hello and welcome back. Today we're going to be continuing with the matching stage of the strategy formulation process, and we're looking at the internal external matrix. Now, before we get started, I want to say that this is very similar to the Boston Consulting group Matrix. And if you've not watched that video, I would suggest you watch it first, because there's some prerequisite material that you'll need to understand now, just a quick look at the I internal external matrix. It uses the total waited internal factor evaluation as the X axis you can see along the top of the graph and the external factors as the Y axis. So what it does is it allows us again, just like the Boston Consulting Group Matrix, and allows us to compare segments within a company. So if we're a big company and we make toys, we have electron ICS and then we have hardware. We can compare each of those different segments. It is portfolio based. Now here's the real difference between it and the Boston Consulting Group. The Boston Consulting Group Matrix uses relative market share and industry growth rate. By contrast, this matrix is going to use the division, internal and external factors. So a little bit of a difference here, and we'll see that as we go through the examples. So let's start right off with an example. We have a company that has three divisions. We make toys, we make hardware and then we make electron ICS. Now, if you are doing this in real life, remember you are using the division, internal factors and division external factors. This is not the same thing as the internal factor evaluation matrix and the external factor evaluation matrix that we made in the input stage. It's similar, but remember, in the input stage, we're doing the organizations the whole. So if you were an analyst and you were doing this in real life, you're divisions that were underneath. You would prepare their own. If you're doing this is part of an academic project. You can estimate the division, internal factors and external factors. Just remember that. That's why they're different. So we have toys with a weighted I F. E of 3.5 and hardware with a 2.2 during the same organization. But the different divisions have different strengths and weaknesses, so keep that in mind. We have waited internal factor waited external factor, and then again, we have percentage of sales and presented profit. Remember, percentage of sales and percentage of profit is the exact same as we did with the BCG. Majors were just using it to make the size of the circles and the slices of the pie. So let's take a look at the internal external matrix, and you can see that we've put the different divisions on here. So there are a total of nine different cells within this matrix, and each one of them belongs to a certain group, a certain family. So depending on where our division falls within this matrix, we're going to have a different strategy. So let's first go through how we put these circles on the Matrix along the X axis. We have total internal factor, so let's go with toys. We have a 3.5, so that is in the far left of the graph. We know that it's either going to be in cell 14 or seven because it's strong on the i f. E. Now to determine its why location? We look at the external factor and it is a 2.2, which puts it in the medium category. It's just simply putting it where it is, based on the coordinates that it has. So what you'll notice about the internal external matrix is it. It's divided into groups, is divided into family. So if you remember back to the BCG matrix, we had cash towels, we had stores, we had dogs and we had questions, but they were all separate with this. We have different groups, but that are still related. So you see cells 12 and four or color coded green. They are the different cells that were going to be focusing on. If we land in this area, we're going to be focusing on a development strategy. This is our strongest so comparatively this would be similar to our stars. This is where we're going to invest a lot of effort. This is where we're going to try to grow, develop new products right now, the blue. You'll notice that we have cell three, Cell five and sell seven these cells or where we're maintaining. We're doing well. It's good, it's profitable, but we're just maintaining. We're not doing a whole lot of investment were not really trying to compete for new markets or developing the newest and latest and greatest here. This is somewhat similar to the cash towns, and then we have yellow yellows or weak performers. Way have low internal strength. We have low external strength. So here were either focusing on retrenchment, which, remember retrenchment is selling bad ports of the division, bad ports of the business and focusing on our core competencies. And Ivester is simply getting rid of the whole thing all together. So now we will overlay that with the three divisions of our company, and we can see that the cause medics are in the green, the home care segment is going to be in the yellow, and then the health care segment is going to be in the blue. So let's compare this with the BCG matrix just so you can see the difference. Now here's the important thing. Cosmetics or in the green section of the internal Extra Eternal matrix. And they are in the stores division of the Boston Consulting Room Matrix. And that's kind of what we talked about. That's kind of what we discussed. There's a large degree of overlap but remember, the internal external right tricks is looking more within our company. So if I was looking at this from an analyst standpoint, I would say OK, the Boston consulting group Matrix says that the industry is attractive and I'm a strong performer in this industry. And then if I'm looking at the intellectual major, some saying, not only is this a strong industry, not only there a lot of potential here as an industry but or company is uniquely positioned to take advantage of that. So the BCG matrix and the internal external nature it's really are compliments for each other. They somewhat answer the same problem, but just from a little different standpoint, So it's beneficial if you can use both of them. If you are writing a report or conducting an analysis home care, we see the same thing. Remember, it can be. It's a question on the BCG matrix, and then on this one, it's in the yellow category. So again, even though it's a different category, the strategies of the same So if you remember back to the BCG matrix, the questions, the question marks, we were thinking, OK, are we going to either sell them or are we going to retrench and double down and try to really refocus our efforts? And even though it's a different matrix, we still have the same strategy options in the yellow section of the internal external matrix. And then, lastly, we have the health care segment. So moving on. In summary, the internal external matrix is very similar to the BCG matrix. They broke the Matrix. They both studied divisions there, a portfolio analysis tool to help us determine how well or poorly different segments off our company are doing. They're complementary to each other, and whenever possible, I would suggest that you use both of them again. If you're doing this for a school project or some kind of research, you probably won't have access to all the internal and external factors, so you may have to use your best estimates to come up with these. I hope you found the video useful, and I will see you in the next lesson. 12. SWOT Matrix: Hello and welcome back. Today, we're going to be starting the first port of the matching stage. Now, remember, the matching stage is important because this is where we're going to take, or internal strengths and weaknesses are opportunities and our external threats, and we're going to store actually using that information to start developing specific strategy. So we're moving kind of from the General Broadview to suggesting specific strategies. Now, the first strap, the first tool that I want to cover is the swap matrix. Now the SWAT matrix stands for strengths, weaknesses, opportunities and threats. And if you have a very basic level of business strategy, if you're starting in your business courses, this is likely the first matrix that you're going to hear about. And even for non business majors, this is typically the one that people know and use the most. So because it is so commonly used, it's important to understand it very well. And if you write any kind of research paper, more than likely you will want to include this in your analysis. So what? Our strengths Well, remember these air, the internal factors that we do well, where can we find our strengths. We can go back to the internal factors evaluation matrix weaknesses. Remember those air internal things that we could improve on again? We're finding those in the internal factor evaluation, matrix opportunities, external factors that can benefit the business so we don't necessarily control this thing. But it could nonetheless help our business out and then threats again, external factors that constrain the business. Now, the one thing that I want to really point out here is that Look, all of these things where we getting this information, we're getting this information from the input stage. That's why I can't stress enough how important it is to take your time during the input stage and make sure that you're coming up with good strengths, weaknesses, threats and opportunities because they're going to be going into this swap matrix. Now you can look at the swap matrix on at least two levels. The most basic level you're gonna have a simple for basically like foursquare. It's gonna be strengths, weaknesses, opportunities and threats. And if you were doing this for on entry level business class or perhaps even an undergrad business level class, this is really about us for us. you would need to g o for the SWAT matrix. You would list your strengths in one. The weaknesses, opportunities and threats and another. And this. This is a very good, simple way to graphically and quickly depict a few key strengths, weaknesses, opportunities and threats. And you would say something about how you were going to improve the company strengths, mitigate the weaknesses, take advantages of opportunities and counter threats. Now, if you were doing this for more of an advanced, perhaps an upper level business management class or if you were even looking at this from a grad school perspective, you can take the SWAT matrix a little bit further. You can expand this to get a MAWR meaningful analysis. So when we look at the slot majors, remember, we have strengths, weaknesses and then opportunities and threats. We're going to move the strengths and weaknesses to the top of the Matrix, and we're gonna keep the opportunities on threats on the left hand side. Now each of these categories can interact with another. So, for example, we have S O type strategies. This is a strengths and opportunities combination. So the good way to think of this is Think of a fight, right? I think of martial arts. If someone throws a punch, it us. Not only do we want to block that punch, but we also want to return our own punch. We wanna have a counter attack. Really? So this is what this is doing? Were using a strength to take advantage of an opportunity right where we are mitigating a weakness by pursuing an opportunity, right, so we can combine each of these things. So eso is using strengths to seize opportunities. W o type strategies, as we mentioned, or mitigating weaknesses by pursuing opportunities and s t type strategies are using strengths to mitigate threats. So what will finish up with the weaknesses and threats? And then we'll give a little bit of an example of each of these. So the weaknesses and threats, this is a defensive position. We are aiming to reduce weaknesses and also avoid threats. So let's let's do an example of each of these because I know sometimes we're just thinking in the abstract. It can be hard to kind of clearly label these down, so strengths and opportunities eso type strategies. Remember those air using our strengths to take advantage of opportunities. So we're just pulling in the information that we've already gathered and we're putting it into the SWAT matrix. So remember that we said we had a diverse portfolio. We had a strong brand reputation and distributed network. Those there are strengths now, as an opportunity, we see that there is growing emerging market demand. So a potential strategy that our business could use to taken advantage of this opportunity is by targeting the growing middle class in emerging markets. Now we know that's an opportunity, but how are our strengths helping this well, based on the research we've done, we know that the middle class and emerging market has a strong preference for brands that they can trust, right so we can use that brand loyalty to expand and take advantage of that opportunity. Let's look at a W o type strategy. So what is one of our weaknesses? Well, we have low corporate social responsibility, So perhaps our firm isn't isn't that environmentally friendly? Or perhaps we're not known for having Strong writes for our workers. One way that we could mitigate a weakness while taking advantage of an opportunity is to Porter with some other firm that has really high CS or and launch a joint product together . So let's suppose that the opportunity is changing consumer preferences, right? So suppose that consumers are performing mortgage green energy, right? What we could do is we could mitigate or weakness of not being a environment or flattened the company. We could porter with an environmental a friendly company to launch a product. So we're doing two things at the same time mitigating a weakness to take advantage of that opportunity s t type strategies, these air using our strength to overcome an external threat. So suppose we have the external threat of new competition. Perhaps we've been the industry giant for a long time, and there's a number of smaller firms that are starting to pop up and compete with us. We can use our strength to to fight against that threat. So our new competitors, they might not have the distribution network that we do. So yes, they're competing with us, but we can offer our customers much more favorable delivery terms. We can give free two day shipping or to capitalize on our strength of the distribution network we could deliver these products at lower costs, right? So we're fighting a threat by using our strengths. And then lastly, w t type strategies. Remember, this is a defense of strategy. So we have low corporate social responsibility, and we also have new competition. So not only are we not good, but we're also facing new competitors. So within this type of strategy, what we want to do is we're going to launch a CSR campaign, right? We're going to try to rebrand ourselves and show ourselves to be a mawr ego friendly. A more socially responsible company. In conclusion. Remember that we're getting all of this information from the input face. So we're not coming up so much with new ideas here. We're using the information that we have. Like I said at the undergrad level, At the basic level, you could do the simple swap matrix. But if you're really starting to generate specific types of strategies, you're gonna want to go and start talking about S o W O S T and W t type strategies that I want to suggest a different strategy based on where your business is fitting. I hope you found this video useful. And I will see you in the next lesson. 13. Quantitative Strategies Planning Matrix: hello and welcome back. We finally got into the decision stage of the strategy formulation process. Now, in this stage, we're going to be using the quantitative strategies planning matrix to recommend the strategy that we think is best suited for the organization. And the way that we're going to be doing this is by taking account of the internal and external strengths and weaknesses that we've discussed during the input phase, and we'll see how these factors match up with strategies that we came up with during the matching phase. Now the way that this is going to work is we have a matrix that compares all of these and there's a few points of information that I needed cover. But I really think the best way is to just jump into the example and cover everything while we're within the example. Now the first thing that you'll notice is that we have the internal factor, strengths and weaknesses on the left, and then we also have the external factor, strengths and weaknesses or opportunities and threats. These are directly copied and pasted from the external factor matrix and the internal factor evaluation matrix. You can literally copy them and just move them down. And in fact, that's what I would suggest doing because everything that you identified as a strength or a weakness or an opportunity or a threat needs to be accounted for in this quantitative strategies planning matrix. Additionally, the weights, whatever weight you assigned to 42% Internet increased by 2025 that needs to be the same weight. That's a sign in the quantitative strategies planning matrix. It helps ensure continuity and that everything is flowing together. So we've assigned our strengths and weaknesses we've assigned or weights. Now we have the two strategies. Now where do these strategies come from? They come from the matching stage. So if you remember when we were doing the space matrix or the grand strategies matrix, we were in the aggressive quadrants and within the aggressive quadrants, there were probably seven different strategies that the Matrix said we pursue. We could do integration. We could develop new products, focus on market penetration. We could raise the stakes to competition, right? There were a lot of different strategies that we could pursue, and then we conducted the SWAT matrix. We said OK, out of all these different strategies. Some cater to our strengths. Some help us mitigate our weaknesses. So what we're doing here is we're gradually narrowing down the strategy. So all the strategies that we could have pursued, then the SWAT matrix helps us narrow it down to a few specific strategies. And then we're going to come down to 23 maybe four different strategies that we want to use in this matrix. They should be as exclusive as possible so we can expand e commerce. Or we can focus on acquiring partners in the emerging markets, such as buying a cosmetics company in Brazil, for example. Now that we have those strategies, what we want to do and this is the heart of the quantitative strategies planning, make sure assume just for a second assumed that you were expanding e commerce instead of focusing on the partnerships. If we were to expand e commerce, how attractive would that strategy be, given our strong consumer brands? If we were expanding e commerce, how attractive would that be given or highly efficient distribution network? So you're pretending that you've chosen a strategy and you say OK, what my strengths and weakness that I have how are they going to either help this strategy succeed or fail? So let's go through this. Strong consumer brands ensure loyalty. Well, if we think about this, if we already have a strong brand and we're selling our products online, that's really just a different place, a different platform to sell our products. So that's going to be good for our brand image, because it's not going to change. We're selling the same products, so I'm going to give that a four. And again, the attractiveness scores are gauged from 1 to 4, with one being not attractive to being someone attractive, three being relatively attractive and for being a very attractive strategy. Now we always want to fill this matrix out by row. We don't want to go up and down with the column, and the reason why is because it forces us to compare. So now that we've selected the expanded e commerce and strong consumer brands were going to say, OK, what if we expanded to include partners in the emerging market? We bought a like I said, a firm that produces cause medics in South America. Well, our existing brand portfolio really isn't going to help us as much, they might say. Oh, we're now owned by Procter and Gamble, for example. But it's not. It's not a product that consumers have a lot of experience with, so we're going to say that that's it. It is a somewhat attractive strategy, but again, it's not as important given the brand image as expanding e commerce. Let's just do another one just to see how it works. How important is the highly efficient distribution network to expanding commerce? Well, I would say this is very important, You know, with e commerce that we have to ship the products, we have to keep them in a warehouse. There's a lot of moving parts, so I would say that it's very important. It's a very attractive strategy to have a highly efficient distribution network. If we're going to expand e commerce, how if important is or distribution network? If we're acquiring other firms now, other firms have already been distributing their products. Yes, we can distribute their products within our existing distributor network, but again, it's not want to be as attractive as having the strong distribution network four expanding the e commerce. So we're going to give this a three. And the important point I'm trying to show you here is that you have to make a call with this. You can't have both of these before. You can't have both of them be a two or three. You need to rank. Okay, if it came down to it, Is it more important for me to have a strong brand with the e commerce or the emerging market partnerships? So you have to make a choice. Now, there are some factors that simply are not going to matter. So if we scroll down here, the fact that I have a high corporate social responsibility does that really impact my ability to sell e commerce? Not really. So I'm gonna put an n a there and doesn't really affect my ability to work with the emerging market partnerships again? Not really. So I'm going to put an n A. They're now, here's one thing that is a little bit interesting. In some cases, you'll have something that you think doesn't apply toe one strategy. But it does apply to the other strategy. So if we expand e commerce, we currently do not offer private label products. That means We don't manufacture products under a different brand image, right? We don't. I'm sure you've heard of this, the great value brand or the Wal Mart brand. That's when a major company will make its product. But it'll put a different label on it, basically, So we currently don't do that now. If we expand e commerce, we're still not going to do that. So you might think, OK, I'm going to put an end A in this spot. But perhaps the emerging market partnership that we're going to apply air does offer private label products, in which case we would want to rank them. So if you rank one of them, you have to rank both of them. So if this emerging market partnership is going to start offering generic label products than we would give it perhaps a three and then we would have to come back over here and give this a one as the way it stands, though, that was just a example. And in reality, both of them are going to be an A. So let's just go ahead and put it in a here cake. Now, how are these total attractiveness scores calculated the total attractiveness score is, quite simply, the weight multiplied by the attracting to score. It's the exact same thing that we were doing in the internal factor matrix and the external factor matrix with the weighted score. So that's all the same. The spreadsheet calculations on that are the same, and what you'll see is that when we come down to the bottom, we're going to have a total internal score. Now this is going to be a 5.86 for expanding e commerce and a 1.89 for the emerging market partnership. So you can see just based on the internal factors that expanding e commerce is much more attractive. But remember, we still have the external factors. The process is exactly the same. You're going to assign the weights with weights are already assigned. You're going to sign yet attractiveness scores, and then multiplying will give you the total attractiveness scores. Now here's where it gets interesting. You were going to some the internal total with the external total, and it's going to give you the sum of total attractiveness scores. So in this case we see that it's an eight about an eight for expanding the e commerce, and it's about a 4.24 focusing on acquiring firms in the emerging market. So what this indicates to us is that it's a much more attractive strategy to pursue the expanded e commerce. So let's go back to the slide show just to finish everything up here. Now, in conclusion, the quantitative Strategies Planning Matrix is a decision making tool. It uses a lot of information that we've already generated, but it simply pulls everything together. So remember, the most important thing is that you are evaluating each potential strategy and seeing how your existing strengths and weaknesses are either going to make that strategy more attractive or less attractive than the alternate strategies that you're comparing. I hope you found the video useful, and I will see you in the next lesson. 14. Resource notes: everyone I just wanted to give a really quick note on the resource is that are included with the course throughout the courses. You'll notice I have several templates that you can use, such as for the grand strategy matrix, the space matrix, and you're free to use these templates for your own projects. Add whatever factors or calculations you want to end of these. But as you'll notice there saved in the ODP format for the presentations. And if I have some of the spreadsheets in here, they're going to be saved in the ODS format. Now this is standing for the open document format. It's a format that's used by Apache Open office, and the reason that I did this is so if you don't have money to pay for Power Point or if you don't have money to pay for Microsoft Excel, you can still use thes templates. All you have to do is go to open office dot org's you can download. It's it's similar to Microsoft Office. It has a lot of the same features, but it's free. So if you don't have office, if you don't have excel, if you don't have power, point you can still use this If you do have power point and you do have excel. The templates that I'm providing should still open for you. I tried to remove a lot of the formatting and stuff like that, so they should still work. If they don't work on excel or Power point, then you can use open office to edit them and do whatever you want. Just a quick note. Hopefully there is no confusion. And I hope that all of the templates are a great resource and that you're able to use them in your projects. 15. Putting It All Together: Hello, everyone. Congratulations. We've covered all the material in the course now to sum up the course. What I want to do is I want to see how we could put all of the different strategies, matrices and different stages of the strategy formulation process together in a class project or as a component of research. So what I've done is created a simple flow chart that illustrates the steps that I would take if I was conducting a strategic analysis for a company. Now the very first thing that I would do is I would start with the company's mission statement and vision statement. Now, why would this be the first thing I would do? You can learn a lot about a company from its vision and mission statement. Specifically, you can learn where the company sees itself. Does The company sees itself as the biggest consumer goods company in the world or doesn't see itself as a small tailoring firm that specifically works in a target market? What does this sound like? It sounds like our generic strategies, and that's why we want to read or mission in our vision statement, because by reading this, we can help identify a firm's generic strategy. Now, after we've identified a generic strategy and kind of put together the pieces of where the firm wants to be. Witching, conduct the internal and external audit and create the internal factor evaluation matrix and the external factor evaluation matrix. Remember? And I can't stress this enough. This is probably the most important port of the research because you're going to use these internal and external factors throughout the rest of your analysis. It really is the foundation. So take your time. Make sure you get these factors right now, after we conduct this analysis, we will have established a baseline of how strong the company is. Remember, with the internal and external factor evaluation matrix 2.5 for an overall score represents an average company. So if we're below a 2.5, we know we're gonna be having a little bit more of an uphill battle than if we're above a 2.5. So we've established our baseline. Now what we're going to do, and this is what I would do. I would start with the competitive profile matrix because, in my opinion, it really is a perfect bridge between the input stage, identifying what we use a company are good at and going to the matching stage and saying, Where is our competitors at? What should our strategy be now? The competitive profile matrix is really going toe line or strengths and weaknesses up against our competitors. So the point here isn't to say that we're good company or bad company, but it's really to get a gauge on where our strengths or relative to our competition. And remember, it's not just determining whether we're stronger week, but it's determining OK, if we're weeks in a certain item, Does that item really matter if we're strong in a certain factor? Is that critical success factor really important for organizational success, or is it something that doesn't really matter? So it's it's really helping us prioritize almost our strengths and weaknesses. This is going to lead us to the matching stage. Now what I would do during the magic stage, I would first start with the broad overall strategy, so I would look at the Grand Strategy matrix and the space matrix, and based on this, I would just be trying to say OK, what general strategy should my company follow. Should we follow an aggressive strategy, a conservative strategy? And what that's going to do is it's going to give us a broad strategy. So once we move into the Internal External Matrix or the Boston Consulting Group Matrix, remember, these two matrixes are evaluating a company on a segment basis on a portfolio basis. So if we're a large company and we do business in electron ICS, toys and clothes, we can compare each of these different segments to see what segments are the strongest. What's segments of the weakest? Should we invest Maurin one segment to try to keep competing? Or should we perhaps let another segment dio and focus our resource is somewhere else. This is going to develop segment strategies now, after I know the general strategy from the Grand Strategy Matrix and the Space Matrix, and I know a segment strategy from the internal external metrics in the Boston Consulting Group Matrix, Then what I would do is I would conduct a SWAT analysis. Now, why would I do the SWAT analysis last? The reason that I would do the SWAT analysis last is because if you remember, the SWAT analysis generates different types of strategies depending on where we are. So if we had an aggressive strategy that we identified as part of the space matrix, then within my SWAT matrix, remember, I'm gonna be focus on those s o type strategies, the strengths and opportunity strategies. Now, by contrast, if some of the previous Matrix said I should be occupying a defensive position, then I would be looking more at the W T type strategies within the slot matrix. So what we're doing is we're really, really starting broad and were gradually winning, whittling down the available options till we get to the options that work best for the company. Now, once I've identified a few specific strategies that I could pursue, what I would do is conduct my quantitative strategies planning matrix. And what this is going to do is it's going to allow us to really zero in and say, Okay of these two or three, maybe four strategies that we have. Which of them are going toe work, best given or existing strengths and weaknesses and the existing opportunities and threats ? That would be the way that I would approach any kind of strategy, management paper or research assignment I hope you found the flow chart useful. And once again, thank you for taking the course and congratulations on making it to the end. 16. Course Summary: congratulations on finishing the course. This is one of the more difficult courses and also one of the longer horses that I created . Finishing such a difficult course represents a significant investment of time and effort on your part. So I want to congratulate you. And I also want to thank you for letting me be a part of this learning journey with you. When I think about this has been a learning experience for me as well. I'm always trying to cover the material in a new and unique way, and I appreciate your student feedback. If there's something that you think I can improve on, please let me know so I can improve the course for future students at the same time. If there's something that you like more thought was very effective, let me know so that I can continue doing that in future courses. Once again, congratulations. Thank you for enrolling in the course and best of luck in your continued learning journeys