The Decision Stage

Analysis and intuition provide a basis for making strategy-formulation decisions. The matching techniques just discussed reveal feasible alternative strategies. Many of these strategies will likely have been proposed by managers and employees participating in the strategy analysis and choice activity. Any additional strategies resulting from the matching analyses could be discussed and added to the list of feasible alternative options. As indicated earlier in this chapter, participants could rate these strategies on a 1 to 4 scale so that a prioritized list of the best strategies could be achieved.

The Quantitative Strategic Planning Matrix

Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a QSPM provides an analytical method for comparing feasible alternative actions. The QSPM method falls within so-called stage 3 of the strategy formulation analytical framework.

[pic]

The left column of a QSPM consists of key external and internal factors (identified in stage 1). The left column of a QSPM lists factors obtained directly from the EFE matrix and IFE matrix. The top row consists of feasible alternative strategies (provided in stage 2) derived from the SWOT analysis, SPACE matrix, BCG matrix, and IE matrix. The first column with numbers includes weights assigned to factors.

How to Construct a QSPM

Step 1

Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of the QSPM. This information should be taken directly from the EFE Matrix and IFE Matrix. A minimum of 10

external critical success factors and 10 internal critical success factors should be included in the QSPM.

Step 2

Assign weights to each key external and internal factor. These weights are identical to those in the EFE Matrix and the IFE Matrix. The weights are presented in a straight column just to the right of the external and internal critical success factors.

Step 3

Examine the Stage 2 (matching) matrices and identify alternative strategies that the organization should consider implementing. Record these strategies in the top row of the QSPM. Group the strategies into mutually exclusive sets if possible.

Step 4

Determine the Attractiveness Scores (AS), defined as numerical values that indicate the relative attractiveness of each strategy in a given set of alternatives. Attractiveness Scores are determined by examining each key external or internal factor, one at a time, and asking the question, “Does this factor affect the choice of strategies being made?” If the answer to this question is yes, then the strategies should be compared relative to that key factor. Specifically, Attractiveness Scores should be assigned to each strategy to indicate the relative attractiveness of one strategy over others, considering the particular factor. The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive. If the answer to the above question is no, indicating that the respective key factor has no effect upon the specific choice being made, then do not assign Attractiveness Scores to the strategies in that set. Use a dash to indicate that the key factor does not affect the choice being made. Note: If you assign an AS score to one strategy, then assign AS score(s) to the other. In other words, if one

strategy receives a dash, then all others must receive a dash in a given row.

Step 5

Compute the Total Attractiveness Scores. Total Attractiveness Scores are defined as the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row. The Total Attractiveness Scores indicate the relative attractiveness of each alternative strategy, considering only the impact of the adjacent external or internal critical success factor. The higher the Total Attractiveness Score, the more attractive the strategic alternative (considering only the adjacent critical success factor).

Step 6

Compute the Sum Total Attractiveness Score. Add Total Attractiveness Scores in each strategy column of the QSPM. The Sum Total Attractiveness Scores reveal which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant external and internal factors that could affect the strategic decisions. The magnitude of the difference between the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative desirability of one strategy over another.

Limitations of QSPM

A limitation of the QSPM is that it can be only as good as the prerequisite information and matching analyses upon which it is based. Another limitation is that it requires good judgment in assigning attractiveness scores. Also, the sum total attractiveness scores can be really close such that a final decision is not clear. Like all analytical tools however, the QSPM should not dictate decisions but rather should be developed as input into the owner’s final decision.

Advantages of QSPM

A QSPM provides a framework to prioritize the strategies, it can be used for comparing strategies at any level such as corporate, business and functional.The other positive feature of QSPM that it integrate external and internal factors into decision making process.A QSPM can be developed for small and large scale profit and non-profit organizations.

Cultural Aspects of Strategy Choice

All organizations have a culture. Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes, and heroines that describe a firm. Culture is the unique way an organization does business. It is the human dimension that creates solidarity and meaning, and it inspires commitment and productivity in an organization when strategy changes are made.

It is beneficial to view strategic management from a cultural perspective because success often rests upon the degree of support that strategies receive from a firm’s culture. If a firm’s strategies are supported by cultural products such as values, beliefs, rites, rituals,ceremonies, stories, symbols, language, heroes, and heroines, then managers often canimplement changes swiftly and easily. However, if a supportive culture does not exist and is not cultivated, then strategy changes may be ineffective or even counterproductive.

A firm’s culture can become antagonistic to new strategies, and the result of that antagonism may be confusion and disarray.

Culture provides an explanation for the difficulties a firm encounters when it attempts to shift its strategic direction.