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Summary Strategic Management Chapter 6: Strategy Formulation: Situation Analysis and Business Strategy
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A summary of Chapter 6 of the book Strategic Management and Business Policy.
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Chapter 6: Strategy formulation:Situation analysis and Business
Strategy
Situational Analysis: SWOT Approach
Strategy formulation (strategic planning or long-range planning) = concerned with
developing a corporation’s mission, objectives, strategies, and policies.
The process of finding a strategic fit between external opportunities and internal strengths
while working around external threats and internal weaknesses.
SWOT is an acronym used to describe the particular Strengths, Weaknesses, Opportunities,
and Threats that are potential strategic factors for a specific company.
A SWOT approach should not only result in the identification of a corporation’s distinctive
competencies but also in the identification of opportunities that the firm is not currently
able to take advantage of due to a lack of appropriate resources.
SWOT can thus be used to take a broader view of strategy through the formula SA= O/(S-W)
Strategic Alternative equals Opportunity divided by Strengths minus Weaknesses.
Criticisms:
- Virtually everything that is a strength is also a weakness
- Virtually everything that is an opportunity is also a threat
- Adding layers of effort does not improve the validity of the list
- It uses a single point in time approach
- There is no validated evaluation approach.
Generating a strategic factors analysis summary (SFAS) matrix
The SFAS (Strategic Factors Analysis Summary) Matrix summarizes an organization’s strategic
factors by coming the external factors from the EFAS table with the internal factors from the
IFAS table.
The highest-weighted EFAS and IFAS factors should appear in the SFAS Matrix.
See page 200.
Column 1 Strategic factors
Column 2 Weight
Column 3 Rating: ratings will probably (but not always) be the same as those listed in the
EFAS and IFAS tables.
Column 4 Weighted Score
Column 5 Duration: Short-term (less than one year), intermediate-term (one to three
years), or long-term (three years and beyond).
Column 6 Comments: repeat or revise your comments for each strategic factor from the
previous EFAS and IFAS table. The total weighted score for the average firm in an industry is
always 3.0.
Finding a propitious niche
A niche is a need in the marketplace that is currently unsatisfied.
The goal is to find a propitious niche – an extremely favourable niche – that is so well suited
to the firm’s internal and external environment that other corporations are not likely to
challenge or dislodge it.
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