Grand Strategy Matrix
Grand Strategy Matrix
The grand strategy matrix is a powerful tool for constructing alternative strategies. The matrix has a basis of four basic elements.
• Weak Competitive Position
• Strong Competitive Position
• Slow Market Growth
• Rapid Market Growth
The four elements create a four quadrant matrix. Using a four quadrant matrix approach makes it easy to organize and position all products so that you’re able to make the best selection of a deserving strategy. With the four quadrant matrix, you will be able to adopt the most appropriate strategy based on the growth and competiveness of the business. Even large businesses’ with multiple subdivisions can make use of the grand strategy matrix.
In management, it’s important that you select the best strategy that blends well with the market and competitive position of your business. With the grand strategy matrix, you can scientifically analyze the current position of your firm and select the best result based on your findings.
Overall, there are only two evaluative dimensions of the grand strategy matrix; competitive position and market growth. The best strategies are enlisted sequentially in each matrix segment and these are unique for organizations and divisions and illustrate how attractive quadrants are.
This quadrant is best suited for enterprises that are established, with rapid market growth and a strong competitive position. Firms in this quant rant should concentrate on the current products and markets more than anything else. By concentrating on current markets, they will be able to discover the strategies to adopt, including market development and market penetration. These firms have an advantage of a competitive advantage that they have earned over time and should never lose focus on these.
Quadrant one firms with excessive resources should adopt an extension program and participate in a horizontal, forward and backward integration. But the decision on the integrations to indulge in should be carefully arrived at so that the current competitive advantage is not used as the main reason. Quadrant one firms also mostly tends to be committed to a single product line and they should be able to analyze the risks associated with this. A slender product line can be burdened with many risks and thus diversification can reduce such risks.
The prime advantage the quadrant one firms have is that they have many external opportunities to exploit and increase their wealth.
Quadrant II firms in the Grand Strategy Matrix are mostly those in a fast growing market but with a weak competitive position. Managers of these firms have the mind the market position and strategize on measures to improve it. The main challenge here is that firms are having an unfair competition while operating in a growing market. An in-depth analysis should be conducted to locate the challenges that are leading to ineffective competition. Thereafter counteractive measures should be implemented to address the problem.
The first adoption option for Quadrant II firms is adoption of an intensive strategy, seeing that they’re operating in a rapidly growing industry. The dilemma in this is that firms don’t have the competitive advantage, which means a horizontal integration can be more effective.
Another option is diversification of some divisions. This strategy may make it easier to acquire funding to invest in the current business in another division or to purchase the shares back. The very last option is for another business to be acquired through liquidation.
The quadrant three firms have two major problems; they are operating in a slow growth market and they have a weak competitive advantage. These firms are susceptible to possible liquidation and there is therefore the need for introduction of drastic changes in every area. The management must review its philosophy of farm management and adopt new governing approaches where possible. There is need for huge re-investment to ensure that these firms stand in their feet again.
The first option that can be considered is assets reduction. Another option for consideration is overall diversification of the business. Diversification can be related or unrelated. If this doesn’t solve the problem then the final option of liquidation or divesture can be considered.
Quadrant IV firms have the advantage of a strong competitive position. Unfortunately, they operate in a slow growth market. Their main aim should therefore be to search for opportunities in the growing industry where they can maximize their strength of applying the diversified programs.
Quadrant four firms due to their competitive position, bask in high cash flows. They thus have minimal requirements of funds to assist their internal growth. These firms can therefore seek related or unrelated fruitful diversification. Quadrant IV firms have the final option of pursuing joint ventures since they have excess funds.