The Grand Strategy Matrix has become a popular tool for formulating feasible strategies, along with the SWOT Analysis, SPACE Matrix, BCG Matrix, and IE Matrix. Grand strategy matrix is the instrument for creating alternative and different strategies for the organization. All companies and divisions can be positioned in one of the Grand Strategy Matrix’s four strategy quadrants. The Grand Strategy Matrix is based on two dimensions: competitive position and market growth. Data needed for positioning SBUs in the matrix is derived from the portfolio analysis. This matrix offers feasible strategies for a company to consider which are listed in sequential order of attractiveness in each quadrant of the matrix.
- Quadrant I (Strong Competitive Position and Rapid Market Growth) – Firms located in Quadrant I of the Grand Strategy Matrix are in an excellent strategic position. The first quadrant refers to the firms or divisions with strong competitive base and operating in fast moving growth markets. Such firms or divisions are better to adopt and pursue strategies such as market development, market penetration, product development etc. The idea behind is to focus and make the current competitive base stronger. In case such firms possess readily available resources they can move on to integration strategies but should never be at the cost of diverting attention from current strong competitive base.
- Quadrant II (Weak Competitive Position and Rapid Market Growth) – Firms positioned in Quadrant II need to evaluate their present approach to the marketplace seriously. Although their industry is growing, they are unable to compete effectively, and they need to determine why the firm’s current approach is ineffectual and how the company can best change to improve its competitiveness. The suitable strategies for such firms are to develop the products, markets, and to penetrate into the markets. Because Quadrant II firms are in a rapid-market-growth industry, an intensive strategy (as opposed to integrative or diversification) is usually the first option that should be considered. To achieve the competitive advantage or becoming market leader Quadrant II firms can go into horizontal integration subject to availability of resources. However if these firms foresee a tough competitive environment and faster market growth than the growth of the firm, the better option is to go into divestiture of some divisions or liquidation altogether and change the business.
- Quadrant III (Weak Competitive Position and Slow Market Growth) – The firms fall in this quadrant compete in slow-growth industries and have weak competitive positions. These firms must make some drastic changes quickly to avoid further demise and possible liquidation. Extensive cost and asset reduction (retrenchment) should be pursued first. An alternative strategy is to shift resources away from the current business into different areas. If all else fails, the final options for Quadrant III businesses are divestiture or liquidation.
- Quadrant IV (Strong Competitive Position and Slow Market Growth) – Finally, Quadrant IV businesses have a strong competitive position but are in a slow-growth industry. Such firms are better to go into related or unrelated integration in order to create a vast market for products and services. These firms also have the strength to launch diversified programs into more promising growth areas. Quadrant IV firms have characteristically high cash flow levels and limited internal growth needs and often can pursue concentric, horizontal, or conglomerate diversification successfully. Quadrant IV firms also may pursue joint ventures
Generally, strategies listed in the first quadrant of Grand Strategy Matrix are intended to maintain a firm’s competitive edge and boost rapid growth, while the other three quadrants represent appropriate actions to take to reach the best position, which is the first quadrant. Increasing market share, expanding to new markets and creating new products are common strategies.
The efficiency of the management greatly depends upon adoption of and pursuing the strategies consistent with the market and competitive position of the firm. For devising appropriate strategy management is required to reveal the firm’s competitive position and market place through a scientific analysis of its current position. Grand Strategy Matrix is there to simplify the job.
Advantages of Grand Strategy Matrix is that, this model allows better implementation of strategy because of the intensified focus and objectivity. It conveys a lot of information about corporate plans in a simplified format.
However, Grand Strategy Matrix may not be as simple as it seems, upon application to real life due to the unforeseen factors and also complications in the business world. In addition, the relationship between market share and profitability differs in different industries. Another issue about this model is that, the grand strategy options are mostly concern on cash related issues but not values of the firm.
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Strategic mgt notes was very useful . But i did not find an answer for a very important question i.e. the variants of conglomerate strategies i will be very thankful if you could post that too.
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