Quantitative Strategic planning Matrix (QSPM)

The Decision Stage

Quantitative strategic planning matrix (QSPM)

QSPM determines the relative attractiveness of various strategies based on key internal and external factors. The relative attractiveness of each strategy within a set of alternatives is computed by determining the cumulative impact of each key internal and external factors. Any number of sets of alternative strategies can comprise a given set. For example, one set of strategies may include concentric, horizontal or conglomerate diversification, whereas another set may include issuing stock verses divesting of a division to raise needed capital. The steps involved are:

1. List the firm’s key internal and external strengths/weaknesses and external opportunities/threats in the left column of the QSPM. This information should be taken directly from the IFE&EFE matrix. A minimum of 5 key internal factors and 5 external factors should be included in the QSPM. Remember that each factor should be stated in specific terms.
2. Assign ratings to each key internal and external factor. These ratings are identical to those in the IFE and EFE matrix. The ratings are presented in a straight column just to the right of the key internal and external factor statements.
3. Examine state 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 sets if appropriate.
4. Determine the attractiveness score. They are 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 internal and external factor, one at a time and asking a question is YES, then the strategy should be evaluated relative to the key factor. Specifically, attractiveness scores should be assigned to each strategy in the given set of alternatives, and where 1=the strategy is not acceptable, 2=the strategy is possible acceptable, 3=the strategy is probably acceptable and 4= the strategy is most acceptable. However, if the answer to the above question is NO, indicating that the respective key factor does not affect the specific choice being made, then do not assign attractiveness scores to the strategies in that set.
5. Compute the total attractiveness score, which is defined as the product of multiplying the ratings (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 internal and external factors. The higher the total attractiveness score, the more attractive the strategic alternative.
6. Compute the total attractiveness score in a strategy column of the QSPM. This reveals which strategy is most attractive in each set of alternatives. Higher scores indicate more attractive strategies, considering all the relevant internal and external factors that could impact the strategic decisions. Attractiveness scores in a given set of strategic alternatives indicate the relative desirability of one strategy over another.

The QSPM

Internal factors 1 = major weakness, 2=minor weakness, 3=minor strength 4=major strength

External factors 1=major threat, 2=minor threat, 3=minor opportunity, 4=major opportunity