The Grand Strategy Matrix
This is based on two evaluative dimensions competitive position and market growth. Appropriate strategies for an organization to consider listed in order of attractiveness in each quadrant of the matrix.
RAPID MARKET GROWTH
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Quadrant I 1. Market development 2. Market penetration 3. Product development 4. Horizontal integration 5. Divestitures 6. Liquidation |
Quadrant II 1. Market development 2. Market penetration 3. Product development 4. Horizontal integration 5. Vertical integration 6. Concentric diversification |
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Quadrant III 1. Concentric diversification 2. Horizontal diversification 3. Conglomerate diversification 4. Divestiture 5. Liquidation |
Quadrant IV 1. Concentric diversification 2. Horizontal diversification 3. Conglomerate diversification 4. Joint ventures |
Companies located in quadrant I of the grand strategy matrix are in an excellent strategic position and continued concentration on current markets (penetration & development) and products (development) are appropriate strategies. When the quadrant I organization has excessive resources then integration may be an effective strategy. When the quadrant I organization is too heavily committed to a single product then concentric diversification may reduce the risks associated with a narrow product line Quadrant I firms can afford to take advantage of external opportunities in many areas.
Firms positioned in Quadrant II need to evaluate seriously their present approach to the market place. Although their industry is growing, they are unable to compete effectively. The most appropriate strategies are market penetration, market development, product development, horizontal integration, divestiture, and liquidation.
Quadrant III organizations compete in the slow-growth industry and have a weak competitive position. These firms must take some drastic changes quickly to avoid further loss and possible extinction. Internal retrenchment may be pursued first. An alternative strategy is to shift resources away from the current business into different areas. If all else fails best is divestiture or liquidation.
Finally, quadrant IV businesses have a strong competitive position but are in a slow-growth industry. These firms 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 successfully pursue concentric, horizontal or conglomerate diversification. Another viable option for the quadrant IV firm is to form a joint venture.
The X-axis – the “competitive position” axis of the grand strategy matrix is analogous to the “competitive advantage” (CA) axis of the SPACE matrix. The 0 to 6 CA scale described earlier for the SPACE matrix could be used with the grand strategy matrix. Recall that 0 = strong competitive position and 6 = weak competitive position. A numerical value of 3 could represent an average competitive position on the grand strategy matrix, as it did on the SPACE matrix. The X intersection points on the grand strategy matrix could, therefore, be -3.
The Y-axis – The “market growth” axis of the grand strategy matrix is analogous to the “industry sales growth” axis on the BCG matrix the -20 to +20% scale described earlier for the BCG matrix could be used for the grand strategy matrix. Recall that +20% = rapid market growth and -20% – rapid market decline with 0% growth being the intersection point on the grand strategy matrix.