Grand Strategy Matrix has emerged into a powerful tool in devising alternative strategies. This matrix is basically based on four important elements:
• Rapid Market Growth
• Slow Market Growth
• Strong Competitive Position
• Weak Competitive Position
These elements form a four quadrant matrix in which all organizations can be positioned in such a way that identification and selection of appropriate strategy becomes an easy task. Moreover, this matrix helps in adopting the best strategy based on the current growth and competitive state of the firm. A large scale firm segregated into many divisions can also plot its divisions in this four quadrant Grand Strategy Matrix for formulating the best strategy for each division.
The key area of management is to suitably select the strategy cohesive with the firms’ market and competitive position. The Grand Strategy Matrix makes it an easy going job. It helps in scientific analysis of firms‘current position and selection of best strategy in accordance with the revealed competitive position and market place.
Broadly speaking four elements of the Grand Strategy Matrix can be described as two evaluative dimensions namely market growth and competitive position. In each quadrant of the matrix the apt strategies are enlisted in sequential order for each organization or division keeping in view the attractiveness in each quadrant of the matrix.
The quadrant one of the Grand Strategy Matrix is meant for those firms which are in a strong competitive position and flourishing with rapid market growth. Firms located in this quadrant are in excellent strategic position and they need to concentrate on current markets and products. Concentration on current markets reveals the adoption of strategies such as market penetration and market development and likewise concentration on current products calls for adoption of product development strategy. These firms or divisions should continue to ponder upon current competitive advantage and must avoid from loosing the focus from the competitive advantage gained over the time.
[large]In case quadrant one firms have excessive resources, than, it would be wise to adopt the expansion program and indulge in backward, forward, or horizontal integration. But and a careful thought process needs to be done before assuming such integrations so that any meditation from the current competitive advantage can be avoided. The quadrant one firm also requires identifying the risk associated mainly if it is committed to a single product line. The best strategy to espouse in this case is related diversification because it can be helpful in reducing the risk associated with the slender product line.
One of the main advantages to the quadrant one firms is that they can afford to exploit the external opportunities and magnify the wealth in numerous areas of dealings.
Firms and divisions falling in quadrant two of the Grand Strategy Matrix are characterized with a weak competitive position in fast growing market. The present market position of these firms must click in the minds of the management and they need to weigh up the firms’ present market place critically. The opportunity lagging here is that such firms are operating in a growing industry but the problem area is that they are competing ineffectively. An in-depth analysis is necessary to identify the gray areas of incompetence and the reasons behind such ineffectiveness. Moreover, adoption of counteractive measures is also indispensable so that ability to compete effectively is strengthen and firm can find its space in the more competitive environment.
[linkunit]Since quadrant two firms are in a rapid market growth industry, therefore, an intensive strategy, more appropriately, can be classified as the first option to adopt. The dilemma in espousing the intensive strategy arises when the firms is lacking distinctive competence or competitive advantage. In this scenario the most enviable substitute is horizontal integration.
In case the quadrant II firm does not find any suitable strategy to adopt than divestiture of some divisions can be considered as another option. Such an arrangement may avail the desired funding to buy back the shares or to invest in the current venture in other divisions to strengthen the competitive position. Moreover, as last resort, liquidation should be considered so that another business can be acquired.
The quadrant three firms are operating in a slow growth industry with a weak competitive position. These firms are prone to further decline which may result possibly in liquidation. To avoid such situations quadrant three firms needs introduce drastic changes in almost all the areas of managing the company. The management has to change its philosophy and should necessarily adopt new approaches of governing the firm. The management should be willing to incur some extensive costs in the overall revamp of the organization.
Strategically retrenchment (assets reduction) would be the best option to be considered first. Secondly diversifying the overall business through shifting the resources should be evaluated as another choice (related or unrelated diversification). The final option is again divesture or liquidation.
The firms falling in quadrant IV are characterized as having a strong competitive position but are operating in a slow growth industry. These firms have to quest for the promising growth areas and to exploit the opportunities in the growing markets as they possess the strengths to instigate diversified programs in growing industries.
Ideally quadrant four firms have limited requirements of funds for internal growth whereas they enjoy the high cash flows due to the competitive position they are characterized for. Therefore, these firms can often hunt for related or unrelated diversification fruitfully. Due to availability of excessive funds quadrant IV firms can also pursue joint ventures.