Strategic Planning: SWOT Analysis, Strategies, Policies,
1.2 Analytical Tools
Weihrich suggested the use of a simple matrix to record the strengths and weaknesses, and the opportunities and threats confronting the organization [1]. The intersecting cells of the matrix provide a vehicle for identifying and recording initial strategies that might be adopted in response to the SWOT analysis (see Figure 4.1). For example, if an organization has recently upgraded its information technology to include e-commerce capabilities (strength), it may be well-positioned to take advantage of opportunities to accelerate financial and other transactions using the Internet.
Rowe, Mason, and Dickel developed the Strategic Position and Action Evaluation (SPACE) matrix as a means of determining whether aggressive, conservative, defensive, or competitive strategies are most appropriate for a given organization [2]. While the dimensions of the matrix are designed for private sector application, some parallels can be drawn for public and nonprofit organizations. As shown in Figure 4.2, the axes of the SPACE matrix represent two internal dimensions (financial strength and competitive advantage) and two external dimensions (environmental stability and industry strength). For public and nonprofit organizations, financial strength may include such factors as the elasticity of revenues and expenditures, the organization’s cash flow position, liquidity and return on investments, and amount of working capital.Competitive advantage may include the level of constituent/end user satisfaction, use of technological know-how, and quality of service. Environmental stability may focus on factors such as the rate of inflation, regulatory impact, price elasticity, technological change, and competitive pressures. It is somewhat more difficult
FIGURE4.1 Weihrich’s SWOT matrix.
to identify public sector counterparts in the area of industry strength, which in the SPACE matrix deals with such industry-wide indices as growth and profit potential, financial stability, productivity, and technological know-how.
A possible surrogate would be the status of the organization in the broader economic environment in which it must function. For example, a suburban community that is largely residential with service-oriented businesses might
“score” lower on this dimension than a city with a more diverse economy and a broader tax base.
The steps required to develop a SPACE matrix are as follows:
1. A numerical value ranging from+1 (worst) to+6 (best) is assigned to each of the variables selected to represent the financial strength and economic status dimensions.
2. A numerical value ranging from−1 (best) to−6 (worst) is assigned to each of the variables selected to represent the environmental stability and competitive advantage dimensions.
3. An average score is computed for each dimension by summing the values given to the variables, and dividing by the number of variables included in the respective dimension. For example, if the values assigned to the financial strength variables were +1, +3, +4, and +5, the average score would be 13/4= +3.25.
FIGURE4.2 The SPACE matrix.
4. The two scores on the x axis are summed and the resultant point is plotted on X. The two scores on the y axis are summed and the resultant point is plotted on Y. The intersect of the new XY point then is plotted.
5. A directional vector is drawn from the origin of the matrix through the new intersection point. This vector reveals the type of strategies recommended for the organization.
If, for example, competitive advantages are low (e.g.,−4) compared to economic status (+2), and financial strength (+5) outweighs environmental stability (−2), then the XY intercept would be (−2, +3). The vector would point to the conservative quadrant, indicating an organization that has achieved financial strength but without major competitive advantages.
Ian MacMillan developed a strategy grid to help public and nonprofit organizations assess their competitive status [10]. MacMillan’s matrix examines four program dimensions that guide placement on the strategy grid and indicate implied strategies.
Alignment with mission statement: Degree to which a program “fits” or
“belongs” within an organization.
Competitive position: Degree to which the organization has a stronger capability and the potential to deliver the program than other organiza- tions.
Program attractiveness:Complexity associated with the management of a program.
Alternative coverage:Number of other organizations attempting to deliver or succeeding in delivering a similar program in the same region to similar constituents.
MacMillan suggested that an organization should divest itself of those services or programs that are not aligned with its mission, or that cannot draw on existing skills or knowledge within the organization. It should also jettison programs that are unable to share resources or for which activities can not be coordinated with other programs. On the other hand, programs that have a growing client base, stable financial resources, and a low client resistance are considered simple or “easy to manage” and should be built upon. Program attractiveness also includes the degree to which a program is appropriate from an economic perspective, for example, as an investment of current or future organizational resources.
The MacMillan matrix provides ten cells in which to place programs that have been reviewed in terms of these four dimensions (see Figure 4.3). Each cell is assigned a strategy that directs the future of the program listed in the cell (e.g., aggressive competition, joint venture, orderly divestment, etc.). One cell of the matrix, “Soul of the Agency,” requires additional explanation. These are the difficult programs for which an organization is often the “last, best hope”
for the constituents or clients. Management must find ways to use the programs in other cells to develop, piggyback, subsidize, leverage, promote, or otherwise support programs in this category.