Selling and Sales Management Assignment 3: Grand Strategy Matrix

This assignment, submitted by a BBA student at the University of Central Punjab, explains the Grand Strategy Matrix and its components. The document defines the matrix as a tool for formulating strategies based on market growth and competitive position. It explores the four quadrants of the ma...Read More

University of Central Punjab
Selling and Sales Management
Submitted to:
Prof. Nabiha Jamshed
Submitted by:
Syyed Sultan haider (S2F18BBAM0007)
Date of submission 29th December 2021
Assignment no. 3
Program:
BBA-7
Session:
F-18

Question
Explain purpose and all components of “grand strategy matrix”?
Explanation:-
It is good for companies to know which strategies they should or should not develop.
There are multiple ways of finding out. Among other things, a kind of SWOT analysis
that looks at the business's internal strengths and weaknesses as well as the external
opportunities and threats may be of help.
The Grand Strategy Matrix is a handy tool as well, when it comes to formulating feasible
strategies. Grand Strategy Matrix has grown into a powerful tool for coming up with
alternative strategies.
The model is based on two dimensions plotted along a vertical and a horizontal axis; the
vertical axis represents market growth, varying from slow to fast growth. The horizontal
axis represents the organization’s competitive position, which may range from weak to
very strong.
These data combine to create four quadrants, in which organizations can be positioned so
that selecting suitable strategies can be easily researched.
Both a company's current growth and its competitive status count as important factors.
The model also allows businesses that are split into multiple divisions to formulate a best
strategy for each of those divisions (product groups).

 Market Penetration: This focuses on increasing sales of existing products to an
existing market.
 Product Development: Focuses on introducing new products to an existing market.
 Market Development: This strategy focuses on entering a new market using existing
products.
 Diversification: Focuses on entering a new market with the introduction of new
products.
 Related diversification
It is one in which the two involved businesses have meaningful commonalties, which
provide the potential to generate economies of scale or synergies based upon the
exchange of skills or resources. In a related diversification the resulting combined
business should be able to achieve improved ROI because of increased revenues,
decreased costs, or reduced investment, which are attributable to the commonalties.
 Unrelated diversification:
Unrelated diversification lacks commonality in markets, distribution channels, production
technology, and R&D thrust to provide the opportunity for synergy through the exchange
or sharing of assets or skills. Reliance entered into retailing by allocating Rs25, 000 crore
in a phased manner is a typical example.
 Divestiture
Selling a division or part of an organization is called divestiture. Divestiture often is
used to raise capital for further strategic acquisitions or investments. Divestiture can
be part of an overall retrenchment strategy to rid an organization of businesses that are
unprofitable, that require too much capital, or that do not fit well with the firm's other
activities.
 Retrenchment
The Retrenchment Strategy is adopted when an organization aims at reducing its one or
more business operations with the view to cut expenses and reach to a more stable
financial position.
 Joint venture
At its most basic, a joint venture is when two or more businesses agree to work together.
It’s effectively a commercial agreement between two or more participants, usually
entered into in order to achieve specific business goals such as launching a new type of
business or selling products into a new market. Each company maintains their separate

business structure and legal status, with joint ventures creating a new, jointly-owned child
entity that is effectively at arm’s reach from the parent companies.
1. 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.
2. 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.
3. 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.
4. 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.
The advantages of the Grand Strategy Matrix
Seeing the diagram as a whole provides a bird’s-eye view of the complete business life
cycle in a given industry. In addition, the diagram shows that four distinct strategies are
available to all companies in all industries during each stage of the industry’s life cycle. It
also reveals that some types of strategic growth and maturity are not physically possible,
as they are represented by two different quadrants. Competitive strategy and the
industry’s maturity, then, are not the only factors that determine a company’s strength
and position.
Disadvantages of the Grand Strategy Matrix
It is possible to confuse it with a matrix of product strategies, as each of the four
strategies depicted in each quadrant corresponds to a strategy for developing a new
product or improving an existing one. However, a product strategy can only be
determined if the need is present, while a grand strategy is determined by the company’s
situation. It is important not to confuse product strategies with grand strategies. In
addition, this tool is useful only for companies in particular industries. Moreover, the size
of a company is not indicated on its matrix, making it difficult to determine a company’s
strength and position in the industry, particularly if it is a small business in a large
market.
How does the Grand Strategy Matrix differ from an Industry Life Cycle
Matrix?
In the original version of the Industry Life Cycle Matrix, DiMaggio depicts the growth,
maturity and decline of an industry, while the strategic options of a company in a mature
industry are restricted to merger, postponement of decline, or acquisition, or industry exit.
In the more complete version of the matrix, DiMaggio added a new dimension by
depicting the four different strategies available in each stage of the industry’s life cycle.
Conclusion:
Every organization must fall in any one of the four quadrants. The
organization that lies in the first quadrant must adopt those set of strategies
that are specified in that quadrant. Similarly the organization that lies in the
second quadrant must adopt the given set of strategies in that quadrant. In

the same manner the organizations lie in the third & fourth quadrants must
follow the set of strategies of the third & fourth quadrants respectively.
References
http://www.zainbooks.com/books/management/strategic-management_22_types-of-strategies-5.html
https://www.mbaknol.com/strategic-management/grand-strategy-matrix/
https://www.yourarticlelibrary.com/marketing/diversification-strategies-related-and-unrelated-
diversification/43621
https://businessjargons.com/retrenchment-strategy.html
https://www.startuploans.co.uk/business-advice/joint-venture-definition-examples-pros-cons/
https://welpmagazine.com/complete-guide-to-grand-strategy-matrix/