The decision stage is the last stage of strategy formulation in which a tool is used called Quantitative Strategic Planning Matrix or QSPM Matrix. Hence there are a number of alternative strategies and the Quantitative Strategic Planning Matrix (QSPM). Actually, that can be used to objectively evaluate the most suitable strategy among the list of all the alternative strategies. Therefore the data is collected and a matrix is developed by using quantitative methods for strategic planning. Thus the identification of the external and internal crucial success factors is regarded as the basis of the QSPM Matrix. Since the relative attractiveness of feasible alternative action can be determined by only the specially designed technique of QSPM Matrix.
The best alternative strategies are objectively indicated by this technique. Basically, the alternative strategies are objectively evaluated by using the inputs from the analysis of stage 1. So matching results from analysis of stage 2. In fact, the QSPM matrix is considered stage 3. While stage 1 includes the Internal Factor Evaluation Matrix, External Factor Evaluation Matrix, and Competitive Profile Matrix. However, stage 2 includes SPACE Matrix, TOWS Matrix, SWOT Analysis, Internal External Matrix, BCG Matrix, and Grand Strategy Matrix. Therefore all the required data is were obtained from these two stages.
QSPM Matrix – Preparation
There is a complete procedure for preparing the QSPM matrix. First of all, there are certain key external and internal factors. Strengths & weaknesses are included in the internal factor category while opportunities & threats are included in the external factor category. It is identical to old IFE & EFE in which all factors are given a certain weight. The importance given to external & internal factors is specified through assigned weight. The sum of all the weights should be equal to
- When the weights are assigned to all the factors then the next step is to make an analysis of the matrices of the stage
- In order to point out the alternative strategies that should be implemented. The alternative strategies identified from the SPACE Matrix, TOWS, IE Matrix, BCG Matrix, and Grand Strategy Matrix are listed in the top row of the Quantitative Strategic Planning Matrix (QSPM).
Similar feasible alternatives are generated by these matching tools. However, it is not necessary to evaluate every suggested alternative strategy by the matching techniques in a QSPM matrix. Sound intuitive judgments of the strategists are required in selecting the strategies to be included in the QSPM Matrix. When each strategy is assigned by a certain weight then the attractiveness score of each strategy is determined & after that total attractiveness score is also ascertained. That strategy is the most feasible that has the highest total attractiveness score.
Steps in Preparation
Following are some of the steps of preparation of the QSPM matrix.
- In the left column of the QSPM key external opportunities, threats & internal strengths, and weaknesses are listed
- This information should be taken directly from the EFE Matrix and IFE Matrix
- A minimum of 10 external and 10 internal critical success factors should be included.
- Assign weights to each key external and internal factor
- Weights should be identical to the EFE Matrix and the IFE Matrix
- The weights are presented in a straight column
- Adjust weights to the right of the external and internal critical success factors.
- Examine the matching matrices by stage 2
- In order to implement the decision, alternative strategies should be identified.
- Record these strategies in the top row of the QSPM.
- Group the strategies into mutually exclusive sets if possible.
- Determine the Attractiveness Scores (AS)
- AS should be defined as numerical values
- Values should indicate the relative attractiveness of each strategy in a given set of alternative
- The range for AS is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive.
- If the respective key factor has no effect then do not assign AS to the strategies in that set.
- Determine the total AS
- Total AS is defined as the product of multiplying the weights by each row. (revise steps 2 and 4)
- The higher the total AS, the more attractive the strategic alternative.
- Determine the Sum total AS.
- Add total AS in each strategy column of the QSPM.
- This step will reveal which strategy is most attractive in each set of alternatives.
- Higher scores indicate more attractive strategies by considering all the relevant external and internal factors
Following are some of the limitations of the Quantitative Strategic Planning Matrix (QSPM)
- Intuitive judgments & educated assumptions are required.
- The effectiveness of the QSPM depends on the prerequisite inputs from previous stages
- Only those strategies evaluated that are related to one another in a given set
Advantages of QSPM Matrix
Following are some of the advantages of the QSPM matrix.
- Consideration of a set of strategies is made in a sequential or simultaneous manner
- The relevant internal & external factors are integrated into the decision-making process
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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