The choice of strategy, its formation and control in the implementation process helps to implement such an instrument as the Thompson and Strickland matrix. The development of a functional, corporate, as well as business strategy of an enterprise is impossible without taking into account the data obtained in the analysis of the organizational environment. Using the Thompson and Strickland matrix, you can get a ready-made portfolio of strategies.
The story and the essence of the tool
Scientists Thompson and Strickland believed that for the analysis of the implemented strategy it is necessary to consider at least five internal and external factors. So a matrix was created that helps to evaluate certain environmental factors of the enterprise. The choice of strategies is based on the competitive position of the company in the market and the overall growth dynamics of the market in which the company operates.
The matrix of Thompson and Strickland allows you to analyze the existing strategy, identify and evaluate the five main factors of influence and decide on the choice of a new strategy. The difficulties in working with this matrix are due to the fact that analysis requires a large amount of data about the company.
Description of matrix structure
The Thompson and Strickland matrix is divided by vertical and horizontal axes into four quadrants. The vertical axis contains data on slow, medium or fast market growth. On the horizontal axis are marked estimates of the company's competitive position - weak or strong.
Analysis can be done both for the whole company, and for individual types of business from the portfolio of the enterprise. Depending on the data received, the positions of a business or company can be located in one of the quadrants. According to the theory of the Thompson and Strickland matrix, for each of these positions there is a certain set of desirable strategies.
Description of quadrants of fast-growing markets
If the company has a strong competitive position in the market with rapid growth, then the state of the company is described in the first quadrant. In this case, the company should change its strategy to vertical integration, if possible, or diversify its activities into related industries.
When a company has weak competitive positions in a fast-growing market, this condition is described in the second quadrant. To select a subsequent strategy of action, the company is recommended diversification or horizontal integration. If the budget is insufficient or other resources are not available to achieve one of these strategies, then elimination remains the most acceptable option.
Description of quadrants of a weakly growing market
The third quadrant of the Thompson and Strickland matrix contains those types of businesses that have weak competitive positions and are located in a weakly growing market. In this situation, the whole enterprise or one of the types of businesses in the company's portfolio provides several options for action. Minimization of costs, as well as diversification will help to cope with the current situation. In an extreme case, it is desirable to merge with a competing company.
If, when analyzing the state of the business, it turns out that the company is located in the fourth quadrant, that is, the company's competitive position is strong, but the market is slowed down, then the new strategy may be as follows. It is possible to diversify into new or related existing industries.Vertical integration and the creation of associations from several enterprises will also help to establish an effective strategy. If there are external factors supported by internal capabilities, then activities should be expanded to an international level.
Matrix Strategy Selection
The matrix of the choice of Thompson and Strickland strategy allows the analytical method to select the one or several strategies necessary for the efficient operation of the enterprise. It is impossible to draw up a strategic plan of an enterprise based on only one tool. That is why, after choosing a strategy, it should be analyzed.
If all the specific numbers and data have already been calculated, then a reanalysis of the strategy should be carried out by the irrational method. It is proposed, using expert assessments, to review each of the criteria of a potential strategy:
- Situationality.
- Uncertainty.
- Mental correctness.
- Uniqueness.
The situationality criterion should evaluate the strategy from the point of view of a comprehensive presentation of specific situations in conjunction with potential factors in the future. Uncertainty in the implementation of the strategy also becomes an important criterion, since it can be considered as a strategic opportunity for the enterprise.
Evaluation of mental correctness when communicating with experts allows you to evaluate understanding and knowledge of the effectiveness of the strategy, its key elements and boundary values. The uniqueness of the chosen strategies can be analyzed both rationally and irrationally. Here additional marketing research can be carried out, and not necessarily primary. Often enough to analyze secondary information and compare the selected strategy with the current and planned activities of competitors.
Application of the matrix in analytics
The use of the Thompson and Strickland matrix is an example of a partial analysis of the external and internal environment. In fact, it is convenient to use it after detailed preparation for a SWOT analysis, which requires a detailed review of the marketing plan, current strategies, analysis of macro and microenvironment. A ready-made SWOT analysis reveals a number of potential strategies, and after building the Thompson and Strickland matrix, you can choose the only right strategy for the future.
Thus, it is impossible to use only one tool in the case of short-term and long-term planning. In the work of marketers and senior managers, it becomes important to determine the most effective set of methods, methods and tools for analysis.
What can you learn about the enterprise using the matrix?
The Thompson and Strickland Matrix is an example of a GPS navigator for business. The tool helps to accurately determine the current position of the enterprise by the established coordinate system. Possessing data on the volume of the market, its dynamics, and also comparing this with information on the existing market shares of the enterprise and competitors, we can clearly note the current location and next steps.
Using the example of an enterprise, the Thompson and Strickland matrix allows you to effectively analyze the available data about the company and the market, as well as make the choice of further strategic actions. This will be useful to any company, regardless of the number of employees, scope of activity and type of products.