Quantitative Strategic Planning Matrix (QSPM)¶
The Quantitative Strategic Planning Matrix (QSPM) is a tool that helps organizations objectively evaluate and prioritize strategic alternatives based on specific criteria. By assigning weights and scores, the QSPM provides a structured approach for decision-making, allowing organizations to select the most attractive strategy based on quantitative analysis. It is particularly useful in the Decision Stage of the strategy formulation process.
Purpose of the QSPM¶
The QSPM helps organizations: - Objectively compare multiple strategic options. - Prioritize strategies based on their attractiveness. - Make informed decisions based on quantitative data rather than subjective judgment.
Key Components of the QSPM¶
The QSPM is structured into several components:
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Key Factors: Identifies the internal and external factors affecting strategic decisions. These factors are often derived from tools like the SWOT Analysis, IFE Matrix, and EFE Matrix.
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Weights: Assigns a weight to each key factor based on its importance. Weights typically range from 0 to 1, with the sum of all weights equaling 1.
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Strategic Alternatives: Lists the different strategic options or alternatives being considered, such as market expansion, product development, or cost reduction.
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Attractiveness Scores (AS): Each strategic alternative is assigned an attractiveness score for each factor. Scores typically range from 1 (not attractive) to 4 (highly attractive) based on how well the strategy aligns with the factor.
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Total Attractiveness Scores (TAS): Calculated by multiplying each factor’s weight by its attractiveness score for each strategy. The TAS values are then summed for each strategy to determine its overall attractiveness.
QSPM Structure¶
The QSPM Matrix layout is as follows:
| SN | Internal Factors | Weight | Strategy 1 | Strategy 2 | ||
|---|---|---|---|---|---|---|
| AS | TAS | AS | TAS | |||
| 1 | Internal Factor 1 | 0.30 | 4 | 1.20 | 4 | 1.20 |
| 2 | Internal Factor 2 | 0.15 | 3 | 0.45 | 3 | 0.45 |
| 3 | Internal Factor 3 | 0.25 | 2 | 0.50 | 3 | 0.75 |
| 4 | Internal Factor 4 | 0.30 | 3 | 0.90 | 2 | 0.60 |
| Total TAS (Internal) | 1.00 | 3.05 | 3.00 |
| SN | External Factors | Weight | Strategy 1 | Strategy 2 | ||
|---|---|---|---|---|---|---|
| AS | TAS | AS | TAS | |||
| 1 | External Factor 1 | 0.25 | 2 | 0.50 | 3 | 0.75 |
| 2 | External Factor 2 | 0.20 | 4 | 0.80 | 3 | 0.60 |
| 3 | External Factor 3 | 0.30 | 3 | 0.90 | 2 | 0.60 |
| 4 | External Factor 4 | 0.25 | 4 | 1.00 | 4 | 1.00 |
| Total TAS (External) | 1.00 | 3.20 | 2.95 |
Explanation of Columns: - Key Factors: Lists factors (both internal and external) impacting strategic choices. - Weight: Indicates the importance of each factor. - AS (Attractiveness Score): Rates how attractive each strategy is based on each factor. - TAS (Total Attractiveness Score): Calculated by multiplying the weight by the attractiveness score for each factor.
Steps to Create a QSPM¶
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Identify Key Factors: List critical internal and external factors from the IFE and EFE matrices.
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Assign Weights: Assign a weight to each factor based on its significance, with weights summing up to 1.
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List Strategic Alternatives: Identify the strategic options under consideration.
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Assign Attractiveness Scores: Rate each strategy for each factor (1 = not attractive; 4 = highly attractive).
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Calculate Total Attractiveness Scores (TAS): Multiply the weight by the attractiveness score for each factor and add up the TAS values for each strategy.
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Analyze the Results: Compare the total TAS for each strategy. The strategy with the highest TAS is generally the most attractive option.
Example of QSPM in Action¶
Consider a tech company deciding between two strategies: Market Expansion and Product Development.
Quantitative Strategic Planning Matrix (QSPM) Example¶
Internal Factors¶
| SN | Internal Factors | Weight | Market Expansion | Product Development | ||
|---|---|---|---|---|---|---|
| AS | TAS | AS | TAS | |||
| 1 | Brand Strength | 0.25 | 3 | 0.75 | 4 | 1.00 |
| 2 | R&D Capabilities | 0.20 | 2 | 0.40 | 4 | 0.80 |
| 3 | Operational Efficiency | 0.30 | 3 | 0.90 | 3 | 0.90 |
| 4 | Financial Resources | 0.25 | 4 | 1.00 | 3 | 0.75 |
| Total TAS (Internal) | 1.00 | 3.05 | 3.45 |
External Factors¶
| SN | External Factors | Weight | Market Expansion | Product Development | ||
|---|---|---|---|---|---|---|
| AS | TAS | AS | TAS | |||
| 1 | Market Growth Potential | 0.30 | 4 | 1.20 | 3 | 0.90 |
| 2 | Competitive Pressure | 0.15 | 2 | 0.30 | 3 | 0.45 |
| 3 | Customer Demand Trends | 0.25 | 4 | 1.00 | 3 | 0.75 |
| 4 | Regulatory Environment | 0.30 | 3 | 0.90 | 2 | 0.60 |
| Total TAS (External) | 1.00 | 3.40 | 2.70 |
Interpretation¶
In this example: - Internal Factors give Product Development a TAS of 3.45, while Market Expansion scores 3.05. - External Factors give Market Expansion a TAS of 3.40, while Product Development scores 2.70.
Conclusion: Product Development scores higher for internal factors, while Market Expansion scores higher for external factors. Given the overall analysis, the company might choose Product Development if it prioritizes internal capabilities, or Market Expansion if it focuses on external market growth potential.
Benefits of the QSPM¶
- Objectivity: Provides a structured, data-driven approach for comparing strategies.
- Prioritization: Helps organizations focus on the most beneficial strategic option.
- Informed Decision-Making: Combines qualitative and quantitative factors to support well-rounded decisions.
The Quantitative Strategic Planning Matrix (QSPM) enables organizations to analyze and prioritize strategic options systematically, ensuring that chosen strategies align with internal strengths, external opportunities, and overall organizational goals.
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