The Grand Strategy Matrix is a useful strategic planning tool that provides organizations with viable alternatives based on their competitive position and market growth rate. This 2×2 matrix, developed by management expert Paul J. DiMaggio in the 1980s, considers two key factors to determine feasible strategies that businesses can pursue to meet their objectives.
What is the Grand Strategy Matrix?
Grand Strategy Matrix is a standard 2×2 matrix layout that provides a template for mapping competitive positions and growth rates.
The Grand Strategy Matrix plots a company’s competitive position on the x-axis, from weak to strong. It plots the growth rate of the market on the y-axis, from slow to rapid. The intersection of these two factors forms four quadrants, each suggesting a type of strategy the business should focus on.
Here is a standard Grand Strategy Matrix table based on the theoretical concept:
| Degree | Weak Competitive Position | Strong Competitive Position |
|---|---|---|
| Rapid Market Growth | Quadrant II – Improve competitiveness – Innovation, M&A – Divest losing business units | Quadrant I – Expand market share – New product development – Integration strategies |
| Slow Market Growth | Quadrant III – Retrenchment | Quadrant IV -Diversify into new markets – New products – Joint ventures |
This standard 2×2 matrix layout provides a template for mapping competitive positions and growth rates to determine which of the four grand strategy types is most appropriate for a given business unit. The general strategic guidance is shown in each quadrant.
The Four Quadrants of the Grand Strategy Matrix and Recommended Strategies:
The specific quadrants guide which types of strategies should be pursued based on the factors of competitive standing and growth rate. The Grand Strategy Matrix provides a high-level strategic recommendation tailored to the business unit’s position.
1. Quadrant I (Strong Competitive Position, Rapid Market Growth)
This is the best strategic position, indicating the organization should focus on expanding its market share through strategies like market development, market penetration, product development, and integration.
2. Quadrant II (Weak Competitive Position, Rapid Market Growth)
Organizations here must determine why their current approach is ineffective despite rapid market growth. Strategies involve improving competitiveness through innovation, horizontal integration, or divesting losing business units.
3. Quadrant III (Weak Competitive Position, Slow Market Growth)
This is the worst strategic position. Businesses must implement retrenchment, cost-cutting, diversification into new markets, or divestment/liquidation.
4. Quadrant IV (Strong Competitive Position, Slow Market Growth)
Organizations should leverage strengths to diversify into new markets and products. Joint ventures and strategic alliances are also options.
So in summary, the recommended strategies by the grand strategy matrix are:
- Rapid growth, strong competitive position – focus on growth strategies
- Rapid growth, weak competitive position – improve competitiveness
- Slow growth, weak competitive position – turnaround strategies
- Slow growth, strong competitive position – diversification strategies
What are the four grand strategies?
The four grand strategy types are:
- Expansion – growing existing markets or entering new ones
- Stability – maintaining the status quo by focusing on current products and markets
- Retrenchment – turning around weak business units through asset/cost reduction
- Combination – pursuing a mix of expansion, stability, and retrenchment approaches
Grand Strategy Matrix – Example
Let’s consider a fictional diversified technology company called TechDyne that has the following four business units:
Business Unit A – Smartphones
- Strong competitive position (market leader with 30% share)
- Rapid growth market
Business Unit B – Laptops
- Weak competitive position (5% market share)
- Rapid growth market
Business Unit C – Data Storage
- Weak competitive position (many low-cost rivals)
- Slow growth market
Business Unit D – Cloud Computing Services
- Strong competitive position (early mover advantage)
- Slow growth market
Mapping these business units on the Grand Strategy Matrix looks like this:
| Degree | Weak Competitive Position | Strong Competitive Position |
|---|---|---|
| Rapid Market Growth | Business Unit B: Laptops (Innovation, Horizontal Integration, Divestment) | Business Unit A: Smartphones (Expand Market Share, New Product Development) |
| Slow Market Growth | Business Unit C: Data Storage (Retrenchment, Cost Cutting, Diversification) | Business Unit D: Cloud Services (Diversification into New Markets and Products) |
1. Business Unit A lands in Quadrant I, indicating TechDyne should focus on aggressively expanding its market share in the high-growth smartphone segment.
2. Business Unit B falls into Quadrant II, suggesting TechDyne must determine how to boost competitiveness in the rapidly growing laptops market through strategic innovations or M&A.
3. Business Unit C is in the undesirable Quadrant III, meaning TechDyne should implement retrenchment, cost-cutting, and diversification in the weak data storage unit.
4. Finally, Business Unit D lies in Quadrant IV, so TechDyne should leverage its strength in cloud services to expand into new market segments and develop new product offerings.
This example demonstrates how the Grand Strategy Matrix can provide customized strategic guidance based on the competitive standing and growth rate of each major business unit. While not universally applicable, it serves as a good starting point for strategy formulation.
Benefits of the Grand Strategy Matrix
- Provides a logical process for exploring strategic alternatives based on competitive standing and growth rate.
- Stimulates discussion around the future direction and objective evaluation of options.
- Accounts for differences between business units in large multi-divisional firms.
- Guides resource allocation depending on the strategic situation.
- Offers a simple visualization of strategic position.
With its logical framework, the Grand Strategy Matrix serves as a versatile tool for developing business strategies tailored to an organization’s competitive standing and market conditions. While not a perfect solution, it provides a robust model for exploring options.
Frequently Asked Questions
How often should a company use the Grand Strategy Matrix?
The matrix can be used during annual strategic planning to determine feasible directions. It may also be used whenever there are significant changes to competitive standing or market growth.
What preparation should be done before using the matrix?
Conduct a thorough analysis of the competitive position and growth rate for each major business unit. Identify strengths, weaknesses, opportunities, and threats.
How does grand strategy differ from corporate strategy?
Corporate strategy guides actions to achieve overall company objectives. The grand strategy focuses on the means to attain those goals through major resource allocation decisions between business units or product lines.
What are the limitations of the Grand Strategy Matrix?
The matrix presents broad archetypes and does not consider nuances of individual situations. It should be used as a starting point, not a definitive prescription.