The Grand Strategy Matrix was created by American business theorist Paul Joseph DiMaggio in 1980. The matrix, which first appeared in the Strategic Management Journal, was initially used as a strategic option tool for managers. The grand strategy matrix helps organizations develop feasible alternative strategies based on their competitive position and the growth of their industry.
Understanding the grand strategy matrix
Later, the approach became popular with business strategists who believed it was useful for any business operating during very early or very late phases of the industry life cycle.
In truth, the grand strategy matrix reveals feasible strategic options for virtually any business – regardless of its industry, size, or life cycle stage. It is one of several similar tools including the SWOT analysis, SPACE matrix, BCG matrix, and IE matrix.
The four quadrants of the grand strategy matrix
The grand strategy matrix consists of a graph containing four quadrants, with:
- Competitive position represented on the x-axis, with the left side of the matrix indicating weak competitiveness and the right side strong competitiveness.
- Market growth represented on the y-axis, with the top of the matrix indicating rapid growth and the bottom indicating slow growth.
Depending on the degree of competitiveness and market growth, the business will occupy one of four quadrants. Collectively, the quadrants model four broad strategic options that it can use to meet its needs at a particular point in time.
With that said, let’s take a look at each quadrant below:
- Quadrant I (strong competitive position/rapid market growth) – companies located in this quadrant enjoy an excellent strategic position. This enables them to focus resources on market development, market penetration, and product development. Here, maintaining a dominant position should be the priority.
- Quadrant II (weak competitive position/rapid market growth) – companies in the second quadrant need to determine why they are unable to compete in a rapidly growing market. To improve their competitive position, strategies such as market development, market penetration, horizontal integration, and decentralization should be considered.
- Quadrant III (weak competitive position/slow market growth) – in this quadrant, the business is dealing with an unenviable combination of strong competition and lackluster market growth. As a result, major action is required. This may include retrenchment, diversification, or in some cases, liquidation.
- Quadrant IV (strong competitive position/slow market growth) – these organizations should consider diversification into untapped markets by leveraging their existing resources. Diversification may be horizontal, vertical, or conglomerate. The excess of resources may also be channeled into joint ventures.
Key takeaways:
- The grand strategy matrix generates feasible business strategies based on competitive position and industry growth. It was released by business theorist Paul Joseph DiMaggio in 1980.
- The grand strategy matrix can be used by any business regardless of size, industry, or life cycle stage.
- The grand strategy matrix is divided into four quadrants, with each based on varying degrees of competitive position and industry growth. The first quadrant favors strategies that maintain competitive advantage, while the remaining three focus on strengthening it with suitable courses of action.
Other Business Matrices
SFA Matrix
Hoshin Kanri X-Matrix
Kepner-Tregoe Matrix
Eisenhower Matrix
Decision Matrix
Action Priority Matrix
TOWS Matrix
GE McKinsey Matrix
BCG Matrix
Growth Matrix
Ansoff Matrix
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