Custom essays on STRATEGY FORMULATION

. SPACE analysis
SPACE (Strategic Position and Action Evaluation) matrix is a tool which allows to formulate strategies with regard to competitive position of the organization. This method includes the evaluation of four strategic organizational dimensions: financial strength, competitive advantage, environmental stability, and industry strength. According to SPACE model, the importance of these four dimensions is evaluated separately, and the results are put on a Cartesian graph with X and Y axes . The process of constructing a SPACE matrix is the following: the factors affecting each of four dimensions are outlined, and the values for these factors are assigned. For competitive advantage and financial stability dimensions, the scale ranges from -6 (worst result) to -1 (best result). For industry strength and financial strength, the scale ranges from +1 (word result) to +6 (best result) . For each dimension, average score is calculated, and then the total score for axis X is determined by adding scores for competitive advantage and industry strengths, and the score for axis Y is obtained by adding average values for financial strength and environmental stability. The resulting two values are used to build a strategy vector, and the quadrant of this vector define the type of the strategy to be chosen: aggressive, conservative, defensive or competitive .
For ACF International, the following factors characterizing competitive advantage in the industry can be determined: market share, reputation, public awareness, contacts with investors and cost-effectiveness. Financial strengths characteristics in the humanitarian sector can be evaluated basing on the following factors: liquidity, effective use of resources, efficiency of program services, cash flows and revenue concentration. For industry strength, the aspects are the following: growth potential, access to financing, need for humanitarian services, partnerships and political environment. Finally, environmental stability can be characterized by the likelihood of emergency situations, demand variability, availability of grants, technology and local infrastructure. Table 2 shows the results of SPACE analysis applied to ACF International.
INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION
X axis Competitive advantage (CA) (-6 worst, -1 best) Industry strength (IS) (+1 worst, +6 best)
Market share -3 Growth potential +6
Reputation -1 Access to financing +4
Public awareness -3 Need for humanitarian services +6
Contacts with investors -2 Partnerships +3
Cost-effectiveness -4 Political environment +5
Average -2.6 Average +4.8
Total axis X score 2.2
Y axis Financial strength (FS) (+1 worst, +6 best) Environmental stability (ES) (-6 worst, -1 best)
Liquidity +6 Likelihood of emergency situations -5
Effective use of resources +3 Demand variability -2
Efficiency of program services +4 Availability of grants -2
Cash flows +6 Technology -1
Revenue concentration +4 Local infrastructure -4
Average +4.6 Average -2.8
Total axis Y score 1.8
Table 2. SPACE analysis for ACF International
Resulting score for axis X is 2.2, and for axis Y the score is 1.8. This combination of scores leads the strategy vector to the first quadrant, associated with aggressive strategies. Fig. 1 illustrates the SPACE strategy vector for ACF International.

Figure 1. SPACE strategy vector for ACF International
The results of SPACE analysis show that ACF International has enough competency and resources to expand its market share and to increase the provision of services. Thus, the organization should focus on aggressive strategies. Basing on strategic analysis of ACF International, appropriate strategies are the expansion of ACF International services to more countries and regions in need of humanitarian services, and collaborating with competitors to create joint projects (thus increasing own public awareness with their help).
D. Grand matrix
In order to use grand matrix analysis, it is necessary to perform some preliminary steps. First of all, it is useful to apply the BCG matrix to business units. This matrix allows to determine how to allocate cash to business units. For ACF International, all business units are focused on reaching the same goal – eliminating hunger and malnutrition throughout the world. The relative market share of the organization in the humanitarian sector is high, and market growth rates (in this case – the growth of demand for humanitarian services) are also high. Thus, business units of ACF International can be classified as “stars”. The type of strategies appropriate for the “star” units is growth and market share enhancement. This result shows that projects of ACF International need more funding and should be expanded as quickly as possible. It should be noted that the “sales value” which is also the result of BCG matrix analysis cannot be directly applied to nonprofit sector.
Grand strategy matrix is widely used for formulating alternative strategies. It has basically the same layout as SPACE matrix, but it is based on two dimensions – competitive position and market growth, and associates each quadrant of the model with a set of alternative strategies. The model provided by grand strategy matrix is shown on Fig. 2.

Figure 2. Grand strategy matrix
In order to determine the set of alternative strategies, it is necessary to associate weights with each of factors in the SWOT analysis, and to calculate the average value for market growth axis (strengths and weaknesses), as well as for competitive position axis (opportunities and threats). In this paper the weights associated with each factor of SWOT analysis are weighted using a scale from -5 to +5, where -5 is the weakest value, and +5 is the strongest value. Table 3 shows the weights and average score for internal factors (market growth axis), and Table 4 shows the weights and average score for external factors (competitive position axis). The considerations for the weights of the factors are similar to those performed in IFE and EFE analysis, with major difference being the range of evaluation.
Factors Weight
Strengths
Strong set of shared values and principles 5
Flexible and efficient organizational culture 4
Devoted and professional staff 4
Diversified revenue and support portfolio 3
Valuable reputation 3
Partnerships with many influential organizations 3
Active use of innovative technologies 2
Leading role in advocacy on hunger and malnutrition 2
Good financial position and liquidity 5
Weaknesses
Overreliance on government grants -3
Lack of internal sources of revenue -5
Ineffective use of resources -5
Inability to respond to growing customer needs in humanitarian sector -1
Weak use of opportunities for growth -2
Large share of temporarily restricted revenues -3
Absence of financial leveraging -5
Lack of integrity between different projects -1
Average 0.35
Table 3. Market growth score evaluation for ACF International

Factors Weight
Opportunities
Partnership with other NGOs 2
Improving access to water and sanitation 4
Launching educational and health care centers 5
Forecast-based emergency help and prevention 4
Promotion using social networking 5
Mobile donation programs 5
Growing number of volunteers 5
Threats
Lack of funding -2
Poor infrastructure in the target regions -3
Lack of qualified professionals in the target regions -3
Existence of two strong competitors -5
Bureaucracy obstacles -3
Criminal groups in the target regions -3
Ineffective implementation -4
Gap in the need for help and actual possibilities -2
Average 0.33
Table 4. Competitive position score evaluation for ACF International
Both average scores are above zero, which means that for ACF International strategic vector is pointing to the first quadrant (similar to the quadrant with aggressive strategies in SPACE analysis). Thus, ACF International should choose as alternatives aggressive strategies, which include product development, market penetration, market development, backward or forward integration, horizontal integration, related diversification, concentric diversification or a combination strategy . With regard to ACF International, the alternative strategies suitable for the organization are related diversification, horizontal integration and market development.