In summary, QSPM is a high-level strategic management approach. The Quantitative Strategic Planning Matrix (QSPM) has not only been used in strategic management but is also used in marketing strategy.
However, QSPM gives the best suitable analytical technique by comparing it with other different actions. So the QSPM helps to make a strategy formulation analytical framework.
WHAT’S IN IT
What is a Quantitative Strategic Planning Matrix (QSPM)?
Firstly, the Quantitative Strategic Planning Matrix is a method to choose the perfect technique by comparing it with its different best possible techniques. So, The best strategy selected by using computation techniques and management techniques.
Also, the QSPM methodology falls inside presumed ‘stage three’ of the strategy formulation analytical framework.
Stages of Strategic Management Tools
In the first place, the analysis gives the inputs to the QSPM matrix. So, The first step in the strategic management analysis is used to identify key strategic aspects.
For example, this can be done using the IFE matrix and the EFE matrix.
In stage 2 analysis, Accordingly match the inputs of stage 1 to the outcomes from stage 2. After identifying and analyzing key strategic factors as inputs to QSPM, we can design the type of strategy, we want to follow.
So, This can be done by using stage 2 strategic management tools. For example; SWOT analysis, SPACE matrix analysis, IE matrix, or BCG matrix model.
In Stage 2, Strategic Tools provides information needed for the QSPM installation. So, The QSPM method allows the evaluation of alternative strategies.
Finally, In this stage, We choose the best strategy from alternative strategies. So, compare QSPM alternative strategies and decide what is best to achieve the goals.
Therefore, The relative attractiveness of each strategy is calculated by determining the cumulative effect of each external and internal critical success factor.
Steps to construct QSPM
Particularly, The main goal of the QSPM matrix is to select the right strategy to move forward which is based on the available information.
If you want to build your QSPM to make accurate decisions to solve the problems, consider the following steps.
Step 1: IFE – Internal Factor Evolution
Firstly, To begin the process of building a QSPM, you will make a list of the strengths and weaknesses of your organization.
Also, Completing a few points under the strengths and weaknesses will give you a good start in your matrix. So remember, that at this point, you are only dealing with considerations within your organization.
Step 2: EFE – External factor Evolution
Similarly, you are now looking for opportunities and threats outside of your company in the market. Earlier, The new market is expanding outside the organization which creates potential opportunities and difficulties for the competitors.
However, threats can create strong competition, and the market price can be lowered.
Finally, These opportunities and threats that you have identified should be listed below on the left side of your paper.
Step 3: Strategy Alternatives
When all your internal and external factors have been identified, now the next process is to outline the strategies. So, These are the strategies you will choose by using a complete matrix.
Specifically, All the strategies should be listed at the top of the matrix that you have considered. You must have at least two options to play, but you can choose more options. So, You will need three columns – weight, attractiveness score, and total under each strategy option.
Step 4: Weighting the Factors
Afterward, For each of the factors you include in your matrix, you must assign a weight. Weight is going to give importance to each factor, so you should take the time to think about how much each factor influences in practical application.
Therefore, The weights of your external factors and internal factors should be up to 100%. When done, you should weigh under each of the proposed strategy options. Since different strategies have different importance on your various factors, it makes sense to have a different weight for each option.
Step 5: Attractiveness score
Similarly, As you did with the weight, you are now going to provide an attraction score for each factor internally and externally.
Specifically, These scores will be on a scale from 1 to 4, where 1 is not attractive and 4 is most attractive.
Therefore, If the factor in question does not affect the choice you make, you can consider the attraction score to be zero.
Go through the whole matrix you have created, until all your factors are weighted and attractive.
Step 6: Final Calculations
Lastly, To complete the QSPM process, you will perform the necessary calculations to stabilize the final values in all your alternatives.
The calculation is very simple – you are going to multiply the weight by the attractiveness score, and then you are going to add this score to each column.
So, You can compare the total with each alternative which is available in the matrix.
the best overall option is the highest total score should be considered.
Example of QSPM
Quantitative Strategic Planning Matrix For XYZ company
QSPM – advantages and disadvantages
1) A set of strategies can be considered simultaneously.
2) Both relevant factors are integrated into the decision-making process
1) Need sensible judgment and assumption.
2) The performance of QSPM depends on the initial input from previous stages.
3) Evaluate only strategies related to each other in a given set.
Finally, After doing some simple calculations in QSPM, we conclude that finding a competitive organization is a good option. So, This is given by the sum of the total attractiveness score.
The acquisition strategy scores higher than the internal expansion strategy.
Also you can read our blog on Prospect Theory- An analysis of decision under Risk and Uncertainty