Grand strategy matrix: how to formulate a grand strategy
Use the grand strategy matrix: judge competitive position and market growth, find your quadrant, and read the typical strategies, with values as evidence.
The grand strategy matrix places a firm in one of four quadrants using two judgments: its competitive position (strong or weak) and the growth of its market (rapid or slow). Each quadrant lists the grand strategies that typically suit a firm in that position.
To use it, decide the market growth and the competitive position, find the quadrant where they meet, and read its strategy list as a set of options. In David's version both judgments are qualitative, so you support each with evidence rather than a formula. It belongs to the matching stage of the strategy-formulation framework.
Your market-growth call comes from the external audit behind your EFE. Try the sample EFE, no account needed.
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What the grand strategy matrix is for
The grand strategy matrix is a matching-stage tool: it matches the firm's position in its market with the families of strategy that suit it. It answers a narrow question, which broad direction is open to this firm, before you choose specific strategies.
- It draws on your external audit (how fast the market is growing) and on your internal and competitive findings (how strong the firm is against its rivals).
- It feeds the decision stage: the strategies you shortlist from its quadrant go to the QSPM to be scored against each other.
What you need before you start
You need evidence for two calls. For market growth, the growth of the industry from your external audit. For competitive position, a comparison with rivals: market share relative to the largest rival, a competitive profile matrix. Your IFE matrix can support the call, but it does not compare you with rivals.
Write down what counts as rapid and what counts as strong before you look at the quadrants, so the evidence decides the call and not the other way round.
Step 1: Judge the growth of the market
Decide whether the firm's market is growing rapidly or slowly. This is the growth of the market or industry, not the growth of the firm's own sales. Cite the figure and its source.
Step 2: Judge the competitive position
Decide whether the firm's competitive position is strong or weak. Strong means the firm holds an advantage over its rivals, weak means it trails them. Judge it against competitors, and cite what you compared.
“How did you decide that the firm's position is strong?”
Name the comparison and its source: relative market share or the competitive profile matrix totals, with the internal audit as support. Say what you counted as strong before you saw the result, and where the evidence is mixed, say that too.
Step 3: Find the quadrant
Market growth runs up the vertical axis and competitive position across the horizontal axis. The four quadrants are:
- Quadrant I: strong competitive position, rapid market growth.
- Quadrant II: weak competitive position, rapid market growth.
- Quadrant III: weak competitive position, slow market growth.
- Quadrant IV: strong competitive position, slow market growth.
Quadrants I and II are the top row, where growth is rapid, and II and III are the left column, where position is weak.
Step 4: Formulate the grand strategy
To formulate a grand strategy, read the list for your quadrant and choose the strategies that fit what you found in the audits. The list is David's typical strategies for a firm in that position. It names options, not a recommendation, and it does not rank them for your firm.
Shortlist two or three, with a reason for each that points back to your factors. The QSPM then scores the shortlist against the same key factors.
Using values: how a position is placed
The grand strategy matrix has no formula in David's version. Both axes are judgments, and nothing sets the number at which growth becomes rapid or a position becomes strong. What you can do is cite measurable evidence for each call and state your rule for it.
- Market growth: the industry's growth rate, ideally compared with something, such as the wider economy or other industries.
- Competitive position: relative market share (the firm's share divided by the largest rival's), or the competitive profile matrix total against rivals, with the IFE total as support only.
The thresholds are yours, so state them and keep them fixed once you have set them. Use the same rule for every division if you are placing more than one.
Worked example: Tala Provisions (fictional)
Tala Provisions, Inc. is a fictional coffee roaster. The evidence below is made up for this guide, apart from the CPM totals, which are the competitive profile guide's.
| Axis | Evidence | Call |
|---|---|---|
| Market growth | Industry sales grew 12% a year, 2.4 times the 5% of the wider economy. | Rapid |
| Competitive position | Relative market share 1.20, and first of three on the CPM (3.05 against 2.95 and 2.45). | Strong |
Tala's relative share is 18% divided by 15%, which is 1.20. Its CPM lead over the nearest rival is narrow, 0.10, so the position call rests mainly on share. A panel can fairly ask whether that is enough, and the answer is to show both pieces of evidence and say why you weighed them as you did.
Market growth: rapidCompetitive position: strongRapid growth with a strong position: Quadrant I
| Weak position | Strong position | |
|---|---|---|
| Rapid growth |
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| Slow growth |
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Tala is in Quadrant I. Its list has 7 strategies, from market development to related diversification. Tala would shortlist a few of them with reasons, and the QSPM would then score the shortlist.
Your market-growth call comes from the external audit behind your EFE. Try the sample EFE, no account needed.
How to read the result
The quadrant narrows the field; it does not choose for you. Quadrant I lists 7 strategies, so Tala still has to pick among them. The matrix also depends on two judgments, so a weaker case for either one makes the quadrant weaker too.
Where sources disagree: the matrix is qualitative, and textbooks and slide decks differ on what to base each call on. If your adviser prescribes a method, such as numeric cutoffs, follow it. Strama follows David's two dimensions and his quadrant lists, and asks for a written rationale on each call.
Common mistakes
Judging market growth from the firm's own sales.
A firm can grow in a slow market, or stand still in a rapid one. The axis is the market's growth.
Fix: cite the industry growth rate and its source, not the firm's revenue growth.
Calling a position strong without a comparison.
Position is relative. A firm with rising profits can still trail every rival.
Fix: compare the firm with named rivals, on share or the CPM, with the IFE and internal audit as support, and cite the comparison.
Setting the threshold after seeing the quadrant.
If the line between rapid and slow moves to suit the result you want, the call is not evidence.
Fix: write down your rule for rapid and strong first, and apply it as written.
Treating the quadrant list as the chosen strategy.
The list holds typical options. Adopting all of them is not a strategy, and none has been tested against the firm.
Fix: shortlist the strategies that fit your findings, and carry them to the QSPM.
Mixing up the quadrant numbers.
Quadrant II is weak position with rapid growth, not strong. A swapped axis changes the whole strategy list.
Fix: check each quadrant by its two words, for example strong and rapid for Quadrant I, before quoting its list.
What your panel will ask
What is the grand strategy matrix?
A matching-stage matrix with two dimensions, competitive position and market growth, that gives four quadrants. Each quadrant lists the strategies typical for a firm in it.
How did you decide the market is growing rapidly?
Cite the industry growth rate, its source, and what you compared it with. Here, industry sales grew 12% a year, 2.4 times the 5% of the wider economy. State your rule for rapid.
How did you judge the firm's competitive position?
Point to the comparison with rivals. If the evidence is mixed, as with a narrow lead, say so rather than hiding it.
Why did you choose these strategies from Quadrant I?
The quadrant gives options only. Link each strategy you chose to a factor in your audits, and show that the QSPM scores it above the others.
Where it goes next
Upstream are your external audit and the EFE matrix, plus the competitive profile matrix for position. Alongside it in the matching stage are the IE matrix, the TOWS matrix (David calls it the SWOT matrix), the SPACE matrix and the BCG matrix. The strategies you shortlist go to the QSPM in the decision stage.
Your market-growth call comes from the external audit behind your EFE. Try the sample EFE, no account needed.
Where this fits in your paper: the STRAMA paper format guide.
Sources
Method: Fred R. David's strategy-formulation framework, as set out in his Strategic Management: Concepts and Cases. Check the edition your program uses for page references.
Tala Provisions, Inc., its rivals, its market figures and its sources are fictional, made up for this guide.
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Your market-growth call comes from the external audit behind your EFE. Try the sample EFE, no account needed.
Related guides
- IE matrix
Build an Internal-External (IE) matrix: plot your IFE total and EFE total on the nine-cell grid and read the grow, hold or harvest region.
- QSPM matrix
Build a QSPM matrix: take weights from your EFE and IFE, score strategies 1 to 4, compute TAS and sum. Covers five strategies in one QSPM, and limits.
- TOWS matrix
Build a TOWS matrix: pair strengths and weaknesses with opportunities and threats to write SO, WO, ST and WT strategies. Includes SWOT vs TOWS.