Harris KhanWhat is the Grand Strategy Matrix?
A grand strategy matrix consists of a four-quadrant graph, similar to a SWOT matrix, that lists strategic options for companies in either strong or weak competitive positions in industries experiencing either rapid or slow growth. Unlike a SWOT matrix, a grand strategy matrix reveals strategic options for virtually any business in a given industry within any stage of the industry’s life cycle.
In the quadrant corresponding to slow industry growth and a strong competitive position, for example, options such as new-product development and merging with other companies can be listed, but these options will not apply to companies with weaker competitive positions. Accurately gauging a company’s competitive strength and the growth rate of its industry is a key to gaining the most relevant insights from this tool.
At the same time, the quadrants that do not apply to a specific company can still be useful, as they can reveal the strategic options available to stronger or weaker competitors or the options available to a company if it enters a different industry.
The Grand Strategy Matrix was created in the late twentieth century by the American business theorist Joseph DiMaggio, who called it a “Matrix of Strategic Options for Managers.” The matrix later became popular amongst the growing number of business strategists who called it the Industry Life Cycle Matrix because it was viewed as particularly useful for businesses in industries in the later phases of the industry’s life cycle.
The strategic options available to a company at any given point in time are very different from those options available to the company in adjacent quadrants of the matrix. A company in a strong competitive position in a mature industry will have a very different strategic focus than a company in a weaker competitive position in an industry experiencing rapid growth.
This matrix is necessarily non-directional. Strategy is always both reactionary and proactive. Global Security, for example, is something that countries are reacting to and attempting to counteract. Some adversaries, however, are spurred into action by the aggressive actions of other adversaries. And there is always a proactive element in military strategy.
The grand strategy matrix, then, is two-dimensional. It is a model of the four broad strategic options open to executives in virtually any industry at any time in an industry’s life cycle. DiMaggio’s original Matrix lists ten strategic options in each quadrant depicting an industry at two points in its life cycle: thriving and deteriorating. A third option, Industry Exit, applies to all four quadrants.
In the four-quadrant version of the matrix, the two-quadrant version is replicated two times in exactly the same way. In this way, four complete business life cycles are depicted on one page, with more strategic options than there are quadrants in the four-quadrant version. Thus the strategic options available for businesses in a potentially endless variety of industries are depicted, and those strategic options become much easier to see.
The four strategic options in each quadrant are independent of each other. Strategy, however, is not static. The relative priority of these four strategic options is a matter of managerial decisions. These decisions depend upon the managerial style of the company, the personality of its executive team, financial considerations, and a variety of other factors. The strategic options available to a company at one point in time are not necessarily the same options available to it the next time it reconsiders its options.
The matrix can be used to determine which of these four grand strategies best fits the company’s or the industry’s needs at a particular point in time. In the introduction to his management strategy book, “Unlocking the Mysteries of Creative Business Strategy” (2002), author Denis Savage recommends it to his readers. He states:
The matrix is easily adaptable to a variety of business circumstances. An example of the matrix used to demonstrate that small businesses are usually less successful than large businesses is an adaptation of the illustration of a failing business offered by DiMaggio in his strategic management textbook “Management by Strategy.”
Grand Strategy Matrix Examples
Real Estate Industry:
- Growth Stage
- Declining Stage
- Niche Stage
- Exit Stage
Soft Drink Industry:
- Growth Stage
- Declining Stage
- Niche Stage
- Exit Stage
Power Supply Industry:
- Growth Stage
- Declining Stage
- Niche Stage
- Exit Stage
Grand Strategy Matrix
What are the strategies in the Grand Strategy Matrix?
The ten options in the original two-quadrant matrix are divided into four categories as follows:
The four strategic options in each quadrant are independent of each other. Strategy, however, is not static. The relative priority of these four strategic options is a matter of managerial decisions. These decisions depend upon the managerial style of the company, the personality of its executive team, financial considerations, and a variety of other factors. The strategic options available to a company at one point in time are not necessarily the same options available to it the next time it reconsiders its options.
The matrix can be used to determine which of these four grand strategies best fits the company’s or the industry’s needs at a particular point in time. In his introduction to the management strategy book “Unlocking the Mysteries of Creative Business Strategy” (2002), author Denis Savage recommends using it to determine the best strategy to pursue, either offensively or defensively. He states:
Executives and business strategists regularly use this tool in their strategic planning processes. Government officials and military strategists have also used it and likely will do so in the future.
What are the advantages of the Grand Strategy Matrix?
Seeing the diagram as a whole provides a bird’s-eye view of the complete business life cycle in a given industry. In addition, the diagram shows that four distinct strategies are available to all companies in all industries during each stage of the industry’s life cycle. It also reveals that some types of strategic growth and maturity are not physically possible, as they are represented by two different quadrants. Competitive strategy and the industry’s maturity, then, are not the only factors that determine a company’s strength and position.
What are the disadvantages of the Grand Strategy Matrix?
It is possible to confuse it with a matrix of product strategies, as each of the four strategies depicted in each quadrant corresponds to a strategy for developing a new product or improving an existing one. However, a product strategy can only be determined if the need is present, while a grand strategy is determined by the company’s situation. It is important not to confuse product strategies with grand strategies. In addition, this tool is useful only for companies in particular industries. Moreover, the size of a company is not indicated on its matrix, making it difficult to determine a company’s strength and position in the industry, particularly if it is a small business in a large market.
How does a Grand Strategy Matrix differ from a SWOT Matrix?
Both tools are forms of strategic planning tools that graphically depict a strategy matrix: one for the strengths, weaknesses, opportunities and threats associated with each industry strategy in a company’s business operations; the other, a strategy matrix, for determining the strategic options available to a company in its industry. A SWOT Matrix, however, is limited to a two-by-two matrix that depicts the company or industry’s strong and weak points and its opportunities and threats. These strategies are static. Thanks to DiMaggio’s innovation, the Grand Strategy Matrix, on the other hand, is not only far more versatile; it can depict four generations of strategies, none of which is static.
How does the Grand Strategy Matrix differ from an Industry Life Cycle Matrix?
In the original version of the Industry Life Cycle Matrix, DiMaggio depicts the growth, maturity and decline of an industry, while the strategic options of a company in a mature industry are restricted to merger, postponement of decline, or acquisition, or industry exit. In the more complete version of the matrix, DiMaggio added a new dimension by depicting the four different strategies available in each stage of the industry’s life cycle.
Who should use the Grand Strategy Matrix?
The tool is useful for any company that wants to evaluate its growth potential and make better strategic decisions, particularly as the industry in which the company operates is either rapidly declining or rapidly maturing. DiMaggio states that it is inappropriate to use it for companies in industries that are growing steadily.
How can I apply the Grand Strategy Matrix?
Many government and military strategists believe the matrix is an effective weapon in fighting terrorists and insurgents who hide behind civilians, but legally protected, moral and cultural factors make it difficult for the strategists to employ the matrix in its original purpose or other purposes. In the strategic management textbook “Management by Strategy” (1978), author Denis Savage states:
Mature business strategists would also benefit from using this tool to guide their strategic planning process as a means of determining whether continuing on the same path is the best strategy for the company. Currently, DiMaggio is working on a revised version of the matrix, which will further expand the scope of the tool. It will include additional strategies in each quadrant of the matrix. In addition, he is working on a new edition of his groundbreaking book, “Reinventing the Wheel: The World System of Innovation” (with Boris Groysberg), which he published in 1996 (36th printing). The 1st edition was published by Addison Wesley in 1991 and won the Bronze Medal in the 1991 Business Books Best Award.
How can I learn more about the Grand Strategy Matrix?
To understand the complete matrix, it is best to consult the original diagram, published in the Strategic Management Journal (1980), or one of the revised versions of the matrix that DiMaggio has published. Alternatively, it is available in the strategic management textbook, “Management by Strategy” (Wiley, 4th edition, 2003), in which author Denis Savage introduces DiMaggio’s innovation of the matrix by describing it in academic detail.
