Corporate Strategy Formulation Corporate Strategy Formulation and Implementationand Implementationfor a large enterprisefor a large enterprise

Strategic PlanningStrategic Planning

Strategic planning has taken on new

importance in today’s world of

globalization, deregulation,

advancing technology, and changing

demographics, and lifestyles

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Strategy Formulation and Strategy Formulation and ImplementationImplementationStrategic Management

◦Definition◦Components◦Model of Strategic Management

Process◦Models of Strategy Formation

Managerial Tools to Implement Strategic Plans

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Thinking StrategicallyThinking Strategically

Answers to the following define an overall direction for the organization's grand strategy

Where is the organization now? Where does the organization want to be? What changes are among competitors? What courses of action will help us achieve our

goals?

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Strategic ManagementStrategic ManagementSet of decisions and actions used

to implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals

Responsibility = top managers & chief executive

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Strategic ManagementStrategic Management

Managers ask such questions as...What changes and trends are occurring?Who are our customers?What products or services should we

offer?How can we offer these products or

services most efficiently?

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Grand StrategyGrand Strategy

General plan of major action to achieve long-term goals

Falls into three general categories1. Growth2. Stability3. Retrenchment

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A separate grand strategy can be defined for global operations

Grand Strategy: GrowthGrand Strategy: GrowthGrowth can be promoted internally

by investing in expansion or externally by acquiring additional business divisions- Internal growth = can include

development of new or changed products

- External growth = typically involves diversification – businesses related to current product lines or into new areas

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Grand Strategy: StabilityGrand Strategy: Stability

Stability, sometimes called a pause strategy, means that the organization wants

◦to remain the same size or

◦to grow slowly and in a controlled fashion

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Grand Strategy: Grand Strategy: RetrenchmentRetrenchmentRetrenchment = the organization goes

through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses

Liquidation = selling off a business nit for the cash value of the assets, thus terminating its existence

Divestiture = involves selling off of businesses that no longer seem central to the corporation

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Global Corporate Global Corporate StrategiesStrategies

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Need for National Responsiveness HighLow

Low

High Transnational Strategy• Seeks to balance global

efficiencies and local responsiveness

• Combines standardization and customization for product/advertising strategies

Globalization Strategy

• Treats world as a single global market

• Standardizes global products/advertising strategies

Multi-domestic Strategy• Handles markets

independently for each country

• Adapts product/advertising to local tastes and needs

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ExportStrategy

•Domestically focused

•Exports a few domestically produced products to selected countries

Global StrategyGlobal Strategy

Globalization = product design and advertising strategies are standardized around the world

Multi-domestic = adapt product and promotion for each country

Transnational = combine global coordination with flexibility to meet specific needs in various countries

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Purpose of StrategyPurpose of Strategy

The plan of action that prescribes resource allocation and other activities for dealing with the environment, achieving a competitive advantage, that help the organization attain its goals

Strategies focus on:● Core competencies● Developing synergy● Creating value for customers

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Three Levels of Strategy in Three Levels of Strategy in OrganizationsOrganizations

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Corporate-Level Strategy: What business are we in?

Corporation

Business-Level Strategy: How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

Functional-Level Strategy: How do we support the business-level strategy?

Finance R&D Manufacturing Marketing

Strategic Management Strategic Management ProcessProcess

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Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems

SWOT

Formulate Strategy – Corporate, Business, Functional

Define new Mission Goals, Grand Strategy

Identify Strategic Factors – Strengths, Weaknesses

Identify Strategic Factors – Opportunities, Threats

Scan Internal Environment – Core Competence, Synergy, Value Creation

Evaluate Current Mission, Goals, Strategies

Scan External Environment – National, Global

Strategy Formulation vs. Strategy Formulation vs. ImplementationImplementationStrategy Formulation = stage of strategic

management that involves planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan

Strategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes

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Checklist for AnalyzingChecklist for AnalyzingOrganizational Strengths and WeaknessesOrganizational Strengths and Weaknesses

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Management and Organization

Management qualityStaff quality

Degree of centralization

Organization charts

Planning, information, control systems

Finance

Profit margin

Debt-equity ratio

Inventory ratio

Return on investment

Credit rating

Marketing

Distribution channels

Market share

Advertising efficiency

Customer satisfaction

Product quality

Service reputation

Sales force turnover Production

Plant location Machinery obsolescence

Purchasing system

Quality control

Productivity/efficiency

Human Resources

Employee experience, education

Union status

Turnover, absenteeism

Work satisfaction

Grievances

Research and Development

Basic applied research

Laboratory capabilities

Research programs

New-product innovations

Technology innovations

Portfolio StrategyPortfolio Strategy

Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage

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BCG Matrix

Five Forces Affecting Industry CompetitionFive Forces Affecting Industry Competition

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•Internet reduces barriers to entry

•Internet expands market size, but creates new substitution threats

•Internet tends to increase the bargaining power of suppliers

•Internet shifts greater power to end consumers

Internet blurs differences among competitors in an industry

Bargaining Power of Buyers

Bargaining Power of Suppliers

Threat of Substitute Products

Potential New Entrants

Rivalry among

Competitors

Competitive Edge ThroughCompetitive Edge ThroughCompetitive StrategiesCompetitive Strategies

Differentiation = attempt to distinguish products or services from that of competitors

Cost leadership = aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors

Focus = concentrates on a specific regional market or buyer group

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Continuum of Partnership StrategiesContinuum of Partnership Strategies

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Organizational Combination

Strategic Alliances

Preferred Supplier Arrangements

Strategic Business Partnering

Mergers

Acquisitions

Low High

Joint Ventures

Degree of Collaboration

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Implementing Strategy ToolsImplementing Strategy Tools

LeadershipStructural designInformation and control systemsHuman resources

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Tools for Putting Tools for Putting Strategy into ActionStrategy into Action

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Environment

Organization

Strategy Performance

Leadership Persuasion Motivation Culture/values

Structural Design Organization Chart Teams CentralizationDecentralization, Facilities, task design

Human Resources Recruitment/selection Transfers/promotions Training Layoffs/recallsInformation and Control Systems

Pay, reward system Budget allocations Information systems Rules/procedures

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