Strategy Formulation and Implementation

Strategy Formulation and Implementation

Strategy Formulation and Implementation

CHAPTER 8CHAPTER 8

2 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning ObjectivesLearning Objectives

Define the components of strategic management.

Describe the strategic planning process and SWOT analysis.

Understand grand strategies for domestic and international operations.

Define corporate-level strategies and explain the portfolio approach.


Learning Objectives (contd.)Learning Objectives (contd.)

Describe business-level strategies, including Porter’s competitive forces and strategies and partnership strategies.

Explain the major considerations in formulating functional strategies.

Discuss the organizational dimensions used for implementing strategy.


Strategic ManagementStrategic Management

Set 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 and chief executive


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?


Grand Strategy

General plan of major action to achieve long-term goals

Falls into three general categories

1. Growth

2. Stability

3. RetrenchmentA separate grand strategy can be defined for global operations


Grand Strategy: GrowthGrand Strategy: Growth

Growth 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


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


Grand Strategy: RetrenchmentGrand Strategy: Retrenchment

Retrenchment = 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


Global Corporate StrategiesGlobal Corporate Strategies

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 needsN

eed

fo

r G

lob

al I

nte

gra

tio

n

ExportStrategy

•Domestically focused

•Exports a few domestically produced products to selected countries

Exhibit 8.1


Global Strategy

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

Multi-domestic = adapt product and promotion for each country

Transnational = combine both globalization and national responsiveness


Purpose 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


Three Levels of Strategy in OrganizationsThree Levels of Strategy in Organizations

Exhibit 8.2

Three Levels of Strategy in Organizations


Strategic Management ProcessStrategic Management Process

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

Exhibit 8.3


Strategy Formulation vs. ImplementationStrategy Formulation vs. Implementation

Strategy 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


Checklist for Analyzing Organizational Strengths and Weaknesses

Checklist for Analyzing Organizational Strengths and Weaknesses

Exhibit 8.4


Portfolio StrategyPortfolio Strategy

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

BCG Matrix Exhibit 8.5


Five Forces Affecting Industry CompetitionFive Forces Affecting Industry Competition

Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

•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

Exhibit 8.6


Competitive Edge ThroughCompetitive Strategies

Competitive Edge ThroughCompetitive 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


Continuum of Partnership StrategiesContinuum of Partnership Strategies

Organizational Combination

Strategic Alliances

Preferred Supplier Arrangements

Strategic Business Partnering

Mergers

Acquisitions

Low High

Joint Ventures

Degree of Collaboration

De g

ree

of C

oll a

bor a

ti on

Exhibit 8.8


Implementing Strategy ToolsImplementing Strategy Tools

Leadership Structural design Information and control systems Human resources


Tools for Putting Strategy into Action

Tools for Putting Strategy into Action

EnvironmentOrganization

Strategy Performance

Leadership Persuasion Motivation Culture/values

Structural Design Organization Chart Teams CentralizationDecentralization, Facilities, task design

Human Resources Recruitment/selection Transfers/promotions Training Layoffs/recalls

Source: Adapted from Jay R. Galbraith and Robert K. Kazanjian, strategy Implementation: Structure, Systems and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115, Used with permission.

Information and Control Systems Pay, reward system Budget allocations Information systems Rules/procedures

Exhibit 8.9

Strategy Formulation and Implementation

Entertainment & Humor

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