APPLIED MARKETING STRATEGIES Lecture 25 MGT 681. Strategy Formulation & Implementation Part 3 & 4.
Strategy Formulation and Implementation
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Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.
Strategic Planning
Strategic planning has taken on new
importance in today’s world of
globalization, deregulation, advancing
technology, and changing demographics,
and lifestylesManager’s Challenge: Nintendo
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Strategy Formulation and Implementation
Strategic Management– Definition– Components– Model of Strategic Management Process– Models of Strategy Formation
Managerial Tools to Implement Strategic Plans
Topics:Chapter 8
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Thinking 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 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 & chief executive
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Strategic 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 Strategy
General plan of major action to achieve long-term goals
Falls into three general categories
1. Growth
2. Stability
3. Retrenchment
A separate grand strategy can be defined for global operations
Ethical Dilemma: A Great Deal for Whom?
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Grand 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
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Grand 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: 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
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Global 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 needs
Nee
d f
or
Glo
bal
In
teg
rati
on
ExportStrategy
•Domestically focused
•Exports a few domestically produced products to selected countries
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Global 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 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 OrganizationsCorporate-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
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Strategic 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
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Strategy 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
Experiential Exercise: Developing Strategy for a Small Business
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Checklist for AnalyzingOrganizational Strengths and Weaknesses
Sources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens, Long-Range Planning for Your Business (New York: American Management Association, 1976).
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
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Portfolio Strategy
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
BCG Matrix
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Five 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
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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
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ORGANIZATIONAL CHARACTERISTICS
Differentiation– Acts in a flexible, loosely knit way, with strong
coordination among departments– Strong capability in basic research– Creative flair, thinks `out of the box`– Strong marketing abilities– Rewards employee innovation– Corporate reputation for quality and technological
leadership
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Cost leadership– Strong central authority; tight cost control– Maintains standard operating procedures– easy-to-use manufacturing technologies– Highly efficient procurement and distribution
systems– Close supervision; finite employee empowerment– Frequent, detailed control reports
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Focus– May use combination of above policies directed at
particular strategic target– Values and rewards flexibility and customer
intimacy– Measures cost of providing service and
maintaining customer loyalty– Pushes empowerment to employees with
customer contact
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Continuum of Partnership StrategiesOrganizational 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
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Implementing Strategy Tools
Leadership Structural design Information and control systems Human resources
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Tools for Putting Strategy into ActionEnvironment
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/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