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MMP Chapter 08

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  • 1. STRATEGY FORMULATION and IMPLEMENTATION MANAGEMENT 6th Ed. By: Richard Daft Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 2. Learning 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• Describe business-level strategies, including Porter’s competitive forces and strategies and partnership strategies• Explain the major considerations in formulating functional strategies• Enumerate the organizational dimensions used for implementing strategy Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 3. What is Strategic Management?Strategic Management • The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 4. Grand Strategy • The general plan of major action by which an organization intends to achieve its long-term goals.Three general categories: 1. Growth – can be promoted internally by investing in expansion or externally by acquiring additional business divisions. 2. Stability (pause strategy) – that the organization wants to remain the same size or grow slowly and in a controlled fashion. 3. Retrenchment – that the organization goes through period of forced decline by either shrinking current business units or selling off or liquidating entire business. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 5. Global Strategy • a separate grand strategy as the focus of global business.Three global strategies: 1. Globalization – the standardization of product design and advertising strategies throughout the world. 2. Multidomestic strategy – the modification of product design and advertising strategies to suit the specific needs of individual countries. 3. Transnational strategy – a strategy that combines global coordination to attain efficiency with flexibility to meet specific needs in various countries. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 6. Purpose of Strategy• Choosing how the organization will be different.Strategy  The plan of action that prescribes resource allocation and other activities for dealing with the environment and helping the organization attain its goals. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 7. To remain competitive, companies developstrategies that focus on: 1. Core competence » A business activity that an organization does particularly well in comparison to competitors. 2. Synergy » The condition that exists when the organization’s parts interact to produce a joint effect that is greater than the sum of the parts acting alone. 3. Value Creation » The heart of strategy. » Value can be defined as the combination of benefits received and costs paid by the customers. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 8. Levels of Strategy• Corporate-Level Strategy • The level of strategy concerned with the question, “What business are we in?”. Pertains to the organization as a whole and the combination of business units and product lines that make it up.• Business-Level Strategy • The level of strategy concerned with the question, “How do we compete?”. Pertains to each business unit or product line within the organization.• Functional-Level Strategy • The level of strategy concerned with the question, “How do we support the business-level strategy?”. Pertains to all of the organization’s major departments. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 9. Three Levels of Strategy in Organization Corporate-Level Strategy: What business are we in? Corporation Business-Level Strategy: How do we compete? Textile Units Chemicals Unit Auto Parts Unit Functional-Level Strategy: How do we support the business-level strategy?Finance R&D Manufacturing Marketing Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 10. Corporate-Level Strategy: What business are we in? Corporation Business-Level Strategy: How do we compete? Textile Units Functional-Level Strategy: How do we support the business-level strategy?Finance R&D Manufacturing Marketing Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 11. Strategy Formulation Versus Implementation• Strategy Formulation • The stage of strategic management that involves the planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan.• Strategy Implementation • The stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 12. The Strategic Management Process Scan External Identify Strategic Environment: Factors: • National • Opportunities • Global • Threat Implement Strategy via Changes in: • Leadership /Evaluate Define New: Formulate CultureCurrent: • Mission Strategy: • Structure• Mission SWOT • Goals • Corporate • Human• Goals • Grand • Business Resources• Strategies Strategy • Functional • Information and Control System Scan Internal Identify Strategic Environment: Factors: • Core • Strengths Competence • Weaknesses • Synergy • Value Creation Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 13. Situation Analysis • Analysis of the strengths, weaknesses, opportunities, and threats (SWOT) that affect organizational performance. Strengths  Positive internal characteristics that the organization can exploit to achieve its strategic performance goals. Weaknesses  Internal characteristics that might inhibit or restrict the organization’s performance. Opportunities  Characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals. Threats  Characteristics of the external environment that may prevent the organization from achieving its strategic goals. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 14. Formulating Corporate-Level Strategy Portfolio Strategy  A type of corporate-level strategy that pertains to the organization’s mix of SBUs and product lines that fit together in such a way as to provide the corporation with synergy and competitive advantage.  Strategic Business Unit (SBU)  A division ofthe organization that has a unique business mission, product line, competitors, and markets relative to other SBUs in the same corporation. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 15. The BCG Matrix• A concept developed by the Boston Consulting Group that evaluates SBUs with respect to the dimension of business growth rate and market share. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 16. Four Alternative Positions: – Question Marks • The business unit has low market share compared to competitors, however it is doing business in high-growth market. – Stars • The business has high market share compared to competitors and it is doing business in high-growth market. – Cash Cows • The market is not very attractive – low market growth rate, however the business has high market share compared to competitors. – Dogs • This business has low market share and operates in low- growth market. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 17. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 18. Formulating Business-Level Strategyit is a strategy formulation within the strategicbusiness unit in which the concern is how tocompete.the same three generic strategies (growth, stability,and retrenchment) apply at the business level, butthey are accomplished through competitive actionsrather than the acquisition or divestment of businessdivisions. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 19. Porter’s Five Competitive Forces Internet reduces Potential New barriers to entry Entrants Internet blurs differences among competitors Threat of Rivalry Substitute among Bargaining Power Products Competitors of BuyersInternet creates new Internet shifts greatersubstitution threats power to end consumers Bargaining Power of Suppliers Internet tends to increase bargaining power of suppliers Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 20. Competitive Strategies1. Differentiation • a type of competitive strategy with which the organization seeks to distinguish its products or services from competitors.2. Cost Leadership • A type of competitive strategy with which the organization aggressively seeks efficient facilities, cuts costs, and employs tight cost controls to be more efficient than competitors.3. Focus • A type of competitive strategy that emphasizes concentration on a specific regional market or buyer group. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 21. Partnership Strategies High Organizational Combination Acquisitions C O MergersDE LG LR AE BE O R StrategicO A Alliances Joint VenturesF T I O Strategic Business Partnering N Preferred Supplier Arrangements Low Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 22. Formulating Functional-Level Strategythe action plans adopted by majordepartments to support the execution ofbusiness-level strategy.major organizational functions includemarketing, production, finance, humanresources, and research & development. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 23. Strategy Implementation and ControlImplementation is the final step in thestrategic management process and it is howstrategy put into action.Some people argue that strategyimplementation is the most difficult andimportant part of strategic management. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 24. Tools for Putting Strategy into ActionEnvironment Organization LEADERSHIP • Use persuasion • Motivate employees • Shape culture/values STRUCTURAL DESIGN HUMAN RESOURCES • Design organization chart • Recruit/select employees • Create teams • Manage Performance Strategy • Determine centralization transfers/promotions/training • Arrange facilities, task design • Direct layoffs/recalls INFORMATION AND CONTROL SYSTEMS • Revise pay, reward system • Change budget allocations • Implement information systems • Apply rules and procedures Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 25. Implementing Global StrategiesIn the international arena, flexibility and superbcommunication emerge as mandatory leadership skills.Structural design must merge successfully with foreigncultures as well as link foreign operations to the homecountry.Information and control systems must fit the needs andincentives within local cultures.Recruitment, training, transfer, promotion, and layoff ofinternational human resources create array of problemsnot confronted from other countries such as labor laws,guaranteed jobs, and cultural traditions of keepingunproductive employees on the job. Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku
  • 26. THE END Any clarification? HAVE A NICE DAY!!!  Google from:Prepared by:GREGAR DONAVEN E. VALDEHUEZA, MBALourdes College Instructor Uploaded to refferance for MBA Student of Uni of Colombo Chapter 07 - Managerial Planning and Goal Setting Chandra Kodituwakku