Strategic planning has taken on new importance in today’s world of globalization, deregulation, advancing technology, and changing demographics, and lifestyles
Manager’s Challenge: Nintendo
Strategy Formulation and Implementation
Model of Strategic Management Process
Models of Strategy Formation
Managerial Tools to Implement Strategic Plans
Topics: Chapter 8
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?
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 &
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?
General plan of major action to achieve long-term goals
Falls into three general categories
A separate grand strategy can be defined for global operations Ethical Dilemma: A Great Deal for Whom?
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
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
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
Global Corporate Strategies Need for National Responsiveness High Low Low High
Seeks to balance global efficiencies and local responsiveness
Combines standardization and customization for product/advertising strategies
Treats world as a single global market
Standardizes global products/advertising strategies
Handles markets independently for each country
Adapts product/advertising to local tastes and needs
Need for Global Integration
Exports a few domestically produced products to selected countries
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
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:
Creating value for customers
Three Levels of Strategy in Organizations 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 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
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
Checklist for Analyzing Organizational 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 quality Staff quality Degree of centralization Organization charts Planning, information, control systems Finance Profit margin Debt-equity ratio Inventory ratio Return on investment Credit rating Marketing 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 Distribution channels Market share Advertising efficiency Customer satisfaction Product quality Service reputation
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
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
Competitive Edge Through Competitive 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 Strategies Organizational Combination Strategic Alliances Preferred Supplier Arrangements Strategic Business Partnering Mergers Acquisitions Low High Joint Ventures Degree of Collaboration Degree of Collaboration
Implementing Strategy Tools
Information and control systems
Tools for Putting Strategy into Action Environment Organization Strategy Performance Leadership Persuasion Motivation Culture/values
Structural Design Organization Chart Teams Centralization
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