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Strategy Formulation and Implementation


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Strategy Formulation and Implementation

  1. 1. Strategy Formulation and Implementation CHAPTER 8 0
  2. 2. Learning Objectives <ul><li>Define the components of strategic management. </li></ul><ul><li>Describe the strategic planning process and SWOT analysis. </li></ul><ul><li>Understand grand strategies for domestic and international operations. </li></ul><ul><li>Define corporate-level strategies and explain the portfolio approach. </li></ul>0
  3. 3. Learning Objectives (contd.) <ul><li>Describe business-level strategies, including Porter’s competitive forces and strategies and partnership strategies. </li></ul><ul><li>Explain the major considerations in formulating functional strategies. </li></ul><ul><li>Discuss the organizational dimensions used for implementing strategy. </li></ul>0
  4. 4. Strategic Management <ul><li>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 </li></ul><ul><li>Responsibility = top managers and </li></ul><ul><li> chief executive </li></ul>0
  5. 5. Strategic Management <ul><li>Managers ask such questions as... </li></ul><ul><li>What changes and trends are occurring? </li></ul><ul><li>Who are our customers? </li></ul><ul><li>What products or services should we offer? </li></ul><ul><li>How can we offer these products or services most efficiently? </li></ul>0
  6. 6. Grand Strategy <ul><li>General plan of major action to achieve long-term goals </li></ul><ul><li>Falls into three general categories </li></ul><ul><li>1. Growth </li></ul><ul><li>2. Stability </li></ul><ul><li>3. Retrenchment </li></ul>A separate grand strategy can be defined for global operations 0
  7. 7. Grand Strategy: Growth <ul><li>Growth can be promoted internally by investing in expansion or externally by acquiring additional business divisions </li></ul><ul><ul><li>Internal growth = can include development of new or changed products </li></ul></ul><ul><ul><li>External growth = typically involves diversification – businesses related to current product lines or into new areas </li></ul></ul>0
  8. 8. Grand Strategy: Stability <ul><li>Stability , sometimes called a pause strategy , means that the organization wants </li></ul><ul><ul><li>to remain the same size or </li></ul></ul><ul><ul><li>to grow slowly and in a controlled fashion </li></ul></ul>0
  9. 9. Grand Strategy: Retrenchment <ul><li>Retrenchment = the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses </li></ul><ul><li>Liquidation = selling off a business nit for the cash value of the assets, thus terminating its existence </li></ul><ul><li>Divestiture = involves selling off of businesses that no longer seem central to the corporation </li></ul>0
  10. 10. Global Corporate Strategies Need for National Responsiveness High Low Low High <ul><li>Transnational </li></ul><ul><li>Strategy </li></ul><ul><li>Seeks to balance global efficiencies and local responsiveness </li></ul><ul><li>Combines standardization and customization for product/advertising strategies </li></ul><ul><li>Globalization </li></ul><ul><li>Strategy </li></ul><ul><li>Treats world as a single global market </li></ul><ul><li>Standardizes global products/advertising strategies </li></ul><ul><li>Multi-domestic Strategy </li></ul><ul><li>Handles markets independently for each country </li></ul><ul><li>Adapts product/advertising to local tastes and needs </li></ul>Need for Global Integration <ul><li>Export </li></ul><ul><li>Strategy </li></ul><ul><li>Domestically focused </li></ul><ul><li>Exports a few domestically produced products to selected countries </li></ul>Exhibit 8.1 0
  11. 11. Global Strategy <ul><li>Globalization = product design and advertising strategies are standardized around the world </li></ul><ul><li>Multi-domestic = adapt product and promotion for each country </li></ul><ul><li>Transnational = combine both globalization and national responsiveness </li></ul>0
  12. 12. Purpose of Strategy <ul><li>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 </li></ul><ul><li>Strategies focus on: </li></ul><ul><li>Core competencies </li></ul><ul><li>Developing synergy </li></ul><ul><li>Creating value for customers </li></ul>0
  13. 13. Three Levels of Strategy in Organizations 0 Exhibit 8.2 Three Levels of Strategy in Organizations
  14. 14. 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 Exhibit 8.3 0
  15. 15. Strategy Formulation vs. Implementation <ul><li>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 </li></ul><ul><li>Strategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes </li></ul>0
  16. 16. Checklist for Analyzing Organizational Strengths and Weaknesses Exhibit 8.4 0
  17. 17. Portfolio Strategy <ul><li>Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage </li></ul>BCG Matrix Exhibit 8.5 0
  18. 18. Five Forces Affecting Industry Competition Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980). <ul><li>Internet reduces barriers to entry </li></ul><ul><li>Internet expands market size, but creates new substitution threats </li></ul><ul><li>Internet tends to increase the bargaining power of suppliers </li></ul><ul><li>Internet shifts greater power to end consumers </li></ul>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 0
  19. 19. Competitive Edge Through Competitive Strategies <ul><li>Differentiation = attempt to distinguish products or services from that of competitors </li></ul><ul><li>Cost leadership = aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors </li></ul><ul><li>Focus = concentrates on a specific regional market or buyer group </li></ul>0
  20. 20. 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 Exhibit 8.8 0
  21. 21. Implementing Strategy Tools <ul><li>Leadership </li></ul><ul><li>Structural design </li></ul><ul><li>Information and control systems </li></ul><ul><li>Human resources </li></ul>0
  22. 22. Tools for Putting Strategy into Action Environment Organization Strategy Performance Leadership  Persuasion  Motivation  Culture/values <ul><li>Structural Design  Organization Chart  Teams  Centralization </li></ul><ul><li>Decentralization, </li></ul><ul><li>Facilities, task design </li></ul>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 0