Ch 08


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  • Ch 08

    1. 1. Strategy Formulation and Implementation Chapter 8
    2. 2. Strategic Planning <ul><li>Strategic planning has taken on new importance in today’s world of globalization, deregulation, advancing technology, and changing demographics, and lifestyles </li></ul>Manager’s Challenge: Nintendo
    3. 3. Strategy Formulation and Implementation <ul><li>Strategic Management </li></ul><ul><ul><li>Definition </li></ul></ul><ul><ul><li>Components </li></ul></ul><ul><ul><li>Model of Strategic Management Process </li></ul></ul><ul><ul><li>Models of Strategy Formation </li></ul></ul><ul><li>Managerial Tools to Implement Strategic Plans </li></ul>Topics: Chapter 8
    4. 4. Thinking Strategically <ul><li>Answers to the following define an overall direction for the organization's grand strategy </li></ul><ul><li>Where is the organization now? </li></ul><ul><li>Where does the organization want to be? </li></ul><ul><li>What changes are among competitors? </li></ul><ul><li>What courses of action will help us achieve our goals? </li></ul>
    5. 5. 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 & </li></ul><ul><li> chief executive </li></ul>
    6. 6. 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>
    7. 7. 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 Ethical Dilemma: A Great Deal for Whom?
    8. 8. 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>
    9. 9. 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>
    10. 10. 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>
    11. 11. 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>
    12. 12. 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 global coordination with flexibility to meet specific needs in various countries </li></ul>
    13. 13. 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>
    14. 14. 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
    15. 15. 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
    16. 16. 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>Experiential Exercise: Developing Strategy for a Small Business
    17. 17. 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
    18. 18. 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
    19. 19. 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
    20. 20. 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>
    21. 21. 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
    22. 22. 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>
    23. 23. 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