This document discusses strategy formulation and implementation. It provides definitions of strategic management and outlines the strategic management process. This includes scanning the internal and external environment, formulating strategy, and implementing strategy. It describes different levels of strategy, including corporate, business, and functional strategies. Grand strategies like growth, stability, and retrenchment are defined. Tools for implementing strategy are also outlined, such as leadership, organizational structure, human resources, and information systems.

1. Strategy Formulation and
Implementation
Chapter8

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2
Strategic Planning
 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

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3
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 High
Low
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
NeedforGlobalIntegration
Export
Strategy
•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 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

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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 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
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 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

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Continuum of Partnership Strategies
Organizational Combination
Strategic
Alliances
Preferred Supplier Arrangements
Strategic Business Partnering
Mergers
Acquisitions
Low High
Joint Ventures
Degree of Collaboration

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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
 Centralization
Decentralization,
 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