The document discusses strategic management and the process of strategy formulation and implementation. It defines strategic management as the set of decisions and actions used to formulate and implement strategies that provide a competitive advantage to achieve organizational goals. The strategic management process involves scanning the internal and external environment, conducting a SWOT analysis, formulating corporate, business, and functional level strategies, and implementing strategies through organizational changes. Key aspects of strategy implementation include leadership, structure, human resources, and information systems. The document provides an overview of the major components of strategic management.

1. STRATEGY FORMULATION andSTRATEGY FORMULATION and
IMPLEMENTATIONIMPLEMENTATION
MANAGEMENT 6MANAGEMENT 6thth
Ed.Ed.
By: Richard DaftBy: Richard Daft
Prepared by:
GREGAR DONAVEN E. VALDEHUEZA, MBA
Lourdes College Instructor

2. Learning ObjectivesLearning Objectives
 Define the components of strategic managementDefine the components of strategic management
 Describe the strategic planning process and SWOTDescribe the strategic planning process and SWOT
analysisanalysis
 Understand Grand Strategies for domestic andUnderstand Grand Strategies for domestic and
international operationsinternational operations
 Define corporate-level strategies and explain the portfolioDefine corporate-level strategies and explain the portfolio
approachapproach
 Describe business-level strategies, including Porter’sDescribe business-level strategies, including Porter’s
competitive forces and strategies and partnershipcompetitive forces and strategies and partnership
strategiesstrategies
 Explain the major considerations in formulatingExplain the major considerations in formulating
functional strategiesfunctional strategies
 Enumerate the organizational dimensions used forEnumerate the organizational dimensions used for
implementing strategyimplementing strategy

3. What is Strategic Management?What is Strategic Management?
Strategic ManagementStrategic Management
The set of decisions and actions used to formulateThe set of decisions and actions used to formulate
and implement strategies that will provide aand implement strategies that will provide a
competitively superior fit between the organizationcompetitively superior fit between the organization
and its environment so as to achieveand its environment so as to achieve
organizational goals.organizational goals.

4. Grand StrategyGrand Strategy
The general plan of major action by whichThe general plan of major action by which
an organization intends to achieve its long-an organization intends to achieve its long-
term goals.term goals.
Three general categoriesThree general categories::
1.1. GrowthGrowth – can be promoted internally by investing in– can be promoted internally by investing in
expansion or externally by acquiring additional businessexpansion or externally by acquiring additional business
divisions.divisions.
2.2. Stability (pause strategy)Stability (pause strategy) – that the organization wants to– that the organization wants to
remain the same size or grow slowly and in a controlledremain the same size or grow slowly and in a controlled
fashion.fashion.
3.3. RetrenchmentRetrenchment – that the organization goes through period– that the organization goes through period
of forced decline by either shrinking current business unitsof forced decline by either shrinking current business units
or selling off or liquidating entire business.or selling off or liquidating entire business.

5. Global StrategyGlobal Strategy
a separate grand strategy as the focus ofa separate grand strategy as the focus of
global business.global business.
Three global strategies:Three global strategies:
1.1. GlobalizationGlobalization – the standardization of product design and– the standardization of product design and
advertising strategies throughout the world.advertising strategies throughout the world.
2.2. Multidomestic strategyMultidomestic strategy – the modification of product design– the modification of product design
and advertising strategies to suit the specific needs ofand advertising strategies to suit the specific needs of
individual countries.individual countries.
3.3. Transnational strategyTransnational strategy – a strategy that combines global– a strategy that combines global
coordination to attain efficiency with flexibility to meetcoordination to attain efficiency with flexibility to meet
specific needs in various countries.specific needs in various countries.

6. Purpose of StrategyPurpose of Strategy
Choosing how the organization will be different.Choosing how the organization will be different.
StrategyStrategy
The plan of action that prescribes resourceThe plan of action that prescribes resource
allocation and other activities for dealing with theallocation and other activities for dealing with the
environment and helping the organization attain itsenvironment and helping the organization attain its
goals.goals.

7. To remain competitive, companiesTo remain competitive, companies
develop strategies that focus on:develop strategies that focus on:
1.1. Core competenceCore competence
 A business activity that an organization doesA business activity that an organization does
particularly well in comparison to competitors.particularly well in comparison to competitors.
1.1. SynergySynergy
 The condition that exists when theThe condition that exists when the
organization’s parts interact to produce a jointorganization’s parts interact to produce a joint
effect that is greater than the sum of the partseffect that is greater than the sum of the parts
acting alone.acting alone.
1.1. Value CreationValue Creation
 The heart of strategy.The heart of strategy.
 Value can be defined as the combination ofValue can be defined as the combination of
benefits received and costs paid by thebenefits received and costs paid by the
customers.customers.

8. Levels of StrategyLevels of Strategy
 Corporate-Level StrategyCorporate-Level Strategy
 The level of strategy concerned with the question,The level of strategy concerned with the question, “What“What
business are we in?”business are we in?”. Pertains to the organization as a. Pertains to the organization as a
whole and the combination of business units andwhole and the combination of business units and
product lines that make it up.product lines that make it up.
 Business-Level StrategyBusiness-Level Strategy
 The level of strategy concerned with the question,The level of strategy concerned with the question, “How“How
do we compete?”do we compete?”. Pertains to each business unit or. Pertains to each business unit or
product line within the organization.product line within the organization.
 Functional-Level StrategyFunctional-Level Strategy
 The level of strategy concerned with the question,The level of strategy concerned with the question, “How“How
do we support the business-level strategy?”do we support the business-level strategy?”. Pertains to. Pertains to
all of the organization’s major departments.all of the organization’s major departments.

9. Three Levels of Strategy in OrganizationThree Levels of Strategy in Organization
Corporation
Textile Units Chemicals Unit Auto Parts Unit
Finance R & D Manufacturing Marketing
Corporate-Level Strategy:
What business are we in?
Business-Level Strategy:
How do we compete?
Functional-Level Strategy:
How do we support the business-level strategy?

10. Corporation
Textile Units
Finance R & D Manufacturing Marketing
Corporate-Level Strategy:
What business are we in?
Business-Level Strategy:
How do we compete?
Functional-Level Strategy:
How do we support the business-level strategy?

11. Strategy Formulation Versus ImplementationStrategy Formulation Versus Implementation
 Strategy FormulationStrategy Formulation
The stage of strategic management that involvesThe stage of strategic management that involves
the planning and decision making that lead to thethe planning and decision making that lead to the
establishment of the organization’s goals and of aestablishment of the organization’s goals and of a
specific strategic plan.specific strategic plan.
 Strategy ImplementationStrategy Implementation
The stage of strategic management that involvesThe stage of strategic management that involves
the use of managerial and organizational tools tothe use of managerial and organizational tools to
direct resources toward achieving strategicdirect resources toward achieving strategic
outcomes.outcomes.

12. The Strategic Management ProcessThe Strategic Management Process
Scan External
Environment:
• National
• Global
Identify Strategic
Factors:
• Opportunities
• Threat
Scan Internal
Environment:
• Core
Competence
• Synergy
• Value Creation
Identify Strategic
Factors:
• Strengths
• Weaknesses
Define New:
• Mission
• Goals
• Grand
Strategy
Formulate
Strategy:
• Corporate
• Business
• Functional
Evaluate
Current:
• Mission
• Goals
• Strategies
SWOT
Implement
Strategy via
Changes in:
• Leadership /
Culture
• Structure
• Human
Resources
• Information
and Control
System

13. Situation AnalysisSituation Analysis
Analysis of the strengths, weaknesses,Analysis of the strengths, weaknesses,
opportunities, and threats (SWOT) that affectopportunities, and threats (SWOT) that affect
organizational performance.organizational performance.
 StrengthsStrengths
 Positive internal characteristics that the organization can exploit toPositive internal characteristics that the organization can exploit to
achieve its strategic performance goals.achieve its strategic performance goals.
 WeaknessesWeaknesses
 Internal characteristics that might inhibit or restrict theInternal characteristics that might inhibit or restrict the
organization’s performance.organization’s performance.
 OpportunitiesOpportunities
 Characteristics of the external environment that have the potentialCharacteristics of the external environment that have the potential
to help the organization achieve or exceed its strategic goals.to help the organization achieve or exceed its strategic goals.
 ThreatsThreats
 Characteristics of the external environment that may prevent theCharacteristics of the external environment that may prevent the
organization from achieving its strategic goals.organization from achieving its strategic goals.

14. Formulating Corporate-Level StrategyFormulating Corporate-Level Strategy
Portfolio StrategyPortfolio Strategy
 A type of corporate-level strategy thatA type of corporate-level strategy that
pertains to the organization’s mix of SBUspertains to the organization’s mix of SBUs
and product lines that fit together in such aand product lines that fit together in such a
way as to provide the corporation withway as to provide the corporation with
synergy and competitive advantage.synergy and competitive advantage.
Strategic Business Unit (SBU)Strategic Business Unit (SBU)
A division of the organization that has aA division of the organization that has a
unique business mission, product line,unique business mission, product line,
competitors, and markets relative to othercompetitors, and markets relative to other
SBUs in the same corporation.SBUs in the same corporation.

15. The BCG MatrixThe BCG Matrix
 A concept developed by the Boston Consulting GroupA concept developed by the Boston Consulting Group
that evaluates SBUs with respect to the dimension ofthat evaluates SBUs with respect to the dimension of
business growth rate and market share.business growth rate and market share.

16. Four Alternative Positions:Four Alternative Positions:
 Question MarksQuestion Marks
 The business unit has low market share compared toThe business unit has low market share compared to
competitors, however it is doing business in high-competitors, however it is doing business in high-
growth market.growth market.
 StarsStars
 The business has high market share compared toThe business has high market share compared to
competitors and it is doing business in high-growthcompetitors and it is doing business in high-growth
market.market.
 Cash CowsCash Cows
 The market is not very attractive – low market growthThe market is not very attractive – low market growth
rate, however the business has high market sharerate, however the business has high market share
compared to competitors.compared to competitors.
 DogsDogs
 This business has low market share and operates inThis business has low market share and operates in
low-growth market.low-growth market.

18. Formulating Business-Level StrategyFormulating Business-Level Strategy
it is a strategy formulation within the strategicit is a strategy formulation within the strategic
business unit in which the concern is how tobusiness unit in which the concern is how to
compete.compete.
the same three generic strategies (growth,the same three generic strategies (growth,
stability, and retrenchment) apply at thestability, and retrenchment) apply at the
business level, but they are accomplishedbusiness level, but they are accomplished
through competitive actions rather than thethrough competitive actions rather than the
acquisition or divestment of business divisions.acquisition or divestment of business divisions.

19. Porter’s Five Competitive ForcesPorter’s Five Competitive Forces
Rivalry
among
Competitor
s
Threat of
Substitute
Products
Potential New
Entrants
Bargaining
Power of Buyers
Bargaining
Power of
Suppliers
Internet tends to increase
bargaining power of
suppliers
Internet reduces
barriers to entry
Internet blurs differences
among competitors
Internet creates new
substitution threats
Internet shifts greater
power to end consumers

20. Competitive StrategiesCompetitive Strategies
1.1. DifferentiationDifferentiation
 a type of competitive strategy with which thea type of competitive strategy with which the
organization seeks to distinguish its products ororganization seeks to distinguish its products or
services from competitors.services from competitors.
1.1. Cost LeadershipCost Leadership
 A type of competitive strategy with which theA type of competitive strategy with which the
organization aggressively seeks efficientorganization aggressively seeks efficient
facilities, cuts costs, and employs tight costfacilities, cuts costs, and employs tight cost
controls to be more efficient than competitors.controls to be more efficient than competitors.
1.1. FocusFocus
 A type of competitive strategy that emphasizesA type of competitive strategy that emphasizes
concentration on a specific regional market orconcentration on a specific regional market or
buyer group.buyer group.

21. Partnership StrategiesPartnership Strategies
Organizational
Combination
Strategic
Alliances
Acquisitions
Mergers
Joint Ventures
Strategic Business Partnering
Preferred Supplier Arrangements
High
D
E
G
R
E
E
O
F
C
O
L
L
A
B
O
R
A
T
I
O
N
Low

22. Formulating Functional-Level StrategyFormulating Functional-Level Strategy
the action plans adopted by majorthe action plans adopted by major
departments to support the execution ofdepartments to support the execution of
business-level strategy.business-level strategy.
major organizational functions includemajor organizational functions include
marketing, production, finance, humanmarketing, production, finance, human
resources, and research & development.resources, and research & development.

23. Strategy Implementation and ControlStrategy Implementation and Control
Implementation is the final step in theImplementation is the final step in the
strategic management process and it isstrategic management process and it is
how strategy put into action.how strategy put into action.
Some people argue that strategySome people argue that strategy
implementation is the most difficult andimplementation is the most difficult and
important part of strategic management.important part of strategic management.

24. STRUCTURAL DESIGN
• Design organization chart
• Create teams
• Determine centralization
• Arrange facilities, task
design
LEADERSHIP
• Use persuasion
• Motivate employees
• Shape culture/values
HUMAN RESOURCES
• Recruit/select employees
• Manage
transfers/promotions/training
• Direct layoffs/recalls
INFORMATION AND
CONTROL SYSTEMS
• Revise pay, reward system
• Change budget allocations
• Implement information
systems
• Apply rules and procedures
OrganizationEnvironment
Strategy
Performance
Tools for Putting Strategy into ActionTools for Putting Strategy into Action

25. Implementing Global StrategiesImplementing Global Strategies
In the international arena, flexibility and superbIn the international arena, flexibility and superb
communication emerge as mandatory leadershipcommunication emerge as mandatory leadership
skills.skills.
Structural design must merge successfully with foreignStructural design must merge successfully with foreign
cultures as well as link foreign operations to the homecultures as well as link foreign operations to the home
country.country.
Information and control systems must fit the needsInformation and control systems must fit the needs
and incentives within local cultures.and incentives within local cultures.
Recruitment, training, transfer, promotion, and layoff ofRecruitment, training, transfer, promotion, and layoff of
international human resources create array ofinternational human resources create array of
problems not confronted from other countries such asproblems not confronted from other countries such as
labor laws, guaranteed jobs, and cultural traditions oflabor laws, guaranteed jobs, and cultural traditions of
keeping unproductive employees on the job.keeping unproductive employees on the job.

26. THE ENDTHE END
Any clarification?Any clarification?
HAVE A NICE DAY!!!HAVE A NICE DAY!!! 