strategy formulation

1. Chapter 8
Strategy Formulation and
Implementation

2. Strategic Planning
 Strategic
planning has taken on new
importance in today’s world of
globalization, deregulation, advancing
technology, and changing demographics,
and lifestyles
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Manager’s Challenge: Nintendo

3. Strategy Formulation and
Implementation
 Strategic
–
–
–
–
Management
Definition
Components
Model of Strategic Management Process
Models of Strategy Formation
 Managerial
Tools to Implement Strategic
Plans
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Topics:
Chapter 8
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4. Thinking Strategically





4
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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5. 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
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= top managers &
chief executive
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6. 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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7. Grand Strategy
General plan of major action to achieve
long-term goals
 Falls into three general categories
A separate grand
1. Growth
strategy can be
2. Stability
defined for global
3. Retrenchment
operations

Ethical Dilemma: A Great Deal for Whom?
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8. Grand Strategy: Growth
 Growth
can be promoted internally by
investing in expansion or externally by
acquiring additional business divisions
-
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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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9. Grand Strategy: Stability
 Stability,
sometimes called a pause strategy,
means that the organization wants
–
–
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to remain the same size or
to grow slowly and in a controlled fashion
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10. Grand Strategy: Retrenchment


Liquidation = selling off a business nit for the cash
value of the assets, thus terminating its existence

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Retrenchment = the organization goes through a
period of forced decline by either shrinking current
business units or selling off or liquidating entire
businesses
Divestiture = involves selling off of businesses that
no longer seem central to the corporation
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11. Global Corporate Strategies
Need for Global Integration
High
Low
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Globalization
Strategy
• Treats world as a
single global market
• Standardizes global
products/advertising
strategies
Export
Strategy
•Domestically focused
•Exports a few
domestically produced
products to selected
countries
Transnational
Strategy
• Seeks to balance global
efficiencies and local
responsiveness
• Combines standardization
and customization for
product/advertising
strategies
Multi-domestic Strategy
• Handles markets
independently for each
country
• Adapts product/advertising
to local tastes and needs
Low Need for National Responsiveness
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High

12. 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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13. 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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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
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R&D
Manufacturing
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Marketing

15. Strategic Management Process
Scan External
Environment –
National,
Global
Evaluate
Current
Mission, Goals,
Strategies
Scan Internal
Environment – Core
Competence,
Synergy, Value
Creation
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Identify Strategic
Factors –
Opportunities,
Threats
SWOT
Define new
Mission
Goals, Grand
Strategy
Identify Strategic
Factors –
Strengths,
Weaknesses
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Formulate
Strategy –
Corporate,
Business,
Functional
Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems

16. 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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17. Checklist for Analyzing
Organizational Strengths and Weaknesses
Management and Organization
Marketing
Planning, information,
control systems
Distribution channels
Market share
Advertising efficiency
Customer satisfaction
Product quality
Service reputation
Finance
Sales force turnover
Production
Management quality
Staff quality
Degree of centralization
Organization charts
Profit margin
Debt-equity ratio
Plant location
Machinery obsolescence
Inventory ratio
Purchasing system
Return on investment
Quality control
Credit rating
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
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).
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18. Portfolio Strategy
BCG Matrix
 Mix
of business
units and product
lines that fit
together in a
logical way to
provide synergy
and competitive
advantage
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19. Five Forces Affecting Industry Competition
•Internet reduces
barriers to entry
Potential New
Entrants
Internet blurs differences among
competitors in an industry
Threat of Substitute
Products
•Internet expands market size, but
creates new substitution threats
•Internet tends to increase the
bargaining power of suppliers
Bargaining
Power of
Buyers
Rivalry
among
Competitors
•Internet shifts greater power
to end consumers
Bargaining Power of Suppliers
Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).
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20. 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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21. Continuum of Partnership Strategies
Organizational Combination
Acquisitions
Degree of Collaboration
Mergers
Strategic
Alliances
Joint Ventures
Strategic Business Partnering
Preferred Supplier Arrangements
Low
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Degree of Collaboration
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High

22. Implementing Strategy Tools
 Leadership
 Structural
design
 Information and control systems
 Human resources
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23. Tools for Putting
Strategy into Action
Environment
Organization
Strategy
Leadership
 Persuasion

Motivation

Structural Design
Culture/values
Human Resources
 Organization Chart

 Teams
Recruitment/selection


Centralization
Transfers/promotions
Decentralization,
 Training
 Facilities, task design
 Layoffs/recalls
Information and Control Systems
Performance
 Pay, reward system
 Budget allocations

Information systems
 Rules/procedures
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.
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