mgt chapter-8.pptx

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Chapter EightManaging Strategy and Strategic Planning


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Copyright Houghton Mifflin

Company. All rightsreserved. 82

Learning ObjectivesAfter studying this chapter, you should be able to:

1. Discuss the components of strategy, types of strategicalternatives, and the distinction between strategy formulation andstrategy implementation.

2. Describe how to use SWOT analysis in formulating strategy.

3. Identify and describe various alternative approaches to business-level strategy formulation.

4. Describe how business-level strategies are implemented.

5. Identify and describe various alternative approaches to corporate-level strategy formulation.

6. Describe how corporate-level strategies are implemented.

7. Discuss international and global strategies.


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The Nature of Strategic

Management Strategy

A comprehensive plan for accomplishing anorganizations goals.

Strategic Management A way of approaching business opportunities and

challenges aimed at formulating andimplementing effective strategies.

Effective Strategies

Strategies that promote a superior alignmentbetween the organization and its environmentand the achievement of its goals.


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Components of Strategy

Distinctive Competence Something an organization

does exceptionally well.

Scope Range of markets in which

an organization will compete.

Resource Deployment How an organization will

distribute its resourcesacross the areas in which itcompetes.


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Types of Strategic

Alternatives Business-Level Strategy

The set of strategic alternatives that an

organization chooses from as it conducts

business in a particular industry or a particular

market.

Corporate-Level Strategy

The set of strategic alternatives that an

organization chooses from as it manages its

operations simultaneously across several

industries and several markets.


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Strategy Formulation and

Implementation

Strategy Formulation

The set of processes involved in creating or

determining the organizations strategies; it

focuses on the content of strategies.

Strategy Implementation

The methods by which strategies are

operationalized or executed within the

organization; it focuses on the processes throughwhich strategies are achieved.


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Strategy Formulation and

Implementation (contd)

Deliberate StrategyA plan, chosen and implemented to

support specific goals, that is the result of

a rational, systematic, and plannedprocess of strategy formulation andimplementation.

Emergent StrategyA pattern of action that develops over timein the absence of goals or missions, ordespite goals and missions.


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Using SWOT Analysis to

Formulate Strategy

Evaluating Organizational Strengths Organizational strengths

are skills and abilities enabling an organization toconceive of and implement strategies.

Common organizational strengths are organizational capabilities possessed by numerous

competing firms.

Distinctive competencies are useful for competitive advantage and superior

performance.

Imitation of distinctive competencies is duplicating another firms distinctive competence.


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Formulate Strategy (contd)

Evaluating Organizational Strengths(contd) Sustained competitive advantage

occurs when a distinctive competence cannot be easilyduplicated.

is what remains after all attempts at strategic imitationshave ceased.

Strategic imitation is difficult when:

Distinctive competence is based on unique historicalcircumstances.

Competitors do not understand the nature or character ofa firms competence.

The competence is based on a complex phenomenon,such as organizational culture.


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Evaluating Organizational Weaknesses Organizational weaknesses

Skills and capabilities that do not enable an organizationto choose and implement strategies that support its

mission. Weaknesses can be overcome by:

investments to obtain the strengths needed.

modification of the organizations mission so it can beaccomplished with the current workforce.

Competitive disadvantage A situation in which an organization fails to implement

strategies being implemented by competitors.


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Evaluating an Organizations

Opportunities and Threats

Organizational opportunities

Areas in the organizations environment that

may generate high performance.

Organizational threats

Are areas in the organizations environmentthat make it difficult for the organization to

achieve high performance.


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Formulating

Business-Level Strategies

Porters Generic Strategies Differentiation strategy

An organization seeks to distinguish itself fromcompetitors through the quality of its products or

services. Overall cost leadership strategy

An organization attempts to gain competitive advantageby reducing its costs below the costs of competing firms.

Focus strategy An organization concentrates on a specific regional

market, product line, or group of buyers.


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Company. All rightsreserved. 8 - 14


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Company. All rightsreserved. 8 - 15


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Implementing Business-Level

Strategies (contd)

Implementing Miles and Snows Strategies Prospector

Encourage creativity to seek out new marketopportunities and to take risks.

Develop the flexibility to meet changing marketconditions by decentralizing its organizational structure.

Defender Focus on defending its current markets by lowering its

costs and/or improving the performance of current

products. Analyzer

Incorporate elements of both the prospector and thedefender strategies maintain business and to besomewhat innovative.


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Implementing Business-Level

Strategies (contd)

Implementing Porters Generic Strategies Differentiation

Marketing and sales must emphasize high-quality, high-value image of the organizations products or services.

Overall Cost Leadership Marketing and sales focus on simple product attributes

and how these product attributes meet customer needsin a low-cost and effective manner.

Focus Either differentiation or cost leadership, depending on

which one is the proper basis for competing in or for aspecific market segment, product category, or groupbuyers.


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Formulating Corporate-Level

Strategies

Strategic Business Units

Each business or group of businesses within an

organization is engaged in serving the same

markets, customers, or products. Diversification

The number of businesses an organization is

engaged in and the extent to which these

businesses are related to one another


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Formulating Corporate-Level

Strategies (contd)

Single-Product Strategy

An organization manufactures one product or

service and sells it in a single geographic market.

Related Diversification A strategy in which an organization operates in

several different businesses, industries, or

markets that are somehow linked.

Avoids the disadvantages and risks of a single-product strategy.


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Implementing Corporate-Level

Strategies

Becoming a Diversified Firm Internal development of new products

Developing products and services within the boundariesof traditional business operations.

Replacement of suppliers and customers Backward vertical integration

Beginning a business that furnishes resources previouslyhandledby a supplier.

Forward vertical integration Beginning a business previously handled by an intermediary

andselling more directly to customers.


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Company. All rightsreserved 821

Implementing Corporate-Level

Strategies (contd)

Becoming a Diversified Firm (contd) Merger

Purchase of one firm by another firm of approximatelythe same size.

Acquisition Purchase of a firm by another firm that is considerably

larger.

Purposes of mergers and acquisitions

To diversify through vertical integration. To acquire complementary products or services linked by

a common technology and common customers.

To create or exploit synergies that reduce the combinedorganizations costs of doing business to increaserevenues.

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