strategy formulation and implementation
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Strategy Formulation and Implementation
Strategy Formulation and Implementation
CHAPTER 8CHAPTER 8
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Learning ObjectivesLearning Objectives
Define the components of strategic management.
Describe the strategic planning process and SWOT analysis.
Understand grand strategies for domestic and international operations.
Define corporate-level strategies and explain the portfolio approach.
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Learning Objectives (contd.)Learning Objectives (contd.)
Describe business-level strategies, including Porter’s competitive forces and strategies and partnership strategies.
Explain the major considerations in formulating functional strategies.
Discuss the organizational dimensions used for implementing strategy.
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Strategic ManagementStrategic 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 and chief executive
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Strategic ManagementStrategic 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. RetrenchmentA separate grand strategy can be defined for global operations
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Grand Strategy: GrowthGrand 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: StabilityGrand 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: RetrenchmentGrand 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 StrategiesGlobal Corporate Strategies
Need for National Responsiveness HighLow
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 needsN
eed
fo
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lob
al I
nte
gra
tio
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ExportStrategy
•Domestically focused
•Exports a few domestically produced products to selected countries
Exhibit 8.1
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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 both globalization and national responsiveness
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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 OrganizationsThree Levels of Strategy in Organizations
Exhibit 8.2
Three Levels of Strategy in Organizations
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Strategic Management ProcessStrategic 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
Exhibit 8.3
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Strategy Formulation vs. ImplementationStrategy 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
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Checklist for Analyzing Organizational Strengths and Weaknesses
Checklist for Analyzing Organizational Strengths and Weaknesses
Exhibit 8.4
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Portfolio StrategyPortfolio Strategy
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
BCG Matrix Exhibit 8.5
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Five Forces Affecting Industry CompetitionFive 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
Exhibit 8.6
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Competitive Edge ThroughCompetitive Strategies
Competitive Edge ThroughCompetitive 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 StrategiesContinuum of Partnership Strategies
Organizational Combination
Strategic Alliances
Preferred Supplier Arrangements
Strategic Business Partnering
Mergers
Acquisitions
Low High
Joint Ventures
Degree of Collaboration
De g
ree
of C
oll a
bor a
ti on
Exhibit 8.8
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Implementing Strategy ToolsImplementing Strategy Tools
Leadership Structural design Information and control systems Human resources
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Tools for Putting Strategy into Action
Tools for Putting Strategy into Action
EnvironmentOrganization
Strategy Performance
Leadership Persuasion Motivation Culture/values
Structural Design Organization Chart Teams CentralizationDecentralization, 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
Exhibit 8.9