strategy formulation and implemetation

8/8/2019 Strategy Formulation and Implemetation

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Chapter 8Chapter 8

Strategy Formulation andStrategy Formulation and

ImplementationImplementation


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Thinking StrategicallyT

hinking Strategicallyuu To help managers answer questions suchTo help managers answer questions such

as:as:

** Where is the organization now?Where is the organization now?** Where does the organization want to be?Where does the organization want to be?

** What changes are among competitors?What changes are among competitors?

** What courses of action will help us achieveWhat courses of action will help us achieveour goals?our goals?

uu Answers define an overall direction forAnswers define an overall direction for

the organization's grand strategy.the organization's grand strategy.


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Grand Strategy

Grand Strategy

General plan of action to achieve longGeneral plan of action to achieve long--

term objectivesterm objectives

1. Growth1. Growth

2. Stability2. Stability

3. Retrenchment.3. Retrenchment.


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Growth

Growth

Can be promoted internally by investingCan be promoted internally by investing

in expansion or externally by acquiringin expansion or externally by acquiring

additional business divisions.additional business divisions.


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StabilityStabilityRemain same size or grow steadily andRemain same size or grow steadily and

in a controlled fashion.in a controlled fashion.


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Retrenchment

Retrenchment

Forced decline by either shrinkingForced decline by either shrinking

current business units or selling off orcurrent business units or selling off or

liquidating entire businesses.liquidating entire businesses.


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Global Strategy

Global Strategy

uu GlobalizationGlobalization: product design and: product design and

advertising strategies are standardizedadvertising strategies are standardized

around the worldaround the world

uu MultidomesticMultidomestic: adapt product and: adapt product and

promotion for each countrypromotion for each country

uu TransnationalTransnational: combine global: combine global

coordination with flexibility to meetcoordination with flexibility to meet

specific needs in various countries.specific needs in various countries.


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Purpose of Strategy

Purpose of Strategy

uu CORE COMPETENCE: something theCORE COMPETENCE: something the

organization does especially well inorganization does especially well in

comparison to its competitorscomparison to its competitors

** Superior research and developmentSuperior research and development

** Mastery of a technologyMastery of a technology

** Superior customer service.Superior customer service.


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Purpose of Strategy

Purpose of Strategy

SYNERGY: when organizational partsSYNERGY: when organizational parts

interact to produce a joint effect that isinteract to produce a joint effect that is

greater than the sum of its parts actinggreater than the sum of its parts acting

alone.alone.


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Purpose of Strategy

Purpose of Strategy

Value Creation = use core competenceValue Creation = use core competence

and synergy to provide increasedand synergy to provide increased

benefits received with lower costs paid.benefits received with lower costs paid.


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Levels of StrategyL

evels of Strategyuu CorporateCorporate

uu BusinessBusiness

uu Functional.Functional.


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CorporateCorporate--Level StrategyLevel Strategy

("What business are we in?")("What business are we in?")uu Acquisition of new businessesAcquisition of new businesses

uu Additions or divestment of business units,Additions or divestment of business units,

plants, or product linesplants, or product lines

uu Joint ventures with other companies inJoint ventures with other companies in

new areas.new areas.


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BusinessBusiness--Level StrategyLevel Strategy

("How do we compete?")("How do we compete?")uu AdvertisingAdvertising

uu Direction and extent of R&DDirection and extent of R&D

uu Product changesProduct changes

uu New product developmentNew product development

uu

Equipment and facilitiesEquipment and facilitiesuu Expansion or contraction of productExpansion or contraction of product

lines.lines.


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FunctionFunction--Level StrategyLevel Strategy

("How do we su

pport("How do we su

pportbusinessbusiness--level strategy?")level strategy?")

uu ProductionProduction

uu DistributionDistribution

uu Finance.Finance.


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StrategyF

ormu

lationStrategyF

ormu

lationuu Development of the firm's goals and aDevelopment of the firm's goals and a

specific strategic planspecific strategic plan

uu Assessing the external environment andAssessing the external environment and

the internal problemsthe internal problems

uu Integrating the results into goals andIntegrating the results into goals and

strategy.strategy.


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Strategy ImplementationStrategy ImplementationThe accomplishment of the strategic plan.The accomplishment of the strategic plan.


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The Strategic ManagementThe Strategic Management

ProcessProcess


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Identify

Strategic

Factors:

Opportunities

Threats

Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment


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Situ

ation Analysis: SWOT

Situ

ation Analysis: SWOT

uu Strengths (Internal)Strengths (Internal)

uu Weaknesses (Internal)Weaknesses (Internal)

uu Opportunities (External)Opportunities (External)

uu Threats (External)Threats (External)


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:

Opportunities

Threats

Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

FormulateStrategy:

Corporate


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Formulating CorporateFormulating Corporate--Level StrategyLevel Strategy


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Portfolio StrategyP

ortfolio StrategyThe organizational mix of SBUs andThe organizational mix of SBUs and

product lines to provide synergy and aproduct lines to provide synergy and a

competitive advantage.competitive advantage.


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The BCG matrix evaluatesThe BCG matrix evaluates

SBU

s along twoSBU

s along twodimensions:dimensions:

uu Business growth rate how rapidly theBusiness growth rate how rapidly the

entire industry is growingentire industry is growing

uu Market share defines if an SBU has aMarket share defines if an SBU has a

larger or smaller market share thanlarger or smaller market share than

competitorscompetitorsuu Provides four categories to judge SBUs.Provides four categories to judge SBUs.


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Star

Cash

Cow Dog

Problem

Child

High

High

Low

Low

BusinessBusiness

GrowthGrowth

RateRate

MarketShareMarketShare


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:

Opportunities

Threats

Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

Formulate

Strategy:

Corporate

Business


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Formulating BusinessFormulating Business--LevelLevel

StrategyStrategy

Porter's Competitive ForcesPorter's Competitive Forces


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Potential New

Entrants

Threat ofThreat of

newnewentrantsentrants


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Potential New

Entrants

BuyersBargainingBargaining

power ofpower of

buyersbuyers

Threat ofThreat of



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Potential New

Entrants

Buyers

BargainingBargainingpower ofpower of

supplierssuppliers

BargainingBargaining

power ofpower of

buyersbuyers

Threat ofThreat of



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Substitute

Products

fromOther

Industries

Suppliers

Potential New

Entrants

BuyersThreat ofThreat ofsubstitutesubstitute

productsproducts


supplierssuppliers


power ofpower of

buyersbuyers

Threat ofThreat of



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Substitute

Products

fromOther

Industries

Suppliers

Potential New

Entrants

Buyers

The Firms

Rivalry versusIndustry

Competition

Threat ofThreat ofsubstitutesubstitute

productsproducts


supplierssuppliers


power ofpower of

buyersbuyers

Threat ofThreat of



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Porter's CompetitivePorter's Competitive

StrategiesStrategiesuu DifferentiationDifferentiation

uu Cost LeadershipCost Leadership

uu Focus.Focus.


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Prod

uctL

ife CycleP

rodu

ctL

ife Cycle1. Introduction1. Introduction

2. Growth2. Growth

3.Maturity3.Maturity

4. Decline.4. Decline.


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:

OpportunitiesThreats

Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

Formulate

Strategy:Corporate

Business

Functional


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Formulating FunctionalFormulating Functional--

Level StrategyLevel Strategy

Action plans adopted by majorAction plans adopted by major

departments to support thedepartments to support thebusinessbusiness--level strategy to achievelevel strategy to achieve

the organization's strategic goals.the organization's strategic goals.


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Putting Strategy Into Action

Putting Strategy Into Action


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:


Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

Formulate

Strategy:Corporate

Business

Functional

Implement

Strategy via

Changes in:

Leadership

Culture


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LeadershipL

eadershipThe ability to influence employees toThe ability to influence employees to

support strategy implementation.support strategy implementation.


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Stru

ctu

ral DesignStru

ctu

ral Designuu Managers' responsibilities and authorityManagers' responsibilities and authority

uu Consolidation of facilities, departments,Consolidation of facilities, departments,

and divisionsand divisions

uu Task designTask design

uu Production technology.Production technology.


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:


Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

Formulate

Strategy:Corporate

Business

Functional

Implement

Strategy via

Changes in:

Leadership

Culture

Human

Resources


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Hu

manR

esou

rcesHu

manR

esou

rcesuu RecruitmentRecruitment

uu SelectionSelection

uu TrainingTraining

uu TransfersTransfers

uu PromotionsPromotions

uu Layoff or separation.Layoff or separation.


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Evaluate

Current:

Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:


Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

Formulate

Strategy:Corporate

Business

Functional

Implement

Strategy via

Changes in:

Leadership

CultureHuman

Resources

Information

and Control

Systems


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Information and ControlInformation and Control

SystemsSystemsuu Reward systemsReward systems

uu Pay incentivesPay incentives

uu BudgetsBudgets

uu Information systemsInformation systems

uu Rules, policies, and procedures.Rules, policies, and procedures.


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Evaluate

Current:Mission

Goals

Strategies

Scan External

Environment

Define New:Mission

Goals

Identify

Strategic

Factors:


Identify

Strategic

Factors:

Strengths

Weaknesses

Scan Internal

Environment

Formulate

Strategy:Corporate

Business

Functional

Implement

Strategy via

Changes in:

Leadership

CultureHuman

Resources

Information

and Control

Systems


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Implementing GlobalImplementing Global

StrategiesStrategiesuu Flexibility and communication areFlexibility and communication are

mandatory skills in the internationalmandatory skills in the international

arenaarena

uu Structural design must merge withStructural design must merge with

foreign cultures and link operationsforeign cultures and link operations

uu Information and control systems must fitInformation and control systems must fitthe needs and incentives within localthe needs and incentives within local

culturescultures


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Implementing GlobalImplementing Global

StrategiesStrategiesuu Human resource management faceHuman resource management face

problems not confronted in Northproblems not confronted in North

America such as:America such as:

uu Labor lawsLabor laws

uu Guaranteed jobsGuaranteed jobs

uu Cultural traditions of keepingCultural traditions of keeping

unproductive on the job.unproductive on the job.

strategy formulation and implemetation

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