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0. Strategy Formulation and Implementation. CHAPTER 8. 0. Learning Objectives. Define the components of strategic management. Describe the strategic planning process and SWOT analysis. Understand grand strategies for domestic and international operations.
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0 Strategy Formulation and Implementation CHAPTER 8
0 Learning 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.
0 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.
0 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 = top managers and chief executive
0 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?
0 Grand Strategy • General plan of major action to achieve long-term goals • Falls into three general categories 1. Growth 2. Stability 3. Retrenchment A separate grand strategy can be defined for global operations
0 Grand 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
0 Grand 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
0 Grand 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
0 Global Corporate Strategies Exhibit 8.1 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 Need for Global Integration • Export • Strategy • Domestically focused • Exports a few domestically produced products to selected countries • Multi-domestic Strategy • Handles markets independently for each country • Adapts product/advertising to local tastes and needs Low Low Need for National Responsiveness High
0 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
0 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
0 Three Levels of Strategy in Organizations Three Levels of Strategy in Organizations Exhibit 8.2
0 Strategic Management Process Exhibit 8.3 Scan External Environment – National, Global Identify Strategic Factors – Opportunities, Threats Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems Evaluate Current Mission, Goals, Strategies Formulate Strategy – Corporate, Business, Functional Define new Mission Goals, Grand Strategy SWOT Scan Internal Environment – Core Competence, Synergy, Value Creation Identify Strategic Factors – Strengths, Weaknesses
0 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
0 Checklistfor Analyzing Organizational Strengths and Weaknesses Exhibit 8.4
0 Portfolio Strategy Exhibit 8.5 BCG Matrix • Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
0 Five Forces Affecting Industry Competition Exhibit 8.6 Potential New Entrants • Internet reduces barriers to entry Internet blurs differences among competitors in an industry Threat of Substitute Products Bargaining Power of Buyers Rivalry among Competitors • Internet expands market size, but creates new substitution threats • Internet shifts greater power to end consumers • Internet tends to increase the bargaining power of suppliers Bargaining Power of Suppliers Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).
0 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 produceproducts more efficiently than competitors • Focus = concentrates on a specific regional market or buyer group
0 Continuum of Partnership Strategies Exhibit 8.8 Acquisitions Organizational Combination Mergers Joint Ventures Degree of Collaboration Strategic Alliances Strategic Business Partnering Preferred Supplier Arrangements Low High Degree of Collaboration
0 Implementing Strategy Tools • Leadership • Structural design • Information and control systems • Human resources
0 Tools for Putting Strategy into Action Environment Exhibit 8.9 Organization Leadership Persuasion Motivation Culture/values • Structural Design Organization Chart Teams Centralization • Decentralization, • Facilities, task design Human Resources Recruitment/selection Transfers/promotions Training Layoffs/recalls Strategy Performance Information and Control Systems 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.