Strategy Formulation and Implementation

1. 0 Strategy Formulation and Implementation CHAPTER 8

2. 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.

3. 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.

4. 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

5. 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?

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 0 Three Levels of Strategy in Organizations Three Levels of Strategy in Organizations Exhibit 8.2

14. 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

15. 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

16. 0 Checklistfor Analyzing Organizational Strengths and Weaknesses Exhibit 8.4

17. 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

18. 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).

19. 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

20. 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

21. 0 Implementing Strategy Tools • Leadership • Structural design • Information and control systems • Human resources

22. 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.