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Strategy Formulation and Execution: Achieving Competitive Advantage

This chapter explores the importance of strategic management in organizations and the process of formulating and executing effective strategies. It discusses the elements of competitive advantage, three levels of strategy, SWOT analysis, corporate-level strategy, Porter's competitive strategies, functional-level strategy, and the factors that contribute to the failure or success of strategy execution.

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Strategy Formulation and Execution: Achieving Competitive Advantage

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  1. Chapter 8 Strategy Formulation and Execution

  2. Strategy • Every company is concerned with strategy • It determines which organizations succeed and which ones struggle • Strategic blunders can hurt a company • Strategic management is a specific type of planning

  3. Thinking Strategically • The long-term view of the organization and competition • Thinking strategically impacts performance and financial success • Today’s environment requires everyone to think strategically

  4. Strategic Management Decisions and actions used to formulate and execute strategies that will provide competitively superior fit between the organization and its environment to achieve organizational goals

  5. Purpose of Strategy • Explicit strategy is the plan of action • Competitive advantage is the organization’s distinctive edge for meeting customer needs Strategies should: • Exploit Core Competencies • Achieve Synergy • Create Value • Target Customers

  6. 8.1 The Elements of Competitive Advantage

  7. 8.2 Three Levels of Strategy in Organizations

  8. 8.3 The Strategic Management Process

  9. Strategy Formulation versus Execution Formulation: Assessing the external environment and internal problems to create goals and strategy Execution: the use of managerial and organizational tools to direct resources toward accomplishing strategic results

  10. SWOT Analysis • Formulating strategy often begins with an audit of internal and external factors • Internal Strengths and Weaknesses • External Opportunities and Threats • Information is acquired from reports, surveys, discussions, and meetings

  11. 8.4 Audit Checklist for Analyzing Organizational Strengths and Weaknesses

  12. Formulating Corporate-Level Strategy: Portfolio Strategy • Strategic Business Units (SBUs) have a unique mission, products, and competitors • Portfolio strategy pertains to the mix of SBUs and product lines to provide synergy and competitive advantage • Organizations should not become too dependent on one business

  13. Formulating Corporate-Level Strategy: The BCG Matrix • Organizes business along two dimensions • Business growth rate • Market share • Four categories for corporate portfolio • The combination of high/low market share and high/low business growth

  14. 8.5 The BCG Matrix

  15. Formulating Corporate-Level Strategy: Diversification Strategy • Related diversification:expansion into new business related to existing business activities • Unrelated diversification:expansion into new lines of business • Vertical integration:expansion into businesses that supply to the business or are distributors

  16. Formulating Business-Level Strategy • Strategy within the business units: How do we compete? • Business-level strategies are developed by Porter’s Five Forces • Web technology is impacting all industries in positive and negative ways

  17. 8.5 Porter’s Five Forces

  18. Porter’s Competitive Strategies • Differentiation • Distinguishing products and services • Cost Leadership • Cost reductions, cost controls • Focus Strategy • Concentration on a specific region or buyer • Either differentiation or cost leadership approach

  19. 8.7 Characteristics of Porter’s Competitive Strategies

  20. Formulating Functional-Level Strategy Action plans used by major departments • Marketing • Production • Finance • Human Resources • Research and Development

  21. 8.8 Global Corporate Strategies

  22. Strategy Execution The final step! • “Strategy is easy, but execution is hard” • Most important but most difficult part • Strategy must be skillfully executed • Alignment requires all aspects of the organization to focus on strategy goals • Everyone is moving in the same direction

  23. 8.9 Factors that Contribute to the Failure of Strategy Execution

  24. 8.10 Tools for Putting Strategy into Action

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