1. Management: Principles and Practices
Management 11e Griffin
Management: Principles and Practices
11e
Ricky W. Griffin
CHAPTER 8
Managing Strategy and Strategic Planning
PART 3
Planning and Decision Making
PowerPoint Presentation by Charlie Cook The University of West Alabama
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2. The Nature of Strategic Management
Management 11e Griffin
The Nature of Strategic Management
Strategy
Is a comprehensive plan for accomplishing an organization’s goals.
Strategic Management
Involves formulating and implementing strategies to take advantage of business opportunities and meet competitive challenges.
Effective Strategies
Promote superior alignment between an organization, its environment, and its goals.
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3. Components of Strategy
Management 11e Griffin
Components of Strategy
Distinctive Competence
Competitive Scope
Resource Deployment
Components of Effective Strategies
Something the organization does exceptionally well
Specify the range of market in which it will compete
How to distribute resources across the areas in which it competes
E x a m p l e
Abercrombie and fetch
Track customer preference
Transmits order to supplier
Charters 747 to fly Products
Stores Products in 48 hours
Mars has adopted a broader scope by competing in the pet food business and the electronics industry
GE uses its profit from US operation to invest in new business of Europe and Asia
speed in moving inventory
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4. Types of Strategic Alternatives
Management 11e Griffin
Types of Strategic Alternatives
Business-Level Strategy
The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market. or
Corporate-Level Strategy
The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.
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5. Strategy Formulation and Implementation
Management 11e Griffin
Strategy Formulation and Implementation
Strategy Formulation
The set of processes involved in creating or determining the organization’s strategies; it focuses on the content of strategies.
Strategy Implementation
The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.
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6. Types of Strategies Formulation & Implementation
Management 11e Griffin
Types of Strategies Formulation & Implementation
Deliberate Strategy
A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation.
Emergent Strategy
A pattern of action that develops over time in the absence of goals or missions, or despite goals and missions.
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7. 8.1 SWOT Analysis Management 11e Griffin
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8. SWOT Analysis and Strategy
Management 11e Griffin
SWOT Analysis and Strategy
Evaluating Organizational Strengths
Organizational strengths
are skills and abilities enabling an organization to conceive of and implement strategies.
Common organizational strengths
are organizational capabilities possessed by numerous competing firms.
Distinctive competencies
are useful for competitive advantage and superior performance.
Imitation of distinctive competencies
removes the competitive advantage of the competency.
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9. SWOT Analysis and Strategy (cont’d)
Management 11e Griffin
SWOT Analysis and Strategy (cont’d)
Evaluating Organizational Strengths (cont’d)
Sustained competitive advantage
occurs when a distinctive competence cannot be easily duplicated.
is what remains after all attempts at strategic imitations cease.
Strategic imitation of a distinctive competence is difficult when:
it is based on unique historical circumstances.
it is difficult for competitors to understand its nature or character.
it is based on a complex phenomenon (e.g., organizational culture).
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10. SWOT Analysis and Strategy (cont’d)
Management 11e Griffin
SWOT Analysis and Strategy (cont’d)
Evaluating Organizational Weaknesses
Organizational weaknesses
Skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.
Weaknesses can be overcome by:
investments to obtain the strengths needed.
modification of the organization’s mission so it can be accomplished with the current workforce.
Competitive disadvantage
occurs when an organization fails to implement strategies being implemented by competitors.
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11. SWOT Analysis and Strategy (cont’d)
Management 11e Griffin
SWOT Analysis and Strategy (cont’d)
Evaluating an Organization’s Opportunities and Threats
Organizational opportunities
are areas in the organization’s environment that may generate high performance.
Organizational threats
are areas in the organization’s environment that make it difficult for the organization to achieve high performance.
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12. Formulating Business-Level Strategies
Management 11e Griffin
Formulating Business-Level Strategies
Overall cost leadership strategy
Focus strategy
Differentiation strategy
Porter’s Generic Strategies
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13. Formulating Business-Level Strategies
Management 11e Griffin
Formulating Business-Level Strategies
Porter’s Generic Strategies
Differentiation strategy
An organization seeks to distinguish itself from competitors through the quality of its products or services.
Overall cost leadership strategy
An organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms.
Focus strategy
An organization concentrates on a specific regional market, product line, or group of buyers.
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14. 8.1 Porter’s Generic Strategies
Management 11e Griffin
8.1 Porter’s Generic Strategies
Strategy Type
Definition
Examples
Differentiation
Distinguish products or services
Rolex (watches)
Godiva (chocolate)
Mercedes-Benz (automobiles)
Nikon (cameras)
Cross (writing instruments
Overall cost leadership
Reduce manufacturing and other costs
Timex (watches)
Hershey (chocolate)
Kia (automobiles)
Kodak (cameras)
BIC (writing instruments)
Focus
Concentrate on specific regional market, product market, or group of buyers
Tag Heuer (watches)
Vosges (chocolate)
Fiat, Alfa Romeo (automobiles)
Hasselblad (cameras)
Waterman (writing instruments)
Fisher-Price (handheld calculators)
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15. Implementing Porter’s Generic Strategies
Management 11e Griffin
Implementing Porter’s Generic Strategies
Differentiation
Marketing and sales emphasize HIGH-QUALITY, high-value image of the organization’s products or services.
Overall Cost Leadership
Marketing and sales focus on simple product attributes and how these product attributes meet customer needs in A LOW-COST and effective manner.
Focus
Either differentiation or cost leadership, depending on which one is the proper basis for competing in or for a specific market segment, product category, or group buyers.
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16. Miles and Snow’s Strategy Types
Management 11e Griffin
Miles and Snow’s Strategy Types
Prospectors
Defenders
Analyzers
Reactors
Strategic Types of Organizations
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17. Miles and Snow’s Strategy Types
Management 11e Griffin
Miles and Snow’s Strategy Types
Prospector
Encourages creativity to seek out new market opportunities and to take risks.
Develops the flexibility to meet changing market conditions by decentralizing its organizational structure.
Example: Amazon.com, 3M
Defender
Focuses on defending its current markets by lowering its costs and/or improving the performance of its current products.
Example: ebay.com, BIC
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18. Analyzer
Incorporates elements of both the prospector and the defender strategies to maintain business and to be somewhat innovative.
IBM, DuPont
DuPont was founded in 1802 by Éleuthère Irénée du Pont, using capital raised in France and gunpowder machinery imported from France
DuPont businesses are organized into the following five categories, known as marketing "platforms": Electronic and Communication Technologies, Performance Materials, Coatings and Color Technologies, Safety and Protection, and Agriculture and Nutrition.
Reactor
Has no clear strategy, reacts to changes and events.

19. 8.2 The Miles and Snow Typology
Management 11e Griffin
8.2 The Miles and Snow Typology
Strategy Type
Definition
Examples
Prospector
Is innovative and growth oriented, searches for new markets and new growth opportunities, encourages risk taking
Amazon.com 3M
Rubbermaid
Defender
Protects current markets, maintains stable growth, serves current customers
BIC
eBay
Mrs. Fields
Analyzer
Maintains current markets and current customer satisfaction with moderate emphasis on innovation
DuPont
IBM
Yahoo!
Reactor
No clear strategy, reacts to changes in the environment, drifts with events
International Harvester (now doing business as Navistar)
Joseph Schlitz Brewing Co.
Kmart
Montgomery Ward (no longer in business)
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20. 8.2 The Product Life Cycle Sales Volume Time Management 11e Griffin
High
Stages
Introduction
Growth
Maturity
Decline
Sales Volume
Low
Time
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21. Formulating Corporate-Level Strategies
Management 11e Griffin
Formulating Corporate-Level Strategies
Strategic Business Units
Each business or group of businesses within an organization is engaged in serving the same markets, customers, or products.
Diversification
The number of businesses an organization is engaged in and the extent to which these businesses are related to one another
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22. Corporate-Level Strategies
Management 11e Griffin
Corporate-Level Strategies
Related diversification (synergy)
Unrelated diversification (risk/return)
Single-product strategy (simplicity)
Strategic Choices
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23. Corporate-Level Strategies
Management 11e Griffin
Corporate-Level Strategies
Single-Product Strategy
An organization manufactures one product or service and sells it in a single geographic market.
Related Diversification
A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.
Avoids the disadvantages and risks of a single-product strategy.
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24. Advantages of Related Diversification
Management 11e Griffin
Advantages of Related Diversification
Reduces economic risk by avoiding dependence on a specific business or activity.
Reduces overhead costs through economies of scale and economies of scope.
Increases overall economic value through complementary strengths and capabilities synergies gained by managing the set of businesses together rather than separately.
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25. Unrelated Diversification
Management 11e Griffin
Unrelated Diversification
Unrelated Diversified Organization
Operates multiple businesses that are not logically associated with one another.
Advantages
Stable performance over time due to business cycle differences among the multiple businesses.
Allocation of resources to areas with the highest return potentials to maximize corporate performance.
Disadvantages
Poor performance due to the complexity of managing a diversity of businesses.
Failing to exploit key synergies puts the firm at a competitive disadvantage to firms with related diversification strategies.
Firms that pursue an unrelated diversification strategy operate multiple businesses that are not logically associated with one another.
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26. Becoming a Diversified Firm
Management 11e Griffin
Becoming a Diversified Firm
Development of new products
Vertical integration
Merger with another firm
Acquisition of another firm
Diversification Alternatives
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27. Becoming a Diversified Firm
Management 11e Griffin
Becoming a Diversified Firm
Replacement of Suppliers And Customers
Backward vertical integration
Beginning a business that furnishes resources previously handled by a supplier.
Forward vertical integration
Beginning a business previously handled by an intermediary and selling more directly to customers.
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28. Becoming a Diversified Firm (cont’d)
Management 11e Griffin
Becoming a Diversified Firm (cont’d)
Purposes of Mergers and Acquisitions
To diversify through vertical integration.
To acquire complementary products or services linked by a common technology and common customers.
To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues.
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29. Managing Diversification
Management 11e Griffin
Managing Diversification
Major Tools for Managing Diversification
Organization structure
A detailed discussion of organization structure is contained in Chapter 12.
Portfolio management techniques
Methods used by diversified firms to make decisions about what businesses to engage in and how to manage these businesses to maximize corporate performance.
Two important portfolio management techniques
The BCG Matrix
The GE Business Screen
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30. Managing Diversification (cont’d)
Management 11e Griffin
Managing Diversification (cont’d)
BCG Matrix
Evaluates a portfolio of businesses on the growth rate of their respective markets and each business’s relative share of its market.
Classifies the types of businesses in a diversified firm’s portfolio as:
“Dogs” have small market shares and no growth prospects.
“Cash cows” have large shares of mature markets.
“Question marks” have small market shares in quickly growing markets.
“Stars” have large shares of rapidly growing markets.
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31. 8.3 The BCG Matrix Stars Question marks Market Growth Rate Cash Cows
Management 11e Griffin
8.3 The BCG Matrix
High
Stars
Question marks
Market Growth Rate
Cash Cows
Dogs
Low
Relative Market Share
High
Low
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32. Managing Diversification (cont’d)
Management 11e Griffin
Managing Diversification (cont’d)
GE Business Screen
A method of evaluating businesses in a diversified portfolio along two dimensions, each of which contains multiple factors:
Industry attractiveness.
Competitive position (strength) of each firm in the portfolio.
In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.
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33. Industry Attractiveness
Management 11e Griffin
8.4 The GE Business Screen
Winner
Average business
Loser
Profit producer
Question mark
Competitive Position
Industry Attractiveness
Good
Medium
Poor
High
Low
Market share
Technological know-how
Product quality
Service network
Price competitiveness
Operation costs
Market growth
Market size
Capital requirements
Competitive intensity
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