1. Strategy Formulation and Implementation
Strategy Formulation and Implementation
CHAPTER 8

2. Learning Objectives Define the components of strategic management.
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. Learning Objectives (contd.)
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. 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. Strategic Management Managers ask such questions as...
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. Grand Strategy General plan of major action to achieve long-term goals
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 3

7. Grand Strategy: Growth
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. Grand Strategy: Stability
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. Grand Strategy: Retrenchment
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. Global Corporate Strategies
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. 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 7

12. 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 8

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

14. Strategic Management Process
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. Strategy Formulation vs. Implementation
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. Checklist for Analyzing Organizational Strengths and Weaknesses
Checklist for Analyzing Organizational Strengths and Weaknesses
Exhibit 8.4

17. Portfolio Strategy
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
BCG Matrix
Exhibit 8.5

18. Five Forces Affecting Industry Competition
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
Rivalry among Competitors
Bargaining Power of Buyers
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. Competitive Edge Through Competitive Strategies
Competitive Edge Through Competitive 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 produce products more efficiently than competitors
Focus = concentrates on a specific regional market or buyer group

20. Continuum of Partnership Strategies
Continuum of Partnership Strategies
Exhibit 8.8
Organizational Combination
Acquisitions
Mergers
Joint Ventures
Degree of Collaboration
Strategic Alliances
Strategic Business Partnering
Preferred Supplier Arrangements
Low
High
Degree of Collaboration

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

22. Tools for Putting Strategy into Action
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.