Presentation on theme: "Strategy Formulation and Implementation"— Presentation transcript:
1 Strategy Formulation and Implementation Chapter 8
2 Strategic PlanningStrategic planning has taken on new importance in today’s world of globalization, deregulation, advancing technology, and changing demographics, and lifestylesManager’s Challenge: Nintendo
3 Strategy Formulation and Implementation Topics:Chapter 8Strategic ManagementDefinitionComponentsModel of Strategic Management ProcessModels of Strategy FormationManagerial Tools to Implement Strategic Plans
4 Thinking Strategically Answers to the following define an overall direction for the organization's grand strategyWhere is the organization now?Where does the organization want to be?What changes are among competitors?What courses of action will help us achieve our goals?2
5 Strategic ManagementSet 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 goalsResponsibility = top managers &chief executive
6 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?
7 Grand Strategy General plan of major action to achieve long-term goals Falls into three general categories1. Growth2. Stability3. RetrenchmentA separate grand strategy can be defined for global operationsEthical Dilemma: A Great Deal for Whom?3
8 Grand Strategy: Growth Growth can be promoted internally by investing in expansion or externally by acquiring additional business divisionsInternal growth = can include development of new or changed productsExternal growth = typically involves diversification – businesses related to current product lines or into new areas
9 Grand Strategy: Stability Stability, sometimes called a pause strategy, means that the organization wantsto remain the same size orto grow slowly and in a controlled fashion
10 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 businessesLiquidation = selling off a business nit for the cash value of the assets, thus terminating its existenceDivestiture = involves selling off of businesses that no longer seem central to the corporation
11 Global Corporate Strategies HighTransnationalStrategySeeks to balance global efficiencies and local responsivenessCombines standardization and customization for product/advertising strategiesGlobalizationStrategyTreats world as a single global marketStandardizes global products/advertising strategiesNeed for Global IntegrationExportStrategyDomestically focusedExports a few domestically produced products to selected countriesMulti-domestic StrategyHandles markets independently for each countryAdapts product/advertising to local tastes and needsLowLowNeed for National ResponsivenessHigh
12 Global StrategyGlobalization = product design and advertising strategies are standardized around the worldMulti-domestic = adapt product and promotion for each countryTransnational = combine global coordination with flexibility to meet specific needs in various countries7
13 Purpose of StrategyThe 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 goalsStrategies focus on:Core competenciesDeveloping synergyCreating value for customers8
14 Three Levels of Strategy in Organizations Corporate-Level Strategy:What business are we in?CorporationBusiness-Level Strategy:How do we compete?Textiles UnitChemicals UnitAuto Parts UnitFunctional-Level Strategy:How do we support the business-level strategy?FinanceR&DManufacturingMarketing
15 Strategic Management Process Scan External Environment – National, GlobalIdentify Strategic Factors – Opportunities, ThreatsImplement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systemsEvaluate Current Mission, Goals, StrategiesFormulate Strategy – Corporate, Business, FunctionalDefine new Mission Goals, Grand StrategySWOTScan Internal Environment – Core Competence, Synergy, Value CreationIdentify Strategic Factors – Strengths, Weaknesses
16 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 planStrategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomesExperiential Exercise: Developing Strategy for a Small Business
17 Checklist for Analyzing Organizational Strengths and Weaknesses Management and OrganizationMarketingHuman ResourcesDistribution channelsMarket shareAdvertising efficiencyCustomer satisfactionProduct qualityService reputationEmployee experience, educationManagement qualityStaff qualityDegree of centralizationUnion statusOrganization chartsTurnover, absenteeismPlanning, information, control systemsWork satisfactionGrievancesSales force turnoverFinanceProductionResearch and DevelopmentProfit marginPlant locationBasic applied researchDebt-equity ratioMachinery obsolescenceLaboratory capabilitiesInventory ratioPurchasing systemResearch programsReturn on investmentNew-product innovationsQuality controlTechnology innovationsCredit ratingProductivity/efficiencySources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens, Long-Range Planning for Your Business (New York: American Management Association, 1976).
18 Portfolio StrategyBCG MatrixMix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
19 Five Forces Affecting Industry Competition Potential New EntrantsInternet reduces barriers to entryInternet blurs differences among competitors in an industryThreat of Substitute ProductsRivalry among CompetitorsBargaining Power of BuyersInternet expands market size, but creates new substitution threatsInternet shifts greater power to end consumersInternet tends to increase the bargaining power of suppliersBargaining Power of SuppliersSource: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).
20 Competitive Edge Through Competitive Strategies Differentiation = attempt to distinguish products or services from that of competitorsCost leadership = aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitorsFocus = concentrates on a specific regional market or buyer group
21 Continuum of Partnership Strategies Organizational CombinationAcquisitionsMergersJoint VenturesStrategic AlliancesDegree of CollaborationStrategic Business PartneringPreferred Supplier ArrangementsLowHighDegree of Collaboration
22 Implementing Strategy Tools LeadershipStructural designInformation and control systemsHuman resources
23 Tools for Putting Strategy into Action EnvironmentOrganizationLeadership Persuasion Motivation Culture/valuesStructural Design Organization Chart Teams CentralizationDecentralization,Facilities, task designHuman Resources Recruitment/selection Transfers/promotions Training Layoffs/recallsStrategyPerformanceInformation and Control Systems Pay, reward system Budget allocations Information systems Rules/proceduresSource: 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.