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Strategy Formulation and Implementation

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Presentation on theme: "Strategy Formulation and Implementation"— Presentation transcript:

1 Strategy Formulation and Implementation
Chapter 8

2 Strategic Planning Strategic planning has taken on new importance in today’s world of globalization, deregulation, advancing technology, and changing demographics, and lifestyles Manager’s Challenge: Nintendo

3 Strategy Formulation and Implementation
Topics: Chapter 8 Strategic Management Definition Components Model of Strategic Management Process Models of Strategy Formation Managerial Tools to Implement Strategic Plans

4 Thinking Strategically
Answers to the following define an overall direction for the organization's grand strategy Where 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 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 & 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 categories 1. Growth 2. Stability 3. Retrenchment A separate grand strategy can be defined for global operations Ethical 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 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

9 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

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 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

11 Global Corporate Strategies
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

12 Global Strategy Globalization = product design and advertising strategies are standardized around the world Multi-domestic = adapt product and promotion for each country Transnational = combine global coordination with flexibility to meet specific needs in various countries 7

13 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

14 Three Levels of Strategy in Organizations
Corporate-Level Strategy: What business are we in? Corporation Business-Level Strategy: How do we compete? Textiles Unit Chemicals Unit Auto Parts Unit Functional-Level Strategy: How do we support the business-level strategy? Finance R&D Manufacturing Marketing

15 Strategic Management Process
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

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 plan Strategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes Experiential Exercise: Developing Strategy for a Small Business

17 Checklist for Analyzing Organizational Strengths and Weaknesses
Management and Organization Marketing Human Resources Distribution channels Market share Advertising efficiency Customer satisfaction Product quality Service reputation Employee experience, education Management quality Staff quality Degree of centralization Union status Organization charts Turnover, absenteeism Planning, information, control systems Work satisfaction Grievances Sales force turnover Finance Production Research and Development Profit margin Plant location Basic applied research Debt-equity ratio Machinery obsolescence Laboratory capabilities Inventory ratio Purchasing system Research programs Return on investment New-product innovations Quality control Technology innovations Credit rating Productivity/efficiency Sources: 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 Strategy BCG Matrix Mix 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 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).

20 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

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

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

23 Tools for Putting Strategy into Action
Environment 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.

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