Strategy Formulation and Implementation Strategy Formulation and Implementation

Learning Outcomes Define the components of strategic management and discuss the levels of strategy. Describe the strategic management process and SWOT Analysis. Define corporate-level strategies and explain the portfolio and diversification approaches. Describe Porter’s competitive forces and strategies. Discuss new trends in strategy, including innovation from within and partnership strategies. Discuss the organizational dimensions used for strategy execution.

What is Strategic Management? Plans and actions that lead to superior competitive standing Who are our competitors and what are their strengths and weaknesses? Who are our customers? What products or services should we offer? What does the future hold for our industry? How can we change the rules of the game?

Purpose of Strategy Strategy: Strategy should: Plan of action Strategy: Plan of action Resource allocation Activities for dealing with the environment Achieving competitive advantage Strategy should: Exploit Core Competence Build Synergy Deliver Value

Building Synergy The essence of most good strategies is the need to make many choices that are all consistent—choices about production, service, design, and so on. Companies cannot randomly make a lot of choices that all turn out to be consistent. It’s statistically impossible. That means companies need to grasp at least a part of the whole. As we study the histories of successful companies, we see that someone or some group developed insight into how a number of choices fit together… Michael Porter Harvard Business School

Three Levels of Strategy in Organizations

Strategy Formulation Versus Execution Strategy Formulation Assess environment and internal problems Planning Decision making Establishment of goals Strategy Execution Directing resources Accomplishing results Changes in structure Use managerial and organizational tools

The Strategic Management Process

Assessment of internal and external factors SWOT Analysis Assessment of internal and external factors Organizational strengths, weaknesses, Reports Budgets Financial ratios Employee surveys External information about opportunities and threats Customers Government reports Professional journals Bankers Consultants

Analyzing Organizational Strengths and Weaknesses

Formulating Corporate-Level Strategy Portfolio Strategy A diverse mix of business units Strategic Business Units (SBU) have different products, mission, markets and competitors The BCG Matrix Organizes businesses along two dimensions—growth and market share Diversification Strategy Movement into new lines of business

The BCG Matrix

Formulating Business-Level Strategy Porter’s Five Forces – analyzing a company’s position in the industry Potential New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitute Products Rivalry Among Competitors

Porter’s Five Forces

Porter’s Competitive Strategies Porter suggests that a company can adopt one of three strategies after analyzing the forces

Global Strategy Finding strategies in the world marketplace Finding strategies in the world marketplace Synergy among world operations Organizations differ in their global strategies Globalization Export Transnational Multidomestic

Global Corporate Strategies

Strategy Execution How will the strategy be implemented—put into action? The organization must be congruent with the strategy Execution involves several tools: Leadership Structural Design Human Resources Information and Control Systems

Tools for Putting Strategy into Action