CHP 07 Strategy of growth and managing implication of growth.

Strategic Management Set of decisions and actions used to implement strategies that will provide competitively superior fit between the organization and its environment so as achieve organizational goals

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?

What are Grand Strategy? General plan of major action to achieve long- term goals Falls into three general categories 1. Growth 2. Stability 3. Retrenchment

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

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

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 unit for the cash value of the assets, thus terminating its existence

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

Three Levels of Strategy in Organizations

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

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

Strategic Analysis Porter's five forces model – the five forces the bargaining power of suppliers the bargaining power of buyers the threat of potential new entrants the threat of substitutes the extent of competitive rivalry – factors affecting each of the forces – limitations of the five forces model