Presentation on theme: "Strategy Formulation and Implementation"— Presentation transcript:
1 Strategy Formulation and Implementation Strategy Formulation and ImplementationCHAPTER 8
2 Learning Objectives Define the components of strategic management. Learning ObjectivesDefine 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 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 andchief executive
5 Strategic Management Managers ask such questions as... Strategic ManagementManagers 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 StrategyGeneral plan of major action to achieve long-term goalsFalls into three general categories1. Growth2. Stability3. RetrenchmentA separate grand strategy can be defined for global operations3
7 Grand Strategy: Growth Grand Strategy: GrowthGrowth 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
8 Grand Strategy: Stability Grand Strategy: StabilityStability, sometimes called a pause strategy, means that the organization wantsto remain the same size orto grow slowly and in a controlled fashion
9 Grand Strategy: Retrenchment Grand Strategy: RetrenchmentRetrenchment = 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
10 Global Corporate Strategies Global Corporate StrategiesExhibit 8.1HighTransnationalStrategySeeks 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
11 Global StrategyGlobalization = product design and advertising strategies are standardized around the worldMulti-domestic = adapt product and promotion for each countryTransnational = combine both globalization and national responsiveness7
12 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
13 Three Levels of Strategy in Organizations Three Levels of Strategy in OrganizationsThree Levels of Strategy in OrganizationsExhibit 8.2
14 Strategic Management Process Strategic Management ProcessExhibit 8.3Scan 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
15 Strategy Formulation vs. Implementation Strategy Formulation vs. ImplementationStrategy 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 outcomes
16 Checklist for Analyzing Organizational Strengths and Weaknesses Checklist for Analyzing Organizational Strengths and WeaknessesExhibit 8.4
17 Portfolio StrategyMix of business units and product lines that fit together in a logical way to provide synergy and competitive advantageBCG MatrixExhibit 8.5
18 Five Forces Affecting Industry Competition Five Forces Affecting Industry CompetitionExhibit 8.6Potential 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).
19 Competitive Edge Through Competitive Strategies Competitive Edge Through Competitive StrategiesDifferentiation = 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
20 Continuum of Partnership Strategies Continuum of Partnership StrategiesExhibit 8.8Organizational CombinationAcquisitionsMergersJoint VenturesDegree of CollaborationStrategic AlliancesStrategic Business PartneringPreferred Supplier ArrangementsLowHighDegree of Collaboration
21 Implementing Strategy Tools Implementing Strategy ToolsLeadershipStructural designInformation and control systemsHuman resources
22 Tools for Putting Strategy into Action Tools for Putting Strategy into ActionEnvironmentExhibit 8.9OrganizationLeadership 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.