Chapter 8

Strategy Formulation and Implementation

Thinking Strategically
u * *

*
*

To help managers answer questions such as: 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? Answers define an overall direction for the organization's grand strategy.
2

Grand Strategy
General plan of action to achieve longterm objectives 1. Growth 2. Stability 3. Retrenchment.

Growth
Can be promoted internally by investing in expansion or externally by acquiring additional business divisions.

Stability
Remain same size or grow steadily and in a controlled fashion.

Retrenchment
Forced decline by either shrinking current business units or selling off or liquidating entire businesses.

Global Strategy
u

Globalization: product design and advertising strategies are standardized around the world Multidomestic: adapt product and promotion for each country Transnational: combine global coordination with flexibility to meet specific needs in various countries.
7

Purpose of Strategy
u

CORE COMPETENCE: something the organization does especially well in comparison to its competitors
Superior research and development Mastery of a technology Superior customer service.

* * *

Purpose of Strategy
SYNERGY: when organizational parts interact to produce a joint effect that is greater than the sum of its parts acting alone.

Purpose of Strategy
Value Creation = use core competence and synergy to provide increased benefits received with lower costs paid.

10

Levels of Strategy
u u u

Corporate Business Functional.

11

Corporate-Level Strategy ("What business are we in?")

u u

Acquisition of new businesses Additions or divestment of business units, plants, or product lines Joint ventures with other companies in new areas.

12

Business-Level Strategy ("How do we compete?")

u u u

u
u u

Advertising Direction and extent of R&D Product changes New product development Equipment and facilities Expansion or contraction of product lines.
13

Function-Level Strategy ("How do we support business-level strategy?")

u u u

Production Distribution Finance.

14

Strategy Formulation
u

Development of the firm's goals and a specific strategic plan Assessing the external environment and the internal problems Integrating the results into goals and strategy.

15

Strategy Implementation
The accomplishment of the strategic plan.

16

The Strategic Management Process

17

Scan External Environment

Identify Strategic Factors: Opportunities Threats

Evaluate Current: Mission Goals Strategies

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

18

Situation Analysis: SWOT

u u u

Strengths (Internal) Weaknesses (Internal) Opportunities (External) Threats (External)

19

Scan External Environment

Identify Strategic Factors: Opportunities Threats

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Formulate Strategy: Corporate

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

20

Formulating CorporateLevel Strategy

21

Portfolio Strategy
The organizational mix of SBUs and product lines to provide synergy and a competitive advantage.

22

The BCG matrix evaluates SBUs along two dimensions:

u

Business growth rate how rapidly the entire industry is growing Market share defines if an SBU has a larger or smaller market share than competitors Provides four categories to judge SBUs.

23

High High

Market Share

Low

Star
Business Growth Rate

Problem Child
Dog
24

Cash Cow

Low

Scan External Environment

Identify Strategic Factors: Opportunities Threats

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Formulate Strategy: Corporate Business

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

25

Formulating Business-Level Strategy

Porter's Competitive Forces

26

Potential New Entrants Threat of new entrants

27

Potential New Entrants Threat of new entrants

Buyers Bargaining power of buyers

28

Potential New Entrants Threat of new entrants

Buyers Bargaining power of buyers Bargaining power of suppliers Suppliers

29

Potential New Entrants Threat of new entrants Substitute Products from Other Threat of Industries substitute products

Buyers Bargaining power of buyers Bargaining power of suppliers Suppliers

30

Potential New Entrants Threat of new entrants Substitute Products from Other Threat of Industries substitute products The Firms Rivalry versus Industry Competition

Buyers Bargaining power of buyers

Bargaining power of suppliers Suppliers

31

Porter's Competitive Strategies

u u u

Differentiation Cost Leadership Focus.

32

Product Life Cycle

1. Introduction 2. Growth 3. Maturity 4. Decline.

33

Scan External Environment

Identify Strategic Factors: Opportunities Threats Formulate Strategy: Corporate Business Functional

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

34

Formulating FunctionalLevel Strategy

Action plans adopted by major departments to support the business-level strategy to achieve the organization's strategic goals.
35

Putting Strategy Into Action

36

Scan External Environment

Identify Strategic Factors: Opportunities Threats Formulate Strategy: Corporate Business Functional Implement Strategy via Changes in: Leadership Culture

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

37

Leadership
The ability to influence employees to support strategy implementation.

38

Structural Design
u u

u
u

Managers' responsibilities and authority Consolidation of facilities, departments, and divisions Task design Production technology.

39

Scan External Environment

Identify Strategic Factors: Opportunities Threats Formulate Strategy: Corporate Business Functional

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Implement Strategy via Changes in: Leadership Culture Human Resources

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

40

Human Resources
u u u

u
u u

Recruitment Selection Training Transfers Promotions Layoff or separation.

41

Scan External Environment

Identify Strategic Factors: Opportunities Threats Formulate Strategy: Corporate Business Functional

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

Implement Strategy via Changes in: Leadership Culture Human Resources Information and Control Systems

42

Information and Control Systems

u u u

u
u

Reward systems Pay incentives Budgets Information systems Rules, policies, and procedures.

43

Scan External Environment

Identify Strategic Factors: Opportunities Threats Formulate Strategy: Corporate Business Functional

Evaluate Current: Mission Goals Strategies

Define New: Mission Goals

Scan Internal Environment

Identify Strategic Factors: Strengths Weaknesses

Implement Strategy via Changes in: Leadership Culture Human Resources Information and Control Systems

44

Implementing Global Strategies

u

Flexibility and communication are mandatory skills in the international arena Structural design must merge with foreign cultures and link operations Information and control systems must fit the needs and incentives within local cultures
45

Implementing Global Strategies

u

u u u

Human resource management face problems not confronted in North America such as: Labor laws Guaranteed jobs Cultural traditions of keeping unproductive on the job.
46