Chapter 8 Strategy Formulation and Execution

Every company is concerned with strategy – It determines which organizations succeed and which ones struggle – Strategic blunders can hurt a company Strategic management is a specific type of planning Strategy 2Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The long-term view of the organization and competition Thinking strategically impacts performance and financial success Today’s environment requires everyone to think strategically Thinking Strategically 3Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Decisions and actions used to formulate and execute strategies that will provide competitively superior fit between the organization and its environment to achieve organizational goals Strategic Management 4Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Explicit strategy is the plan of action Competitive advantage is the organization’s distinctive edge for meeting customer needs Strategies should: Exploit Core Competencies Build Synergy Deliver Value Purpose of Strategy 5Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.1 Three Levels of Strategy in Organizations 6Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.2 The Strategic Management Process 7Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Strategy Formulation versus Execution Formulation: Assessing the external environment and internal problems to create goals and strategy Execution: the use of managerial and organizational tools to direct resources toward accomplishing strategic results 8Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Formulating strategy often begins with an audit of internal and external factors – Internal Strengths and Weaknesses – External Opportunities and Threats Information is acquired from reports, surveys, discussions, and meetings SWOT Analysis 9Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.3 Audit Checklist for Analyzing Organizational SWOT 10Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

 Strategic Business Units (SBUs) have a unique mission, products, and competitors  Companies manage the mix of SBUs for synergy and competitive advantage  Organizations should not become too dependent on one business Formulating Corporate-Level Strategy: Portfolio Strategy 11Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Organizes business along two dimensions – Business growth rate – Market share Four categories for corporate portfolio – The combination of high/low market share and high/low business growth Formulating Corporate-Level Strategy: The BCG Matrix 12Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.4 The BCG Matrix 13Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Moving into new lines of business – Expand into new valuable products and services Unrelated diversification is expansion into new lines of business – Can be a difficult strategy – Many companies are giving up on unrelated diversification Vertical integration expands into businesses that supply to the business or are distributors Formulating Corporate-Level Strategy: Diversification Strategy 14Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Strategy within the business units: How do we compete? Business-level strategies are developed by Porter’s Five Forces Web technology is impacting all industries in positive and negative ways Formulating Business-Level Strategy 15Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.5 Porter’s Five Forces 16Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.6 Porter’s Competitive Strategies 17Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Action plans used by major departments  Marketing  Production  Finance  Human Resources  Research and Development Formulating Functional-Level Strategy 18Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

Strategic Flexibility – managers must be prepared to change and adjust strategy quickly Strategic Partnerships – collaboration with other organizations is important Global Strategy – organizations pursue a distinctive focus for global business New Trends in Strategy 19Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.7 Global Corporate Strategies 20Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

The final step! “Strategy is easy, but execution is hard” – Most important but most difficult part Strategy must be skillfully executed Alignment requires all aspects of the organization to focus on strategy goals – Everyone is moving in the same direction Strategy Execution 21Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.8 Six Silent Killers of Strategy 22Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.

8.9 Tools for Putting Strategy into Action 23Copyright ©2012 by South-Western, a division of Cengage Learning. All rights reserved.