MANAGEMENT RICHARD L. DAFT

Strategy Formulation and Implementation Strategy Formulation and Implementation CHAPTER 7

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. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

What’s Your Strategy Strength? How do you handle challenges and issues? How did Best Buy overtake Circuit City as the player to beat in consumer electronics retailing? The strategies managers choose are important. Strategies must be implemented effectively to work. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Strategy Basics Why has Apple been so successful with the iPod, iTouch, iPhone? Why has McDonald’s healthier menu been effective? Finding ways to respond to competitors, and cope with change is strategy. Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Thinking Strategically The long-term view Seeing the big picture The organization Competition Strategy are your competitive actions in the market How do these fit together? Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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? Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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 Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Three Levels of Strategy in Organizations Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Levels of Strategy What business are we in? How do we compete? What business are we in? How do we compete? How do we support the business-level strategy? Corporate-level strategy Business-level strategy Functional-level strategy Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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 Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The Strategic Management Process Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Assessment of internal and external factors SWOT Analysis Assessment of internal and external factors Organizational strengths, weaknesses, opportunities, and threats Reports Budgets Financial ratios Employee Surveys External information about opportunities and threats Customers Government reports Professional journals Bankers Consultants Association meetings Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Analyzing Organizational Strengths and Weaknesses Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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 Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

The BCG Matrix Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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 Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Porter’s Five Forces Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Porter’s Competitive Strategies Porter suggests that a company can adopt one of three strategies after analyzing the forces Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

New Trends in Strategy Mergers and acquisitions Mergers and acquisitions Enhancing organizational capacity Innovation from within Strategic partnerships Companies are focusing on internal innovation as well as innovation through strategic partnerships Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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 Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Global Corporate Strategies Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

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 Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.

Tools for Putting Strategy into Action Copyright ©2010 by South-Western, a division of Cengage Learning.  All rights reserved.