Strategy Formulation and Execution Chapter 8 Strategy Formulation and Execution

Strategy 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

Thinking Strategically The long-term view of the organization and competition Thinking strategically impacts performance and financial success Today’s environment requires everyone to think strategically

Strategic Management 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

Purpose of Strategy Explicit strategy is the plan of action Competitive advantage is the organization’s distinctive edge for meeting customer needs Strategies should: Exploit Core Competencies Achieve Synergy Create Value Target Customers

8.1 The Elements of Competitive Advantage

8.2 Three Levels of Strategy in Organizations

8.3 The Strategic Management Process

Strategy Formulation versus Execution 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

SWOT Analysis 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

8.4 Audit Checklist for Analyzing Organizational Strengths and Weaknesses

Formulating Corporate-Level Strategy: Portfolio Strategy Strategic Business Units (SBUs) have a unique mission, products, and competitors Portfolio strategy pertains to the mix of SBUs and product lines to provide synergy and competitive advantage Organizations should not become too dependent on one business

Formulating Corporate-Level Strategy: The BCG Matrix 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

8.5 The BCG Matrix

Formulating Corporate-Level Strategy: Diversification Strategy Related diversification: expansion into new business related to existing business activities Unrelated diversification: expansion into new lines of business Vertical integration: expansion into businesses that supply to the business or are distributors

Formulating Business-Level Strategy 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

8.5 Porter’s Five Forces

Porter’s Competitive Strategies Differentiation Distinguishing products and services Cost Leadership Cost reductions, cost controls Focus Strategy Concentration on a specific region or buyer Either differentiation or cost leadership approach

8.7 Characteristics of Porter’s Competitive Strategies

Formulating Functional-Level Strategy Action plans used by major departments Marketing Production Finance Human Resources Research and Development

8.8 Global Corporate Strategies

Strategy Execution 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

8.9 Factors that Contribute to the Failure of Strategy Execution

8.10 Tools for Putting Strategy into Action