1. Strategy Formulation and Implementation
Chapter 8

2. Strategic Planning
Strategic planning has taken on new importance in today’s world of globalization, deregulation, advancing technology, and changing demographics, and lifestyles
Manager’s Challenge: Nintendo

3. Strategy Formulation and Implementation
Topics:
Chapter 8
Strategic Management
Definition
Components
Model of Strategic Management Process
Models of Strategy Formation
Managerial Tools to Implement Strategic Plans

4. Thinking Strategically
Answers to the following define an overall direction for the organization's grand strategy
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? 2

5. Strategic Management
Set 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 goals
Responsibility = top managers &
chief executive

6. Strategic Management Managers 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?

7. Grand Strategy General plan of major action to achieve long-term goals
Falls into three general categories
1. Growth
2. Stability
3. Retrenchment
A separate grand strategy can be defined for global operations
Ethical Dilemma: A Great Deal for Whom? 3

8. Grand Strategy: Growth
Growth can be promoted internally by investing in expansion or externally by acquiring additional business divisions
Internal growth = can include development of new or changed products
External growth = typically involves diversification – businesses related to current product lines or into new areas

9. Grand Strategy: Stability
Stability, sometimes called a pause strategy, means that the organization wants
to remain the same size or
to grow slowly and in a controlled fashion

10. Grand Strategy: Retrenchment
Retrenchment = the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses
Liquidation = selling off a business nit for the cash value of the assets, thus terminating its existence
Divestiture = involves selling off of businesses that no longer seem central to the corporation

11. Global Corporate Strategies
High
Transnational
Strategy
Seeks to balance global efficiencies and local responsiveness
Combines standardization and customization for product/advertising strategies
Globalization
Strategy
Treats world as a single global market
Standardizes global products/advertising strategies
Need for Global Integration
Export
Strategy
Domestically focused
Exports a few domestically produced products to selected countries
Multi-domestic Strategy
Handles markets independently for each country
Adapts product/advertising to local tastes and needs
Low
Low
Need for National Responsiveness
High

12. Global Strategy
Globalization = product design and advertising strategies are standardized around the world
Multi-domestic = adapt product and promotion for each country
Transnational = combine global coordination with flexibility to meet specific needs in various countries 7

13. Purpose of Strategy
The 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 goals
Strategies focus on:
Core competencies
Developing synergy
Creating value for customers 8

14. Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business are we in?
Corporation
Business-Level Strategy:
How do we compete?
Textiles Unit
Chemicals Unit
Auto Parts Unit
Functional-Level Strategy:
How do we support the business-level strategy?
Finance
R&D
Manufacturing
Marketing

15. Strategic Management Process
Scan External Environment – National, Global
Identify Strategic Factors – Opportunities, Threats
Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems
Evaluate Current Mission, Goals, Strategies
Formulate Strategy – Corporate, Business, Functional
Define new Mission Goals, Grand Strategy
SWOT
Scan Internal Environment – Core Competence, Synergy, Value Creation
Identify Strategic Factors – Strengths, Weaknesses

16. Strategy Formulation vs. Implementation
Strategy 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 plan
Strategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes
Experiential Exercise: Developing Strategy for a Small Business

17. Checklist for Analyzing Organizational Strengths and Weaknesses
Management and Organization
Marketing
Human Resources
Distribution channels
Market share
Advertising efficiency
Customer satisfaction
Product quality
Service reputation
Employee experience, education
Management quality
Staff quality
Degree of centralization
Union status
Organization charts
Turnover, absenteeism
Planning, information, control systems
Work satisfaction
Grievances
Sales force turnover
Finance
Production
Research and Development
Profit margin
Plant location
Basic applied research
Debt-equity ratio
Machinery obsolescence
Laboratory capabilities
Inventory ratio
Purchasing system
Research programs
Return on investment
New-product innovations
Quality control
Technology innovations
Credit rating
Productivity/efficiency
Sources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens, Long-Range Planning for Your Business (New York: American Management Association, 1976).

18. Portfolio Strategy
BCG Matrix
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage

19. Five Forces Affecting Industry Competition
Potential New Entrants
Internet reduces barriers to entry
Internet blurs differences among competitors in an industry
Threat of Substitute Products
Rivalry among Competitors
Bargaining Power of Buyers
Internet expands market size, but creates new substitution threats
Internet shifts greater power to end consumers
Internet tends to increase the bargaining power of suppliers
Bargaining Power of Suppliers
Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

20. Competitive Edge Through Competitive Strategies
Differentiation = attempt to distinguish products or services from that of competitors
Cost leadership = aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors
Focus = concentrates on a specific regional market or buyer group

21. Continuum of Partnership Strategies
Organizational Combination
Acquisitions
Mergers
Joint Ventures
Strategic Alliances
Degree of Collaboration
Strategic Business Partnering
Preferred Supplier Arrangements
Low
High
Degree of Collaboration

22. Implementing Strategy Tools
Leadership
Structural design
Information and control systems
Human resources

23. Tools for Putting Strategy into Action
Environment
Organization
Leadership  Persuasion  Motivation  Culture/values
Structural Design  Organization Chart  Teams  Centralization
Decentralization,
Facilities, task design
Human Resources  Recruitment/selection  Transfers/promotions
 Training
 Layoffs/recalls
Strategy
Performance
Information and Control Systems
 Pay, reward system  Budget allocations  Information systems  Rules/procedures
Source: 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.