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Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
STRATEGY FORMULATION and IMPLEMENTATION
MANAGEMENT 6th Ed.By: Richard Daft
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Learning Objectives• Define the components of strategic management• Describe the strategic planning process and SWOT analysis• Understand Grand Strategies for domestic and international
operations• Define corporate-level strategies and explain the portfolio
approach• Describe business-level strategies, including Porter’s
competitive forces and strategies and partnership strategies• Explain the major considerations in formulating functional
strategies• Enumerate the organizational dimensions used for
implementing strategy
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
What is Strategic Management?
Strategic Management• The set of decisions and actions used to formulate and
implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Grand Strategy
• The general plan of major action by which an organization intends to achieve its long-term goals.
Three general categories:1. Growth – can be promoted internally by investing in expansion
or externally by acquiring additional business divisions.2. Stability (pause strategy) – that the organization wants to
remain the same size or grow slowly and in a controlled fashion.3. Retrenchment – that the organization goes through period of
forced decline by either shrinking current business units or selling off or liquidating entire business.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Global Strategy
• a separate grand strategy as the focus of global business.
Three global strategies:1. Globalization – the standardization of product design and
advertising strategies throughout the world.
2. Multidomestic strategy – the modification of product design and advertising strategies to suit the specific needs of individual countries.
3. Transnational strategy – a strategy that combines global coordination to attain efficiency with flexibility to meet specific needs in various countries.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Purpose of Strategy
• Choosing how the organization will be different.
StrategyThe plan of action that prescribes resource allocation
and other activities for dealing with the environment and helping the organization attain its goals.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
To remain competitive, companies develop strategies that focus on:
1. Core competence» A business activity that an organization does
particularly well in comparison to competitors.
2. Synergy» The condition that exists when the organization’s
parts interact to produce a joint effect that is greater than the sum of the parts acting alone.
3. Value Creation» The heart of strategy.» Value can be defined as the combination of
benefits received and costs paid by the customers.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Levels of Strategy
• Corporate-Level Strategy• The level of strategy concerned with the question, “What
business are we in?”. Pertains to the organization as a whole and the combination of business units and product lines that make it up.
• Business-Level Strategy• The level of strategy concerned with the question, “How do
we compete?”. Pertains to each business unit or product line within the organization.
• Functional-Level Strategy• The level of strategy concerned with the question, “How do
we support the business-level strategy?”. Pertains to all of the organization’s major departments.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Three Levels of Strategy in Organization
Corporation
Textile Units Chemicals Unit Auto Parts Unit
Finance R & D Manufacturing Marketing
Corporate-Level Strategy:What business are we in?
Business-Level Strategy:How do we compete?
Functional-Level Strategy:How do we support the business-level strategy?
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Corporation
Textile Units
Finance R & D Manufacturing Marketing
Corporate-Level Strategy:What business are we in?
Business-Level Strategy:How do we compete?
Functional-Level Strategy:How do we support the business-level strategy?
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Strategy Formulation Versus Implementation
• Strategy Formulation• The stage of strategic management that involves the
planning and decision making that lead to the establishment of the organization’s goals and of a specific strategic plan.
• Strategy Implementation• The stage of strategic management that involves the
use of managerial and organizational tools to direct resources toward achieving strategic outcomes.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
The Strategic Management ProcessScan External Environment:• National• Global
Identify Strategic Factors:• Opportunities• Threat
Scan Internal Environment:• Core Competence• Synergy• Value Creation
Identify Strategic Factors:• Strengths• Weaknesses
Define New:• Mission• Goals• Grand Strategy
Formulate Strategy:• Corporate• Business• Functional
Evaluate Current:• Mission• Goals• Strategies
SWOT
Implement Strategy via Changes in:• Leadership /
Culture• Structure• Human Resources• Information
and Control System
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Situation Analysis• Analysis of the strengths, weaknesses,
opportunities, and threats (SWOT) that affect organizational performance.
Strengths Positive internal characteristics that the organization can exploit to
achieve its strategic performance goals. Weaknesses
Internal characteristics that might inhibit or restrict the organization’s performance.
Opportunities Characteristics of the external environment that have the potential to
help the organization achieve or exceed its strategic goals. Threats
Characteristics of the external environment that may prevent the organization from achieving its strategic goals.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Formulating Corporate-Level StrategyPortfolio Strategy
A type of corporate-level strategy that pertains to the organization’s mix of SBUs and product lines that fit together in such a way as to provide the corporation with synergy and competitive advantage.
Strategic Business Unit (SBU)A division of the organization that has a unique
business mission, product line, competitors, and markets relative to other SBUs in the same corporation.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
The BCG Matrix• A concept developed by the Boston Consulting Group that
evaluates SBUs with respect to the dimension of business growth rate and market share.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Four Alternative Positions:– Question Marks
• The business unit has low market share compared to competitors, however it is doing business in high-growth market.
– Stars• The business has high market share compared to
competitors and it is doing business in high-growth market.
– Cash Cows• The market is not very attractive – low market growth rate,
however the business has high market share compared to competitors.
– Dogs• This business has low market share and operates in low-
growth market.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Formulating Business-Level Strategy
it is a strategy formulation within the strategic business unit in which the concern is how to compete.
the same three generic strategies (growth, stability, and retrenchment) apply at the business level, but they are accomplished through competitive actions rather than the acquisition or divestment of business divisions.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Porter’s Five Competitive Forces
Rivalry among
Competitors
Threat of Substitute Products
Potential New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers
Internet tends to increase bargaining power of suppliers
Internet reduces barriers to entry
Internet blurs differences among competitors
Internet creates new substitution threats
Internet shifts greater power to end consumers
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Competitive Strategies1. Differentiation
• a type of competitive strategy with which the organization seeks to distinguish its products or services from competitors.
2. Cost Leadership• A type of competitive strategy with which the
organization aggressively seeks efficient facilities, cuts costs, and employs tight cost controls to be more efficient than competitors.
3. Focus• A type of competitive strategy that emphasizes
concentration on a specific regional market or buyer group.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Partnership Strategies
Organizational Combination
Strategic Alliances
Acquisitions
Mergers
Joint Ventures
Strategic Business Partnering
Preferred Supplier Arrangements
High
DEGREE
OF
COLLABORATION
Low
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Formulating Functional-Level Strategy
the action plans adopted by major departments to support the execution of business-level strategy.
major organizational functions include marketing, production, finance, human resources, and research & development.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Strategy Implementation and Control
Implementation is the final step in the strategic management process and it is how strategy put into action.
Some people argue that strategy implementation is the most difficult and important part of strategic management.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
STRUCTURAL DESIGN
• Design organization chart• Create teams• Determine centralization• Arrange facilities, task design
LEADERSHIP
• Use persuasion• Motivate employees• Shape culture/values
HUMAN RESOURCES
• Recruit/select employees• Manage transfers/promotions/training• Direct layoffs/recalls
INFORMATION AND CONTROL SYSTEMS• Revise pay, reward system• Change budget allocations• Implement information systems• Apply rules and procedures
OrganizationEnvironment
StrategyPerformance
Tools for Putting Strategy into Action
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Implementing Global StrategiesIn the international arena, flexibility and superb communication emerge as mandatory leadership skills.
Structural design must merge successfully with foreign cultures as well as link foreign operations to the home country.
Information and control systems must fit the needs and incentives within local cultures.
Recruitment, training, transfer, promotion, and layoff of international human resources create array of problems not confronted from other countries such as labor laws, guaranteed jobs, and cultural traditions of keeping unproductive employees on the job.
Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
THE END
Any clarification?
HAVE A NICE DAY!!!
Prepared by:GREGAR DONAVEN E. VALDEHUEZA, MBALourdes College Instructor
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Uploaded to refferance for MBA Student of Uni of Colombo