8e Daft Chapter 08

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Strategy Formulation andImplementation

Strategy Formulation andImplementation

CHAPTER 8CHAPTER 8

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2 Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning ObjectivesLearning 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.

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Learning Objectives (contd.)Learning Objectives (contd.)

Describe business-level strategies, including

Porters competitive forces and strategies and

partnership strategies.

Explain the major considerations in formulating

functional strategies.

Discuss the organizational dimensions used for

implementing strategy.

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Strategic ManagementStrategic Management

Set of decisions and actions used toimplement strategies that will provide acompetitively superior fit between the

organization and its environment so asto achieve organizational goals

Responsibility = top managers and

chief executive

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Strategic ManagementStrategic 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?

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Grand Strategy

General plan of major action to achieve

long-term goals

Falls into three general categories

1. Growth

2. Stability

3. RetrenchmentA separate grandstrategy can be

defined for global

operations

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7/227 Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Grand Strategy: GrowthGrand Strategy: Growth

Growth can be promoted internally by

investing in expansion or externally by

acquiring additional business divisions

- Internal growth = can include development ofnew or changed products

- External growth = typically involves

diversification businesses related to

current product lines or into new areas

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Grand Strategy: StabilityGrand 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

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Grand Strategy: RetrenchmentGrand Strategy: Retrenchment

Retrenchment = the organization goes througha period of forced decline by either shrinkingcurrent business units or selling off orliquidating entire businesses

Liquidation = selling off a business nit for thecash value of the assets, thus terminating itsexistence

Divestiture = involves selling off of businessesthat no longer seem central to the corporation

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Global Corporate StrategiesGlobal Corporate Strategies

Need for National Responsiveness HighLow

Low

High Transnational

Strategy Seeks to balance global

efficiencies and local

responsiveness Combines standardization

and customization forproduct/advertising

strategies

GlobalizationStrategy

Treats world as asingle global market

Standardizes globalproducts/advertising

strategies

Multi-domestic Strategy Handles markets

independently for eachcountry

Adapts product/advertising

to local tastes and needsNeedfo

rGlobalInteg r

ation

Export

Strategy

Domestically focused

Exports a fewdomestically producedproducts to selectedcountries

Exhibit 8.1

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Global Strategy

Globalization = product design and

advertising strategies are standardized

around the world

Multi-domestic = adapt product andpromotion for each country

Transnational = combine both

globalization and national

responsiveness

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Purpose of Strategy

The plan of action that prescribes resourceallocation and other activities for dealing withthe environment, achieving a competitiveadvantage, that help the organization attainits goals

Strategies focus on:

Core competencies

Developing synergy

Creating value for customers

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Three Levels of Strategy in OrganizationsThree Levels of Strategy in Organizations0

Exhibit 8.2

Three Levels of Strategy in Organizations



Strategic Management ProcessStrategic Management Process

Implement

Strategy via

Changes in:

Leadership

culture,

Structure, HR,

Information &

control

systems

SWOT

Formulate

Strategy

Corporate,

Business,

Functional

Define new

Mission

Goals, Grand

Strategy

Identify Strategic

Factors

Strengths,

Weaknesses

Identify Strategic

Factors

Opportunities,Threats

Scan Internal

Environment Core

Competence,

Synergy, Value

Creation

Evaluate

Current

Mission, Goals,

Strategies

Scan External

Environment

National,Global

Exhibit 8.3

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Strategy Formulation vs. ImplementationStrategy Formulation vs. Implementation

Strategy Formulation = stage of strategic

management that involves planning and

decision making that lead to the

establishment of the organizations goals and

of a specific strategic plan

Strategy Implementation = stage of strategic

management that involves the use of

managerial and organizational tools to directresources toward achieving strategic

outcomes

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Checklistfor Analyzing Organizational Strengthsand Weaknesses

Checklistfor Analyzing Organizational Strengthsand Weaknesses

Exhibit 8.4

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Portfolio StrategyPortfolio Strategy

Mix of businessunits and product

lines that fit

together in a

logical way toprovide synergy

and competitive

advantage

BCG MatrixExhibit 8.5

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Five Forces Affecting Industry CompetitionFive Forces Affecting Industry Competition

Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

Internet reduces

barriers to entry

Internet expands market size, but

creates new substitution threats

Internet tends to increase the

bargaining power of suppliers

Internet shifts greater power

to end consumers

Internet blurs differences among

competitors in an industry

Bargaining

Power of

Buyers

Bargaining Power of Suppliers

Threat of Substitute

Products

Potential New

Entrants

Rivalry

among

Competitors

Exhibit 8.6

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Competitive Edge ThroughCompetitive Strategies

Competitive Edge ThroughCompetitive Strategies

Differentiation= attempt to distinguish products orservices from that of competitors

Cost leadership = aggressively seeks efficientfacilities, pursues cost reductions, and uses tight costcontrols to produceproducts more efficiently thancompetitors

Focus = concentrates on a specific regional market orbuyer group

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Continuum of Partnership StrategiesContinuum of Partnership Strategies

Organizational Combination

Strategic

Alliances

Preferred Supplier Arrangements

Strategic Business Partnering

Mergers

Acquisitions

Low High

Joint Ventures

Degree of Collaboration

Deg

reeo

fC

ollaborat

ion

Exhibit 8.8

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Implementing Strategy ToolsImplementing Strategy Tools

Leadership

Structural design

Information and control systems

Human resources

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22 Copyright 2008 by South-Western a division of Thomson Learning All rights reserved

Tools for Putting Strategy intoAction

Tools for Putting Strategy intoAction

Environment

Organization

Strategy Performance

Leadership

Persuasion

Motivation

Culture/valuesStructural Design Organization Chart

Teams

CentralizationDecentralization, Facilities, task design

Human Resources

Recruitment/selection

Transfers/promotions

Training Layoffs/recalls

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.

Information and Control Systems

Pay, reward system Budget allocations

Information systems

Rules/procedures

Exhibit 8.9

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