Transcript Managing in Turbulent Times - Lake Superior State University

Strategy Formulation and
Implementation
CHAPTER 8
Learning Objectives




2
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.
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Learning Objectives (contd.)



3
Describe business-level strategies, including
Porter’s competitive forces and strategies and
partnership strategies.
Explain the major considerations in formulating
functional strategies.
Discuss the organizational dimensions used for
implementing strategy.
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Strategic Management
4

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 and
chief executive
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
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?

5
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
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
6
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Grand Strategy: Growth

Growth can be promoted internally by
investing in expansion or externally by
acquiring additional business divisions
-
-
7
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
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Grand Strategy: Stability

8
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
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Grand Strategy: Retrenchment
9

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
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Global Corporate Strategies
Exhibit 8.1
High
Need for Global Integration
Globalization
Strategy
• Treats world as a
single global market
• Standardizes global
products/advertising
strategies
Export
Strategy
•Domestically focused
•Exports a few
domestically produced
products to selected
countries
Transnational
Strategy
• Seeks to balance global
efficiencies and local
responsiveness
• Combines standardization
and customization for
product/advertising
strategies
Multi-domestic Strategy
• Handles markets
independently for each
country
• Adapts product/advertising
to local tastes and needs
Low
Low
10
Need for National Responsiveness
High
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Global Strategy



11
Globalization = product design and
advertising strategies are
standardized around the world
Multi-domestic = adapt product and
promotion for each country
Transnational = combine both
globalization and national
responsiveness
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
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
12
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Three Levels of Strategy in Organizations
Three Levels of Strategy in Organizations
Exhibit 8.2
13
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Strategic Management Process
Exhibit 8.3
Scan External
Environment –
National,
Global
Evaluate
Current Mission,
Goals,
Strategies
SWOT
Scan Internal
Environment – Core
Competence,
Synergy, Value
Creation
14
Identify Strategic
Factors –
Opportunities,
Threats
Define new
Mission
Goals, Grand
Strategy
Formulate
Strategy –
Corporate,
Business,
Functional
Identify Strategic
Factors –
Strengths,
Weaknesses
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems
Strategy Formulation vs. Implementation
15

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
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Checklist for Analyzing Organizational Strengths
and Weaknesses
Exhibit 8.4
16
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Portfolio Strategy

17
Mix of business
units and product
lines that fit
together in a
logical way to
provide synergy
and competitive
advantage
BCG Matrix
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Exhibit 8.5
Five Forces Affecting Industry Competition
Exhibit 8.6
•Internet reduces
barriers to entry
Potential New
Entrants
Internet blurs differences among
competitors in an industry
Threat of Substitute
Products
Bargaining
Power of
Buyers
Rivalry
among
Competitors
•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
Bargaining Power of Suppliers
Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).
18
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Competitive Edge Through
Competitive Strategies
19

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
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Continuum of Partnership Strategies
Exhibit 8.8
Acquisitions
Organizational Combination
Mergers
Joint Ventures
Strategic
Alliances
Strategic Business Partnering
Preferred Supplier Arrangements
Low
Degree of Collaboration
20
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
High
Implementing Strategy Tools




21
Leadership
Structural design
Information and control systems
Human resources
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Tools for Putting Strategy into
Action
Environment
Organization
Exhibit 8.9
Leadership
 Persuasion
 Motivation
 Culture/values
Strategy
Structural Design
 Organization Chart
 Teams
 Centralization
Decentralization,
 Facilities, task design
Human Resources
 Recruitment/selection
 Transfers/promotions
 Training
 Layoffs/recalls
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.
22
Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.