Strategy formulation and implementation
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0. Strategy Formulation and Implementation. CHAPTER 8. 0. Learning Objectives. Define the components of strategic management. Describe the strategic planning process and SWOT analysis. Understand grand strategies for domestic and international operations.

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Strategy Formulation and Implementation

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Strategy formulation and implementation

0

Strategy Formulation and Implementation

CHAPTER 8


Learning objectives

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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.


Learning objectives contd

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Learning Objectives (contd.)

  • 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.


Strategic management

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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 and

    chief executive


Strategic management1

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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?


Grand strategy

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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. Retrenchment

A separate grand strategy can be defined for global operations


Grand strategy growth

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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


Grand strategy stability

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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


Grand strategy retrenchment

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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


Global corporate strategies

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Global Corporate Strategies

Exhibit 8.1

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


Global strategy

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Global Strategy

  • 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


Purpose of strategy

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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


Three levels of strategy in organizations

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Three Levels of Strategy in Organizations

Three Levels of Strategy in Organizations

Exhibit 8.2


Strategic management process

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Strategic Management Process

Exhibit 8.3

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


Strategy formulation vs implementation

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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


Checklist for analyzing organizational strengths and weaknesses

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Checklistfor Analyzing Organizational Strengths and Weaknesses

Exhibit 8.4


Portfolio strategy

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Portfolio Strategy

Exhibit 8.5

BCG Matrix

  • Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage


Five forces affecting industry competition

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Five Forces Affecting Industry Competition

Exhibit 8.6

Potential New Entrants

  • Internet reduces barriers to entry

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 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).


Competitive edge through competitive strategies

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Competitive Edge ThroughCompetitive 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 produceproducts more efficiently than competitors

  • Focus = concentrates on a specific regional market or buyer group


Continuum of partnership strategies

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Continuum of Partnership Strategies

Exhibit 8.8

Acquisitions

Organizational Combination

Mergers

Joint Ventures

Degree of Collaboration

Strategic Alliances

Strategic Business Partnering

Preferred Supplier Arrangements

Low

High

Degree of Collaboration


Implementing strategy tools

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Implementing Strategy Tools

  • Leadership

  • Structural design

  • Information and control systems

  • Human resources


Tools for putting strategy into action

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Tools for Putting Strategy into Action

Environment

Exhibit 8.9

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.


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