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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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learning objectives
0Learning 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
0Learning 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
0Strategic 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
0Strategic 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
0Grand 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
0Grand 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
0Grand 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
0Grand 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
0Global Corporate Strategies

Exhibit 8.1


  • 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



Need for National Responsiveness


global strategy
0Global 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
0Purpose 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
0Three Levels of Strategy in Organizations

Three Levels of Strategy in Organizations

Exhibit 8.2

strategic management process
0Strategic 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


Scan Internal Environment – Core Competence, Synergy, Value Creation

Identify Strategic Factors – Strengths, Weaknesses

strategy formulation vs implementation
0Strategy 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
portfolio strategy
0Portfolio 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
0Five 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
0Competitive 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
0Continuum of Partnership Strategies

Exhibit 8.8


Organizational Combination


Joint Ventures

Degree of Collaboration

Strategic Alliances

Strategic Business Partnering

Preferred Supplier Arrangements



Degree of Collaboration

implementing strategy tools
0Implementing Strategy Tools
  • Leadership
  • Structural design
  • Information and control systems
  • Human resources
tools for putting strategy into action
0Tools for Putting Strategy into Action


Exhibit 8.9


Leadership  Persuasion  Motivation  Culture/values

  • Structural Design  Organization Chart  Teams  Centralization
  • Decentralization,
  • Facilities, task design

Human Resources  Recruitment/selection  Transfers/promotions

 Training

 Layoffs/recalls



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.