MMP Chapter 08

Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku

STRATEGY FORMULATION and IMPLEMENTATION

MANAGEMENT 6th Ed.By: Richard Daft


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


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.


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.


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.


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.


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.


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.


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?


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?


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.


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


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.


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.


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.


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.



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.


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


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.


Partnership Strategies

Organizational Combination

Strategic Alliances

Acquisitions

Mergers

Joint Ventures

Strategic Business Partnering

Preferred Supplier Arrangements

High

DEGREE

OF

COLLABORATION

Low


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.


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.


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


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.


THE END

Any clarification?

HAVE A NICE DAY!!!

Prepared by:GREGAR DONAVEN E. VALDEHUEZA, MBALourdes College Instructor

Google from:

Uploaded to refferance for MBA Student of Uni of Colombo

MMP Chapter 08

Business

level of strategy

global strategy

strategy implementation

multidomestic strategy

heart of strategy

transnational strategy

purpose of strategy

businesslevel strategies