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STRATEGY FORMULATION and

IMPLEMENTATION

MANAGEMENT 6thEd.

By: Richard Daft

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


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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 andinternational operations

Define corporate-level strategies and explain theportfolio approach

Describe business-level strategies, including Porterscompetitive forces and strategies and partnership

strategies Explain the major considerations in formulating

functional strategies

Enumerate the organizational dimensions used for

implementing strategy


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What is Strategic Management?

Strategic Management The set of decisions and actions used to formulate

and implement strategies that will provide acompetitively superior fit between the organization

and its environment so as to achieve

organizational goals.


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Grand Strategy

The general plan of major action by whichan 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. Retrenchmentthat the organization goes through period

of forced decline by either shrinking current business units

or selling off or liquidating entire business.


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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 strategythe 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.


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Purpose of Strategy

Choosing how the organization will be different.

Strategy The plan of action that prescribes resource

allocation and other activities for dealing with the

environment and helping the organization attain its

goals.


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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

organizations 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.


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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 organizations major departments.


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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?


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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?


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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 organizations goals and of aspecific strategic plan.

Strategy Implementation

The stage of strategic management that involvesthe use of managerial and organizational tools to

direct resources toward achieving strategic

outcomes.


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The Strategic Management Process

Scan 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


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Situation Analysis

Analysis of the strengths, weaknesses,

opportunities, and threats (SWOT) that affectorganizational 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

organizationsperformance.

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.


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Formulating Corporate-Level Strategy

Portfolio StrategyA type of corporate-level strategy that

pertains to the organizations mix of SBUs

and product lines that fit together in such away 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.


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The BCG MatrixA concept developed by the Boston Consulting Group

that evaluates SBUs with respect to the dimension ofbusiness growth rate and market share.


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Four Alternative Positions:

Question Marks

The business unit has low market share compared tocompetitors, however it is doing business in high-growth market.

Stars

The business has high market share compared tocompetitors and it is doing business in high-growthmarket.

Cash Cows The market is not very attractivelow market growth

rate, however the business has high market sharecompared to competitors.

Dogs This business has low market share and operates in

low-growth market.


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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.


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Porters Five Competitive Forces

Rivalryamong

Competitor

s

Threat ofSubstitute

Products

Potential New

Entrants

Bargaining

Power of Buyers

BargainingPower of

Suppliers

Internet tends to increase

bargaining power of

suppliers

Internet reduces

barriers to entry

Internet blurs differences

among competitors

Internet creates new

substitution threatsInternet shifts greater

power to end consumers


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Competitive Strategies

1. Differentiation a type of competitive strategy with which the

organization seeks to distinguish its products orservices from competitors.

2. Cost Leadership A type of competitive strategy with which the

organization aggressively seeks efficientfacilities, cuts costs, and employs tight costcontrols to be more efficient than competitors.

3. Focus A type of competitive strategy that emphasizes

concentration on a specific regional market orbuyer group.


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Partnership Strategies

OrganizationalCombination

Strategic

Alliances

Acquisitions

Mergers

Joint Ventures

Strategic Business Partnering

Preferred Supplier Arrangements

High

D

E

G

R

E

E

O

F

C

O

L

L

AB

O

R

A

T

IO

N

Low


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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, humanresources, and research & development.


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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 andimportant part of strategic management.


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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 ANDCONTROL SYSTEMSRevise pay, reward system

Change budget allocations

Implement information

systems

Apply rules and procedures

OrganizationEnvironment

StrategyPerformance

Tools for Putting Strategy into Action


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Implementing Global Strategies

In the international arena, flexibility and superbcommunication emerge as mandatory leadershipskills.

Structural design must merge successfully with foreigncultures as well as link foreign operations to the homecountry.

Information and control systems must fit the needsand incentives within local cultures.

Recruitment, training, transfer, promotion, and layoff ofinternational human resources create array ofproblems not confronted from other countries such aslabor laws, guaranteed jobs, and cultural traditions ofkeeping unproductive employees on the job.


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THE END

Any clarification?

HAVE A NICE DAY!!!

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