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8/8/2019 Strategy Formulation and Implemetation
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Chapter 8Chapter 8
Strategy Formulation andStrategy Formulation and
ImplementationImplementation
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Thinking StrategicallyT
hinking Strategicallyuu To help managers answer questions suchTo help managers answer questions such
as:as:
** Where is the organization now?Where is the organization now?** Where does the organization want to be?Where does the organization want to be?
** What changes are among competitors?What changes are among competitors?
** What courses of action will help us achieveWhat courses of action will help us achieveour goals?our goals?
uu Answers define an overall direction forAnswers define an overall direction for
the organization's grand strategy.the organization's grand strategy.
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Grand Strategy
Grand Strategy
General plan of action to achieve longGeneral plan of action to achieve long--
term objectivesterm objectives
1. Growth1. Growth
2. Stability2. Stability
3. Retrenchment.3. Retrenchment.
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Growth
Growth
Can be promoted internally by investingCan be promoted internally by investing
in expansion or externally by acquiringin expansion or externally by acquiring
additional business divisions.additional business divisions.
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StabilityStabilityRemain same size or grow steadily andRemain same size or grow steadily and
in a controlled fashion.in a controlled fashion.
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Retrenchment
Retrenchment
Forced decline by either shrinkingForced decline by either shrinking
current business units or selling off orcurrent business units or selling off or
liquidating entire businesses.liquidating entire businesses.
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Global Strategy
Global Strategy
uu GlobalizationGlobalization: product design and: product design and
advertising strategies are standardizedadvertising strategies are standardized
around the worldaround the world
uu MultidomesticMultidomestic: adapt product and: adapt product and
promotion for each countrypromotion for each country
uu TransnationalTransnational: combine global: combine global
coordination with flexibility to meetcoordination with flexibility to meet
specific needs in various countries.specific needs in various countries.
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Purpose of Strategy
Purpose of Strategy
uu CORE COMPETENCE: something theCORE COMPETENCE: something the
organization does especially well inorganization does especially well in
comparison to its competitorscomparison to its competitors
** Superior research and developmentSuperior research and development
** Mastery of a technologyMastery of a technology
** Superior customer service.Superior customer service.
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Purpose of Strategy
Purpose of Strategy
SYNERGY: when organizational partsSYNERGY: when organizational parts
interact to produce a joint effect that isinteract to produce a joint effect that is
greater than the sum of its parts actinggreater than the sum of its parts acting
alone.alone.
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Purpose of Strategy
Purpose of Strategy
Value Creation = use core competenceValue Creation = use core competence
and synergy to provide increasedand synergy to provide increased
benefits received with lower costs paid.benefits received with lower costs paid.
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Levels of StrategyL
evels of Strategyuu CorporateCorporate
uu BusinessBusiness
uu Functional.Functional.
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CorporateCorporate--Level StrategyLevel Strategy
("What business are we in?")("What business are we in?")uu Acquisition of new businessesAcquisition of new businesses
uu Additions or divestment of business units,Additions or divestment of business units,
plants, or product linesplants, or product lines
uu Joint ventures with other companies inJoint ventures with other companies in
new areas.new areas.
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BusinessBusiness--Level StrategyLevel Strategy
("How do we compete?")("How do we compete?")uu AdvertisingAdvertising
uu Direction and extent of R&DDirection and extent of R&D
uu Product changesProduct changes
uu New product developmentNew product development
uu
Equipment and facilitiesEquipment and facilitiesuu Expansion or contraction of productExpansion or contraction of product
lines.lines.
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FunctionFunction--Level StrategyLevel Strategy
("How do we su
pport("How do we su
pportbusinessbusiness--level strategy?")level strategy?")
uu ProductionProduction
uu DistributionDistribution
uu Finance.Finance.
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StrategyF
ormu
lationStrategyF
ormu
lationuu Development of the firm's goals and aDevelopment of the firm's goals and a
specific strategic planspecific strategic plan
uu Assessing the external environment andAssessing the external environment and
the internal problemsthe internal problems
uu Integrating the results into goals andIntegrating the results into goals and
strategy.strategy.
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Strategy ImplementationStrategy ImplementationThe accomplishment of the strategic plan.The accomplishment of the strategic plan.
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The Strategic ManagementThe Strategic Management
ProcessProcess
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Identify
Strategic
Factors:
Opportunities
Threats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
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Situ
ation Analysis: SWOT
Situ
ation Analysis: SWOT
uu Strengths (Internal)Strengths (Internal)
uu Weaknesses (Internal)Weaknesses (Internal)
uu Opportunities (External)Opportunities (External)
uu Threats (External)Threats (External)
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
Opportunities
Threats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
FormulateStrategy:
Corporate
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Formulating CorporateFormulating Corporate--Level StrategyLevel Strategy
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Portfolio StrategyP
ortfolio StrategyThe organizational mix of SBUs andThe organizational mix of SBUs and
product lines to provide synergy and aproduct lines to provide synergy and a
competitive advantage.competitive advantage.
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The BCG matrix evaluatesThe BCG matrix evaluates
SBU
s along twoSBU
s along twodimensions:dimensions:
uu Business growth rate how rapidly theBusiness growth rate how rapidly the
entire industry is growingentire industry is growing
uu Market share defines if an SBU has aMarket share defines if an SBU has a
larger or smaller market share thanlarger or smaller market share than
competitorscompetitorsuu Provides four categories to judge SBUs.Provides four categories to judge SBUs.
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Star
Cash
Cow Dog
Problem
Child
High
High
Low
Low
BusinessBusiness
GrowthGrowth
RateRate
MarketShareMarketShare
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
Opportunities
Threats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
Formulate
Strategy:
Corporate
Business
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Formulating BusinessFormulating Business--LevelLevel
StrategyStrategy
Porter's Competitive ForcesPorter's Competitive Forces
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Potential New
Entrants
Threat ofThreat of
newnewentrantsentrants
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Potential New
Entrants
BuyersBargainingBargaining
power ofpower of
buyersbuyers
Threat ofThreat of
newnewentrantsentrants
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Potential New
Entrants
Buyers
BargainingBargainingpower ofpower of
supplierssuppliers
BargainingBargaining
power ofpower of
buyersbuyers
Threat ofThreat of
newnewentrantsentrants
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Substitute
Products
fromOther
Industries
Suppliers
Potential New
Entrants
BuyersThreat ofThreat ofsubstitutesubstitute
productsproducts
BargainingBargainingpower ofpower of
supplierssuppliers
BargainingBargaining
power ofpower of
buyersbuyers
Threat ofThreat of
newnewentrantsentrants
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Substitute
Products
fromOther
Industries
Suppliers
Potential New
Entrants
Buyers
The Firms
Rivalry versusIndustry
Competition
Threat ofThreat ofsubstitutesubstitute
productsproducts
BargainingBargainingpower ofpower of
supplierssuppliers
BargainingBargaining
power ofpower of
buyersbuyers
Threat ofThreat of
newnewentrantsentrants
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Porter's CompetitivePorter's Competitive
StrategiesStrategiesuu DifferentiationDifferentiation
uu Cost LeadershipCost Leadership
uu Focus.Focus.
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Prod
uctL
ife CycleP
rodu
ctL
ife Cycle1. Introduction1. Introduction
2. Growth2. Growth
3.Maturity3.Maturity
4. Decline.4. Decline.
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
OpportunitiesThreats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
Formulate
Strategy:Corporate
Business
Functional
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Formulating FunctionalFormulating Functional--
Level StrategyLevel Strategy
Action plans adopted by majorAction plans adopted by major
departments to support thedepartments to support thebusinessbusiness--level strategy to achievelevel strategy to achieve
the organization's strategic goals.the organization's strategic goals.
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Putting Strategy Into Action
Putting Strategy Into Action
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
OpportunitiesThreats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
Formulate
Strategy:Corporate
Business
Functional
Implement
Strategy via
Changes in:
Leadership
Culture
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LeadershipL
eadershipThe ability to influence employees toThe ability to influence employees to
support strategy implementation.support strategy implementation.
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Stru
ctu
ral DesignStru
ctu
ral Designuu Managers' responsibilities and authorityManagers' responsibilities and authority
uu Consolidation of facilities, departments,Consolidation of facilities, departments,
and divisionsand divisions
uu Task designTask design
uu Production technology.Production technology.
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
OpportunitiesThreats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
Formulate
Strategy:Corporate
Business
Functional
Implement
Strategy via
Changes in:
Leadership
Culture
Human
Resources
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Hu
manR
esou
rcesHu
manR
esou
rcesuu RecruitmentRecruitment
uu SelectionSelection
uu TrainingTraining
uu TransfersTransfers
uu PromotionsPromotions
uu Layoff or separation.Layoff or separation.
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Evaluate
Current:
Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
OpportunitiesThreats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
Formulate
Strategy:Corporate
Business
Functional
Implement
Strategy via
Changes in:
Leadership
CultureHuman
Resources
Information
and Control
Systems
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Information and ControlInformation and Control
SystemsSystemsuu Reward systemsReward systems
uu Pay incentivesPay incentives
uu BudgetsBudgets
uu Information systemsInformation systems
uu Rules, policies, and procedures.Rules, policies, and procedures.
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Evaluate
Current:Mission
Goals
Strategies
Scan External
Environment
Define New:Mission
Goals
Identify
Strategic
Factors:
OpportunitiesThreats
Identify
Strategic
Factors:
Strengths
Weaknesses
Scan Internal
Environment
Formulate
Strategy:Corporate
Business
Functional
Implement
Strategy via
Changes in:
Leadership
CultureHuman
Resources
Information
and Control
Systems
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Implementing GlobalImplementing Global
StrategiesStrategiesuu Flexibility and communication areFlexibility and communication are
mandatory skills in the internationalmandatory skills in the international
arenaarena
uu Structural design must merge withStructural design must merge with
foreign cultures and link operationsforeign cultures and link operations
uu Information and control systems must fitInformation and control systems must fitthe needs and incentives within localthe needs and incentives within local
culturescultures
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Implementing GlobalImplementing Global
StrategiesStrategiesuu Human resource management faceHuman resource management face
problems not confronted in Northproblems not confronted in North
America such as:America such as:
uu Labor lawsLabor laws
uu Guaranteed jobsGuaranteed jobs
uu Cultural traditions of keepingCultural traditions of keeping
unproductive on the job.unproductive on the job.