Chapter 8

Strategy Formulation and

Implementation

Thinking Strategically
To help managers answer questions such as:
Where is the organization now?
Where does the organization want to be?
What changes are among competitors?
What courses of action will help us achieve our
goals?
Answers define an overall direction for the
organization's grand strategy.

Grand Strategy
General plan of action to achieve longterm objectives
1. Growth
2. Stability
3. Retrenchment.

Growth
Can be promoted internally by investing
in expansion or externally by acquiring
additional business divisions.

Stability
Remain same size or grow steadily and
in a controlled fashion.

Retrenchment
Forced decline by either shrinking
current business units or selling off or
liquidating entire businesses.

Global Strategy
Globalization: product design and
advertising strategies are standardized
around the world
Multidomestic: adapt product and
promotion for each country
Transnational: combine global
coordination with flexibility to meet
specific needs in various countries.

Purpose of Strategy

CORE COMPETENCE: something the

organization does especially well in
comparison to its competitors

Superior research and development

Mastery of a technology
Superior customer service.

Purpose of Strategy
SYNERGY: when organizational parts
interact to produce a joint effect that is
greater than the sum of its parts acting
alone.

Purpose of Strategy
Value Creation = use core competence
and synergy to provide increased
benefits received with lower costs paid.

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Levels of Strategy
Corporate
Business
Functional.

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Corporate-Level Strategy
("What business are we in?")
Acquisition of new businesses
Additions or divestment of business units,
plants, or product lines
Joint ventures with other companies in
new areas.

12

Business-Level Strategy
("How do we compete?")
Advertising
Direction and extent of R&D
Product changes
New product development
Equipment and facilities
Expansion or contraction of product
lines.

13

Function-Level Strategy
("How do we support
business-level strategy?")
Production
Distribution
Finance.

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Strategy Formulation
Development of the firm's goals and a
specific strategic plan
Assessing the external environment and
the internal problems
Integrating the results into goals and
strategy.

15

Strategy Implementation
The accomplishment of the strategic
plan.

16

The Strategic Management

Process

17

Scan External
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Strengths
Weaknesses

18

Situation Analysis: SWOT

Strengths (Internal)
Weaknesses (Internal)
Opportunities (External)
Threats (External)

19

Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate

20

Formulating CorporateLevel Strategy

21

Portfolio Strategy
The organizational mix of SBUs and
product lines to provide synergy and a
competitive advantage.

22

The BCG matrix evaluates

SBUs along two
dimensions:
Business growth rate how rapidly the
entire industry is growing
Market share defines if an SBU has a
larger or smaller market share than
competitors
Provides four categories to judge SBUs.

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High

Market Share

High

Business
Growth
Rate

Low

Low

Star

Problem
Child

Cash
Cow

Dog
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Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate
Business

25

Formulating Business-Level
Strategy
Porter's Competitive Forces

26

Potential New
Entrants
Threat of
new
entrants

27

Potential New
Entrants
Threat of
new
entrants

Bargaining
power of
buyers

Buyers

28

Potential New
Entrants
Threat of
new
entrants

Bargaining
power of
buyers

Buyers

Bargaining
power of
suppliers
Suppliers

29

Potential New
Entrants
Threat of
new
entrants
Substitute
Products
from Other Threat of
Industries substitute
products

Bargaining
power of
buyers

Buyers

Bargaining
power of
suppliers
Suppliers

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Potential New
Entrants
Threat of
new
entrants
Substitute
Products
from Other Threat of
Industries substitute
products

The Firms
Rivalry versus
Industry
Competition

Bargaining
power of
buyers

Buyers

Bargaining
power of
suppliers
Suppliers

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Porter's Competitive
Strategies
Differentiation
Cost Leadership
Focus.

32

Product Life Cycle

1. Introduction
2. Growth
3. Maturity
4. Decline.

33

Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate
Business
Functional

34

Formulating FunctionalLevel Strategy

Action plans adopted by major
departments to support the
business-level strategy to achieve
the organization's strategic goals.
35

Putting Strategy Into Action

36

Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate
Business
Functional

Implement
Strategy via
Changes in:
Leadership
Culture

37

Leadership
The ability to influence employees to
support strategy implementation.

38

Structural Design
Managers' responsibilities and authority
Consolidation of facilities, departments,
and divisions
Task design
Production technology.

39

Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate
Business
Functional

Implement
Strategy via
Changes in:
Leadership
Culture
Human
Resources

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Human Resources
Recruitment
Selection
Training
Transfers
Promotions
Layoff or separation.

41

Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate
Business
Functional

Implement
Strategy via
Changes in:
Leadership
Culture
Human
Resources
Information
and Control
Systems

42

Information and Control

Systems
Reward systems
Pay incentives
Budgets
Information systems
Rules, policies, and procedures.

43

Scan External
Environment

Evaluate
Current:
Mission
Goals
Strategies

Scan Internal
Environment

Identify
Strategic
Factors:
Opportunities
Threats

Define New:
Mission
Goals

Identify
Strategic
Factors:
Strengths
Weaknesses

Formulate
Strategy:
Corporate
Business
Functional

Implement
Strategy via
Changes in:
Leadership
Culture
Human
Resources
Information
and Control
Systems

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Implementing Global
Strategies
Flexibility and communication are
mandatory skills in the international arena
Structural design must merge with foreign
cultures and link operations
Information and control systems must fit
the needs and incentives within local
cultures

45

Implementing Global
Strategies
Human resource management face
problems not confronted in North
America such as:
Labor laws
Guaranteed jobs
Cultural traditions of keeping
unproductive on the job.

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