Strategy Formulation and

Implementation

Chapter 8
 Strategic Planning

 Strategic planning has taken on new

importance in today’s world of

globalization, deregulation, advancing

technology, and changing demographics,

and lifestyles Manager’s Challenge: Nintendo

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 Strategy Formulation and Topics:
Implementation Chapter 8

 Strategic Management
– Definition
– Components
– Model of Strategic Management Process
– Models of Strategy Formation

 Managerial Tools to Implement Strategic

Plans
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 Thinking Strategically

 Answers to the following define an overall direction for the

organization's grand strategy
 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?

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 Strategic 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 &

chief executive

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 Strategic 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?

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 Grand Strategy

 General plan of major action to achieve

long-term goals
 Falls into three general categories

1. Growth A separate grand

strategy can be
2. Stability
defined for global
3. Retrenchment operations

Ethical Dilemma: A Great Deal for Whom?

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 Grand 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

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 Grand 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

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 Grand 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

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 Global Corporate Strategies
High Transnational
Globalization Strategy
Strategy • Seeks to balance global
• Treats world as a
efficiencies and local
single global market
responsiveness
• Standardizes global
• Combines standardization
products/advertising
and customization for
Need for Global Integration

strategies
product/advertising
strategies

Export
Strategy Multi-domestic Strategy
•Domestically focused • Handles markets
independently for each
•Exports a few country
domestically produced • Adapts product/advertising
products to selected
countries to local tastes and needs

Low
Low Need for National Responsiveness High
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 Global Strategy

 Globalization = product design and advertising strategies

are standardized around the world
 Multi-domestic = adapt product and promotion for each
country
 Transnational = combine global coordination with
flexibility to meet specific needs in various countries

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 Purpose 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

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 Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business are we in?
Corporation

Business-Level Strategy:
How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

Functional-Level Strategy:
How do we support the business-level
strategy?

Finance R&D Manufacturing Marketing

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 Strategic Management Process

Scan External Identify Strategic

Environment – Factors –
National, Opportunities,
Global Threats Implement
Strategy via
Evaluate Formulate Changes in:
Current Define new Strategy – Leadership
SWOT Mission culture,
Mission, Goals, Corporate,
Strategies Goals, Grand Business, Structure, HR,
Strategy Functional Information &
control
Scan Internal systems
Identify Strategic
Environment – Core
Factors –
Competence,
Strengths,
Synergy, Value
Weaknesses
Creation

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 Strategy 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

Experiential Exercise: Developing Strategy for a Small Business

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 Checklist for Analyzing
Organizational Strengths and Weaknesses
Management and Organization Marketing Human Resources
Management quality Distribution channels Employee experience,
Staff quality Market share education
Degree of centralization Advertising efficiency Union status
Organization charts Customer satisfaction Turnover, absenteeism
Planning, information, Product quality Work satisfaction
control systems Service reputation
Grievances
Sales force turnover
Finance Production Research and Development
Profit margin Plant location Basic applied research
Debt-equity ratio Machinery obsolescence Laboratory capabilities
Inventory ratio Purchasing system Research programs
Return on investment Quality control New-product innovations
Credit rating Productivity/efficiency Technology innovations
Sources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens,
Long-Range Planning for Your Business (New York: American Management Association, 1976).
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 Portfolio Strategy
BCG Matrix
 Mix of business units
and product lines that fit
together in a logical way
to provide synergy and
competitive advantage

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 Five Forces Affecting Industry Competition
•Internet reduces Potential New
barriers to entry Entrants

Internet blurs differences among

competitors in an industry

Threat of Substitute Rivalry Bargaining

Products among Power of
Competitors Buyers
•Internet expands market size, but •Internet shifts greater power
creates new substitution threats 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).

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 Competitive Edge Through
Competitive 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 produce products more efficiently
than competitors
 Focus = concentrates on a specific regional
market or buyer group

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 Continuum of Partnership Strategies
Organizational Combination Acquisitions

Mergers
Degree of Collaboration

Joint Ventures
Strategic
Alliances
Strategic Business Partnering

Preferred Supplier Arrangements

Low High
Degree of Collaboration
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 Implementing Strategy Tools

 Leadership
 Structuraldesign
 Information and control systems
 Human resources

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 Tools for Putting
Environment Strategy into Action
Organization
Leadership
 Persuasion

Motivation

Structural Design Culture/values
 Organization Chart Human Resources
 Teams 
Strategy Recruitment/selection Performance

Centralization 
Decentralization, Transfers/promotions
 Facilities, task design  Training
Layoffs/recalls
 Systems
Information and Control

 Pay, reward system

 Budget allocations

Information systems
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.  Rules/procedures
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