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Strategy Formulation (3 points: Values, Synergy, Core Competence of GE)

A strategy is an integrated, overarching plan of how an organisation will achieve its

objectives. It represents the means to an end.
> Vision Statement
> Mission Statement
> Corporate Objectives
> Assessment of internal and external environments
> Diversifcation
> Joint Ventures
> Mergers
> Acquisitions
> New product development
> Entering new markets
How do you select among these options? (SWOT Analysis)
Today, with increasing competitive pressure, frms need leaders to:
> Continuously seek opportunities for new strategies
> Be aware of what reactions such strategies will incite from competitors
> Be prepared to defend their own interests when rivals attack
(Samsung vs Apple lawsuits)
Firms with innovation strategy: high-performing frms vs low-performing frms
> Stronger and more defned leadership
> More defned culture styles
A casual relationship exists among:
> Strategy + organisational culture + leadership + innovation
Good Strategies
> Focus on exploiting opportunities in the organisations external environment that matches
the organisations strength
> Must refect the core mission and objectives of the organisation
> Must enhance value to customers
> i.e. the ratio of benefts received to the cost incurred by the customer
> Must create synergistic opportunities
> i.e. when organisational units or systems interact, they produce a joint result that
is greater than the sum of the parts acting independently; 2 + 2 = 5 phenomenon
> Build on companys core competence
> i.e. capability that allows an organisation to perform extremely well in comparison
to competitors
> Role of a strategic leader is to identify the organisations unique strengths
> i.e. a source of sustainable competitive advantage when they are rare, hard to
imitate, not easily substitutable, creates value for the frm
Sustaining the competitive advantage of a frm
> Core competencies match the opportunities available in the external environment and
consistently generate higher customer value.
> Knowledge, especially people-based knowledge, is the most distinctive and hard to
imitate resource
> Shared belief that an organisations fnancial and strategic success is partially dependent
on the actions and interactions of employees as they share ideas and information across
functional boundaries (remember cross-functional teams?)
> Knowledge-based competitive advantage is hard to imitate or copy because it resides in
people, not physical assets
> Unlike physical resources which deplete when used, core competencies increase (in
terms of efcient application)
What is a strategy?
> Just the means to the end result of meeting customers needs proftably
> Many business failures occur because the company pays too much attention to the
means and ignoring the customer
> The customer must be central in strategy formulation because without consumers buying
the products and services ofered by a frm, strategy fails and performance sufers
> Creating a winning market leadership program that maximises customer value creation is
a precondition for frm proftability and survival
Strategy Implementation (Skills, Working with people, Conficts etc.)
What is Efective Strategy Implementation?
> Objectives have a greater chance of being met = better frm performance
Why is it the most important and most difcult part of the strategic management process?
> Requires strong leadership
> Afected by style of leadership
> Recall directive/task-oriented leadership
> Recall consultative, participative, people oriented leadership
> Afected by abundance of managerial skills
> Persuasiveness, administrative ability, communication, knowledge about team
dynamics, social skills, conceptual skills
> Strategy implementation eforts will afect frm performance
Strategy Implementation: What else is required
> Galvanise the organisations employees and managers at all levels to turn formulated
strategies into action
> An excellent strategy that is poorly executed will yield the same poor results as a bad
> Careful consideration must be paid to its implementation as well, not just its formulation
Obstacles to Efective Strategy Implementation / Why is Strategy Implementation the most
difcult stage?
> Lack of resources: most strategies fail because of this
> Leader must prioritise and make resources available during strategy implementation
> Rewards and other forms of compensation must be aligned with the goals that
employees are seeking to accomplish
> Time is of essence
> Being careful and rational is important but not sufcient if managers are slow to initiate
> Managers must avoid becoming trapped in vicious cycle of rigidity and inaction that
prevents them from acting in a timely fashion
> It involves dealing with people who have varying levels of motivation,
commitment, dedication
> These diferences often result in interpersonal conficts, if left unresolved, can
signifcantly afect implementation eforts and performance.
> Managers must be able to motivate employees to cooperatively perform at high levels
> If right employees are not in place or the leader lacks people skills, it will be difcult
> Many components need to be integrated to turn a chosen strategy into action
> Leadership decisions in these areas must match the requirements of the chosen
strategy, mission and objectives of the company: annual objectives, structure, culture, pay
or reward systems, budget allocation, organisational rules, policies and procedures
I.e. Company pursuing strategy of diferentiation through innovation => where company is
bureaucratic, hierarchical in structure = mismatch between strategy and structure
I.e. Company pursuing strategy of internal efciency and stability, aimed at ofering
customers lower prices than competitors = more likely to succeed with this type of
centralised hierarchical structure because of strict controls on cost containment
I.e. Strategy vs culture, strategy vs structure, strategy vs environment misalignment = high
chances of failure
Evaluation (3 activities of evaluating/Balance Score Card)
Strategy evaluation is the fnal stage in the strategic management process:
> One: Reviewing internal and external factors that are the bases for the current strategies
> Two: Measuring performance against stated objectives
> Three: Taking corrective action
I.e. Step Two = bad
> This will be responsibility of strategic leader to encourage meaningful communication
and interaction among managers and employees across hierarchical levels
> This is because it allows feedback from strategy evaluation to be shared throughout the
organisation and necessary changes implemented
> The job of strategic leadership os to foster and promote a culture of openness and
teamwork throughout the organisation
Balance scorecard:
> Translates mission and vision statements into a comprehensive set of objectives and
performance measure that can be quantifed and appraised
> Worksheet?