CHAPTER

 FOUR    
STRAGY  FORMULATION  AND  IMPLEMENTATION  
Determining  the  OrganizaBon’s  Mission  and  
Goals  

Defining  the  Business  

 
To  define  the  business,  managers  must  ask  three  related  
ques6ons  about  a  company’s  products:  
 
(1)   Who  are  our  customers?  
(2)   What  customer  needs  are  being  sa6sfied?    
(3)   How    are  we  sa6sfying  customer  needs?  
 
 
q IN  strategy  formula6on  managers  work  to  develop  the  set  
         of  strategies  (corporate,  divisional,  and  func6onal)  that  
         will  allow  an  organiza6on  to  accomplish  its  mission  and  
           achieve  its  goals.  
 
q  S t r a t e g y   f o r m u l a 6 o n   b e g i n s   w i t h   m a n a g e r s ’  
systema6cally   analyzing   the   factors   or   forces   inside   an  
organiza6on   and   outside   in   the   global   environment   that  
affect   the   organiza6on’s   ability   to   meet   its   goals   now   and  
in  the  future.  

q   SWOT  analysis  and  the  five  forces  model  are  two  handy  
techniques  managers  can  use  to  analyze  these  factors.  
   
SWOT  Analysis  
 
SWOT  analysis  is  a  planning  exercise  in  which  managers  
iden6fy    are  :  
o  Internal  organiza6onal  strengths  (S)    
o   Weaknesses  (W)  and  
o   External  environmental  Opportuni6es  (O)  
o   Threats  (T).  
 
q    Based   on   a   SWOT   analysis,   managers   at   the   different  
levels   of   the   organiza6on   select   the   corporate,   business,  
and   func6onal   strategies   to   best   posi6on   the   organiza6on  
to  achieve  its  mission  and  goals  .  

SWOT  ANALYSIS  
SWOT  ANALYSIS  
The  Five  Forces  Model  
 
A  well-­‐known  model  that  helps  managers  focus  on  
the  five  most  important  compe66ve  forces,  or  
poten6al  threats,  in  the  external  environment  is  
Michael  Porter’s  five  forces  model.  

PORTER  FIVE  FORCES  MODEL  

PORTER’S FIVE FORCES MODEL
Buyer power
high when buyers have many choices and low when their
choices are few.
Supplier power
high when buyers have few choices and low when
choices are many The opposite of buyer power.
Threat of substitute products and services
high when there are many alternatives for buyers and
low when there are few alternatives.
Threat of new entrants
high when it is easy for competitors to enter the
market and low when entry barriers are significant.
Rivalry among existing competitors
high when competition is fierce and low when
competition is more complacent.
 FORMULATING  BUSINESS  STRATEGY  
q According  to  Porter,  to  obtain  these  higher  profits  
managers  must  choose  
between  two  basic  ways  of  increasing  the  value  of  an  
organiza6on’s  products:  differen6a6ng  the  product  to  
increase  its  value  to  customers  or  lowering  the  costs  of  
making  the  product.    
q Porter  also  argues  that  managers  must  choose  between  
serving  
the  whole  market  or  serving  just  one  segment  or  part  of  a  
market.  Based  on  those  choices,  managers  choose  to  pursue  
one  of  four  business-­‐level  strategies:    
o  Low  Cost,  
o  Differen6a6on  
o  Focused  Low  Cost  
o  Focused  Differen6a6on  
Low-­‐Cost  Strategy  
With   a   low-­‐cost   strategy   managers   try   to   gain   a   compe66ve  
advantage  by  focusing  on  driving  the  company’s  costs  down  below  
the  costs  of  its  industry  rivals.  

DifferenBaBon  Strategy  
  Managers   try   to   gain   a   compe66ve   advantage   by   focusing   on  
dis6nguishing   the   organiza6on’s   products   from   those   of   compe6tors  
on  one  or  more  important  dimensions,  

low-­‐cost  strategy    
serve   one   or   a   few   segments   of   the   overall   market   and   aim   to   make   their  
organiza6on  the  lowest-­‐cost  company  serving  that  segment.  
 
  focused   differenBaBon   strategy   serve   just   one   or   a   few   segments   of  
the   market   and   aim   to   make   their   organiza6on   the   most   differen6ated  
company  serving  that  segment.    

PORTER’S  BUSINESS  STRATEGIES  

FormulaBng  Corporate-­‐Level  Strategies  

Is  a  plan  of  ac6on  that  involves  choosing  :  

 
In  which  industries  and  countries  a  company  should  invest  its  
resources  to  achieve  its  mission  and  goals.    
 
In  choosing  a  corporate-­‐level  strategy,  managers  ask,  How  
should  the  growth  and  development  of  our  company  be  
managed  to  increase  its  ability  to  create  value  for  customers  
(and  thus  increase  its  performance)  over  the  long  run?    
 
Managers  of  effec6ve  organiza6ons  ac6vely  seek  new  
opportuni6es  to  use  a  company’s  resources  to  create  new  and  
improved  goods  and  services  for  
customers.    
IMPLEMENTING  A  STRATEGY  
AZer  iden6fying  appropriate  business  and  corporate  strategies  
managers  confront  the  challenge  of  pu[ng  those  strategies  
into  ac6on.  
 Strategy  implementaBon  is  a  five-­‐step  process:  
 1.  Alloca6ng  responsibility  for  implementa6on  to  the  
           appropriate  individuals  or  groups.  
2.  DraZing  detailed  ac6on  plans  that  specify  how  a  strategy  is    
         to  be  implemented.  
3.  Establishing  a  6metable  for  implementa6on  that  includes  
       precise,  measurable  goals  linked  to  the  a\ainment  of  the      
       ac6on  plan.  
 4.  Alloca6ng  appropriate  resources  to  the  responsible    
         individuals  or  groups.  
5.  Holding  specific  individuals  or  groups  responsible  for  the  
       a\ainment  of  corporate,  divisional,  and  func6onal  goals.    
THANK  YOU