STRATEGY

FORMULATION
Strategy Formulation
process by which an organization CHOOSES
the MOST appropriate courses of ACTION
to achieve its defined GOALS
Elements of Corporate Strategy

Strategy Formulation Process

Alliances and Acquisitions

Tools and Techniques

Plan implementation
ELEMENTS OF
CORPORATE
STRATEGY
 vision
PRESENT STRATEGIC PLAN
of
future
strategic plan…
1. Involves high levels of investment.

2. A well-established business needs

long-term planning.

3. Technological changes.
STRATEGIC vs. TACTICAL
PLAN PLAN
determine the
actions which the the shorter term
company intends actions which lead
to follow in order to the achievement
to meet its of the overall
long-term mission strategic plan
and objectives
“change”
keep it original…
the ELEMENTS
1. External factors
2. Development Stage
3. Kind of Business
DEVELOPMENT STAGE
1. Entrepreneur (Birth) Stage
2. Expansion and Consolidation
Stages
3. Diversification Stage
4. Decline and Renewal Stages
DEVELOPMENT STAGE STRATEGY
1. Entrepreneur (Birth)
“centered in growth by
Stage working closely with
2. Expansion and Consolidation Stages its customers and
3. Diversification Stage suppliers to define the
4. Decline and Renewal Stages product or service”
DEVELOPMENT STAGE STRATEGY
1. Entrepreneur (Birth) Stage

2. Expansion and “assess position and

focus in establishing
Consolidation Stages
policies and processes
3. Diversification Stage and ensure effective
4. Decline and Renewal Stages controls”
DEVELOPMENT STAGE STRATEGY
1. Entrepreneur (Birth) Stage
Expansion and Consolidation Stages
2.
“minimize risk or
3. Diversification aim to maximize
opportunities at
Stage acceptable risk”
4. Decline and Renewal Stages
DEVELOPMENT STAGE STRATEGY
1. Entrepreneur (Birth) Stage
Expansion and Consolidation Stages
2.
“explore opportunities
3. Diversification Stage that will enable the
4. Decline and Renewal organization to survive
Stages and grow again”
KINDS OF BUSINESS

1. Marketing 5. Manufacturing
2. Sales 6. Partially Integrated
3. Marketing and Sales 7. Fully Vertically
Integrated
4. Design
 PRODUCT MK
MK S D MAN P.I. F.V.I
STAGE AND S

SPECIFICATION X X X

DESIGN X X X X

MANUFACTURE X X X X X

MARKETING X X X

SALES X X X
 PRODUCT MK
MK S D MAN P.I. F.V.I
STAGE AND S

SPECIFICATION X X X

DESIGN X X X X

MANUFACTURE X X X X X

MARKETING X X X

SALES X X X
 PRODUCT MK
MK S D MAN P.I. F.V.I
STAGE AND S

SPECIFICATION X X X

DESIGN X X X X

MANUFACTURE X X X X X

MARKETING X X X

SALES X X X
 PRODUCT MK
MK S D MAN P.I. F.V.I
STAGE AND S

SPECIFICATION X X X

DESIGN X X X X

MANUFACTURE X X X X X

MARKETING X X X

SALES X X X
 PRODUCT MK
MK S D MAN P.I. F.V.I
STAGE AND S

SPECIFICATION X X X

DESIGN X X X X

MANUFACTURE X X X X X

MARKETING X X X

SALES X X X
 PRODUCT MK
MK S D MAN P.I. F.V.I
STAGE AND S

SPECIFICATION X X X

DESIGN X X X X

MANUFACTURE X X X X X

MARKETING X X X

SALES X X X
Chief Executive,
owns the corporate strategy

“the others are

too busy…”
PRODUCT
DEVELOPMENT
PRODUCT
MANUFACTURE
PRODUCT
MARKETING
PRODUCT
SALES

FINANCE
BUSINESS
PROCESS > PRODUCT
EFFECTIVE PROCESS:
Key Requirements…

1. Geared to meeting the customer’s needs.

2. Allows fast response to changes in the

environment.

3. Transferable.

4. Expandable.
EFFECTIVE PROCESS:
Key Requirements…

1. Geared to meeting the customer’s needs.

2. Allows fast response to changes in the

environment.

3. Transferable.

4. Expandable.
STRATEGY
FORMULATION
(strategic cycle)
 Vision of Strategic
Future Action Plan

Review of
Assessment
Current
of future
Position
Assessment of Future
S TRENGTHS
W EAKNESS
O PPORTUNITY
T HREATS
 BUSINESS SECTOR

OPPORTUNITIES
TRIANGLE

CUSTOMER MARKET
CHARACTERISTIC CHARACTERISTIC
 ORGANIZATIO
N

IMPLODING TRIANGLE

CONSUME PRODUCE
R R
 Vision of Strategic
Future Action Plan

Review of
Assessment
Current
of future
Position
 Organization’s
aspiration should
be high, often
STRETCHING THE exceeding the
available resources
ORGANIZATION to ensure pursuit
of excellence.
 Vision of Strategic
Future Action Plan

Review of
Assessment
Current
of future
Position
Wider Participation by…
1. As a directive from the top.
2. On a top-down principle.
3. On the basis of agreement among a
committee of members.
4. On a bottom-up principle.
LEVERING RESOURCES
• Prioritizing objectives
• Using other people’s resources
• Extensive re-use of technology
• Breaking down specialties within company
LEVERING RESOURCES
• Forming alliances
• Conserve scarce resources
• Looking for quick paybacks
MAIN CONSIDERATIONS

?
1. Does it maintain current levels of revenues?
2. Does it include improving existing items?
3. Does it introduce change?
AREAS COVERED…
1. Financial Consideration.
2. Market Development
3. Technology
4. Process Improvements
5. Developing the culture of the organization
6. Responsibility to the Public and Society
RESULTS MONITORING
• financial measures
• operational measures
 Vision of Strategic
Future Action Plan

Review of
Assessment
Current
of future
Position
 Vision of Strategic
Future Action Plan

Review of
Assessment
Current
of future
Position
Alliances
and
Acquisitions
Alliances or Acquisitions
Alliance
: a union/relationship between
people, groups, countries, etc.

Acquisitions
: something or someone acquired
or gained.
 Existing New
Geography Geography

Prime Acquisition Alliance

Business (Acquisition)

Secondary
Alliance Alliance
Business
(Acquisition)
Reasons for alliances
• Strategic
alliances can involve several
groups of companies
• May be set up to develop new products
• To enter new markets
Reasons for alliances
• To share in the cost of new research
• Forone of the partners to obtain political
credibility in gaining a foreign license
• Depend largely on the activities of the
partners
Reasons for alliances
The main considerations:
Whether the company is a market
leader/follower in the activity being
considered for the alliance

Whether it forms the prime business or

secondary business of the potential
partners
Reasons for alliances
Market Leader Market Follower

Prime Defend lead Drive for lead

Business position position

Secondary
Maintain Change
Business
status quo position
Strong alliances
• Alliancesformed between two partners of
equal strength have the greatest chance of
success.

• Alliancescan only succeed if they are

considered to be a win-win situation for all
participants and are not treated win-lose
games.
Forming a joint venture
• Jointventures are the ultimate form of
alliance; a separate company is set up to
which each partner contributes a given
amount of finance, personnel and skills.
Forming a joint venture
• It
is vitally important that the joint venture
has full autonomy
• Thejoint venture is a separate entity and not
part of either of its parents
Forming a joint venture

• The objectives for the joint venture must be as

broad and flexible as possible so that it can
follow up opportunities as they arise and grow
beyond its original mandate.
Forming a joint venture

• Employees of the parent companies may

sometimes feel threatened when a joint venture
is being formed.
Forming a joint venture
• It
is important that all parties to a joint
venture make internal plans to cater for the
time when the joint venture may be
terminated or failed.
Forming a joint venture
• Usually three quarters of failed joint ventures
are acquired by one of the partners, and in
these circumstances problems can arise
regarding ownership of items such as
intellectual property rights
STRATEGY FORMULATION TOOLS
AND TECHNIQUES
What is strategy formulation?
• refersto the process of choosing the
most appropriate course of action
for the realization of organizational
goals and objectives and thereby
achieving the organizational vision
Advantages of Using Formal Tools and
Techniques

• Systematic Thought Process is

followed
• Emphasis is placed on facts than
on hunches
• Better analysis of the problem
• Fall-back strategy is provided
Planning Tools and Techniques
• Value Analysis
• Driving forces in business are itemized and
analyzed
• Costumer satisfaction is highly considered
• Key element – shareholder value analysis
Planning Tools and Techniques
• Market Analysis
• Covers the analysis of market-related factors
• Key element – competitor analysis, benchmarking
• Gap Analysis
-Identifying the difference better
corporation's aim and expected result
• Financial Analysis
-Well-established technique
• Group Decision Making
-Take up all considerable amount of
management resources at all levels
Plan
Implementa
tion
Plan Implementation
Long
Term
Medium Term

Short
Term
Management by Objectives
• Organizational goals are set my the executive.
• Objectives are agreed for all levels within the
organization.
• Progress is monitored against each objective.
• individuals are appraised against their
objectives and feedback provided.
Monitoring and Measuring
• Having a mix of measures is good; both operational
and financial.

• Measure must be able to provide quick feedback to

the management on progress being made.
Monitoring and Measuring

• Three key performance measures are considered:

1) Customer-related,
2) Process-related and
3) Financial
Customer-related Measures
• Reducingthe time from receiving an order to
delivering the product to the customer.

• Improvingquality of products delivered to the

customer in terms of reduced defects in goods
inwards inspection.
Customer-related Measures
• Reducing cost to the customer.

• Improving customer care.

Process-related Measures
• Reducing the time to market for new products.

• Quality improvements throughout the organization.

• Lower
costs, again in all stages of development and
manufacturing process.
Process-related Measures
• Ensuring
that the product meets customer
requirements.

• Development of internal core competencies.

Financial Measures
• Profit, measured in terms of return on investment.
• Sales growth in terms of turnover.
• Growth in market share.
• Adequate
cash flow to fund ongoing
developments.