Strategy Formulation and Execution

MANAGEMENT
RICHARD L. DAFT
Strategy Formulation and
Implementation
CHAPTER 7
chapter7 Learning Outcomes
• Define the components of strategic management and discuss the levels of

strategy.
• Describe the strategic management process and SWOT Analysis.
• Define corporate-level strategies and explain the portfolio and

diversification approaches.
• Describe Porter’s competitive forces and strategies.
• Discuss new trends in strategy, including innovation from within and

partnership strategies.
• Discuss the organizational dimensions used for strategy execution.
3
Copyright ©2010 by South-Western, a division of Cengage
Learning. All rights reserved.
What’s Your Strategy
chapter7
Strength?
• How do you handle challenges and
issues?
• How did Best Buy overtake Circuit
City as the player to beat in consumer
electronics retailing?
• The strategies managers choose are
important.
• Strategies must be implemented
effectively to work. 4
chapter7 Strategy Basics
• Why has Apple been so successful with
the iPod, iTouch, iPhone?
• Why has McDonald’s healthier menu been

effective?
• Finding ways to respond to competitors,

and cope with change is strategy.
5
chapter7 Thinking Strategically
• The long-term view
• Seeing the big picture

– The organization How do
these fit
– Competition together?
• Strategy are your competitive actions in

the market
6
What is Strategic
chapter7
Management?
• Plans and actions that lead to superior
competitive standing
Who are our competitors and what are their
strengths and weaknesses?
Who are our customers?
What products or services should we offer?
What does the future hold for our industry?
How can we change the rules of the game?
7
chapter7 Purpose of Strategy
• Strategy:
– Plan of action
– Resource allocation
– Activities for dealing with the environment
– Achieving competitive advantage
• Strategy should:
– Exploit Core Competence
– Build Synergy
– Deliver Value 8
Three Levels of Strategy in
chapter7
Organizations
9
chapter7 Levels of Strategy
What business are

we in? Corporate-level strategy
How do we
compete? Business-level strategy
Functional-level strategy
How do we support
the business-level
strategy?
10
Strategy Formulation Versus
chapter7
Execution
• Strategy Formulation
– Assess environment and internal problems
– Planning
– Decision making
– Establishment of goals
• Strategy Execution
– Directing resources
– Accomplishing results
– Changes in structure
– Use managerial and organizational tools 11
The Strategic
chapter7
Management Process
12
chapter7 SWOT Analysis
Assessment of internal and external factors
• Organizational • External information

strengths, weaknesses, about opportunities
opportunities, and and threats
threats – Customers
– Reports – Government reports
– Budgets – Professional journals
– Financial ratios – Bankers
– Employee Surveys – Consultants
– Association meetings
13
Analyzing Organizational
chapter7
Strengths and Weaknesses
14
Formulating Corporate-
chapter7
Level Strategy
• Portfolio Strategy
– A diverse mix of business units
– Strategic Business Units (SBU) have different
products, mission, markets and competitors
• The BCG Matrix
– Organizes businesses along two dimensions—growth
and market share
• Diversification Strategy
– Movement into new lines of business
15
chapter7 The BCG Matrix
16
Formulating Business-Level
chapter7
Strategy
• Porter’s Five Forces – analyzing a
company’s position in the industry
Potential New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products
Rivalry Among Competitors
17
chapter7 Porter’s Five Forces
18
Porter’s Competitive
chapter7
Strategies
• Porter suggests that a company can adopt one
of three strategies after analyzing the forces
19
chapter7 New Trends in Strategy
• Mergers and acquisitions
• Enhancing organizational capacity
• Innovation from within
• Strategic partnerships
• Companies are focusing on internal
innovation as well as innovation
through strategic partnerships
20
chapter7 Global Strategy
• Finding strategies in the world marketplace
• Synergy among world operations
• Organizations differ in their global strategies
– Globalization
– Export
– Transnational
– Multidomestic
21
chapter7 Global Corporate Strategies
22
chapter7 Strategy Execution
• How will the strategy be implemented—put
into action?
• The organization must be congruent with
the strategy
• Execution involves several tools:
– Leadership
– Structural Design
– Human Resources
– Information and Control Systems
23
Tools for Putting Strategy
chapter7
into Action
24

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MANAGEMENT

• Define the components of strategic management and discuss the levels of

• Describe the strategic management process and SWOT Analysis.

• Define corporate-level strategies and explain the portfolio and

• Describe Porter’s competitive forces and strategies.

• Discuss new trends in strategy, including innovation from within and

• Discuss the organizational dimensions used for strategy execution.

• Why has McDonald’s healthier menu been

• Finding ways to respond to competitors,

• Seeing the big picture

• Strategy are your competitive actions in

What business are

• Organizational • External information

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