Chapter 8

Strategy Formulation and

Implementation

Strategic Planning
Strategic

planning has taken on new

importance in todays world of

globalization, deregulation, advancing
technology, and changing demographics,
and lifestyles
Managers Challenge: Nintendo

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Strategy Formulation and

Implementation
Strategic

Management

Definition
Components
Model of Strategic Management Process
Models of Strategy Formation

Managerial

Tools to Implement Strategic

Plans
3

Topics:
Chapter 8

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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
A separate grand
1. Growth
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

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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

Need for Global Integration

Globalization
Strategy

Low

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Treats world as a
single global market
Standardizes global
products/advertising
strategies

Export
Strategy
Domestically focused
Exports a few
domestically produced
products to selected
countries

Transnational
Strategy
Seeks to balance global
efficiencies and local
responsiveness
Combines standardization
and customization for
product/advertising
strategies

Multi-domestic Strategy
Handles markets
independently for each
country
Adapts product/advertising
to local tastes and needs

Low Need for National Responsiveness

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High

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

12

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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

13

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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

14

R&D

Manufacturing

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Marketing

Strategic Management Process

Scan External
Environment
National,
Global
Evaluate
Current
Mission, Goals,
Strategies
Scan Internal
Environment Core
Competence,
Synergy, Value
Creation

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Identify Strategic
Factors
Opportunities,
Threats

SWOT

Define new
Mission
Goals, Grand
Strategy

Identify Strategic
Factors
Strengths,
Weaknesses

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Formulate
Strategy
Corporate,
Business,
Functional

Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems

Strategy Formulation vs.

Implementation

Strategy Formulation = stage of strategic

management that involves planning and decision
making that lead to the establishment of the
organizations 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

16

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Checklist for Analyzing

Organizational Strengths and Weaknesses
Management and Organization

Marketing

Planning, information,
control systems

Distribution channels
Market share
Advertising efficiency
Customer satisfaction
Product quality
Service reputation

Finance

Sales force turnover

Production

Management quality
Staff quality
Degree of centralization
Organization charts

Profit margin
Debt-equity ratio

Plant location
Machinery obsolescence

Inventory ratio

Purchasing system

Return on investment

Quality control

Credit rating

Productivity/efficiency

Human Resources
Employee experience,
education
Union status
Turnover, absenteeism
Work satisfaction
Grievances
Research and Development
Basic applied research
Laboratory capabilities
Research programs
New-product innovations
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).

17

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Portfolio Strategy
BCG Matrix

18

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
barriers to entry

Potential New
Entrants
Internet blurs differences among
competitors in an industry

Threat of Substitute
Products
Internet expands market size, but
creates new substitution threats

Internet tends to increase the

bargaining power of suppliers

Bargaining
Power of
Buyers

Rivalry
among
Competitors

Internet shifts greater power

to end consumers

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

20

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ORGANIZATIONAL
CHARACTERISTICS
Differentiation

21

Acts in a flexible, loosely knit way, with strong

coordination among departments
Strong capability in basic research
Creative flair, thinks `out of the box`
Strong marketing abilities
Rewards employee innovation
Corporate reputation for quality and technological
leadership

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 Cost

22

leadership

Strong central authority; tight cost control

Maintains standard operating procedures
easy-to-use manufacturing technologies
Highly efficient procurement and distribution
systems
Close supervision; finite employee empowerment
Frequent, detailed control reports

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 Focus

23

May use combination of above policies directed at

particular strategic target
Values and rewards flexibility and customer
intimacy
Measures cost of providing service and
maintaining customer loyalty
Pushes empowerment to employees with
customer contact

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Continuum of Partnership Strategies

Organizational Combination

Acquisitions

Degree of Collaboration

Mergers

Strategic
Alliances

Joint Ventures

Strategic Business Partnering

Preferred Supplier Arrangements

Low

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Degree of Collaboration

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High

Implementing Strategy Tools

Leadership
Structural

design
Information and control systems
Human resources

25

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Tools for Putting

Strategy into Action

Environment
Organization

Strategy

Leadership
Persuasion

Motivation

Structural Design
Culture/values
Human Resources
Organization Chart

Teams
Recruitment/selection

Centralization
Transfers/promotions
Decentralization,
Training
Facilities, task design
Systems
Layoffs/recalls
Information and Control

Performance

Pay, reward system

Budget allocations

Information systems
Rules/procedures

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.

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