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Management 12e richard draft chapter 08

Chapter 8
Strategy Formulation and Execution

© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Strategy


Every company is concerned with strategy



Strategic management is a specific type of planning

It determines which organizations succeed and which ones struggle
Strategic blunders can hurt a company

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.



Thinking Strategically


The long-term view of the organization and competition



Thinking strategically impacts performance and financial success



Today’s environment requires everyone to think strategically

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Strategic Management

Decisions and actions used to formulate and execute strategies that will
provide competitively superior fit between the organization and its
environment to achieve organizational goals

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Purpose of Strategy


Explicit strategy is the plan of action



Competitive advantage is the organization’s
meeting customer needs

distinctive edge for


Strategies should:

Exploit Core Competencies
Achieve Synergy
Create Value
Target Customers

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.1 The Elements of Competitive Advantage

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.2 Three Levels of Strategy in Organizations

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.3 The Strategic Management Process

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Strategy Formulation
versus Execution

Formulation:
Assessing the external
environment and internal
problems to create goals and
strategy

Execution:
the use of managerial and organizational
tools to direct
resources toward accomplishing
strategic results

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


SWOT Analysis


Formulating strategy often begins with an audit of internal and external
factors

Internal Strengths and Weaknesses
External Opportunities and Threats


Information is acquired from reports, surveys, discussions, and meetings

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.4 Audit Checklist for Analyzing Organizational Strengths and
Weaknesses

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Formulating Corporate-Level Strategy: Portfolio
Strategy


Strategic Business Units (SBUs) have a unique mission, products, and
competitors



Portfolio strategy pertains to the mix of SBUs and product lines to
provide synergy and competitive advantage



Organizations should not become too dependent on one business

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Formulating Corporate-Level Strategy: The BCG
Matrix


Organizes business along two dimensions

Business growth rate
Market share


Four categories for corporate portfolio

The combination of high/low market share and high/low business growth

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.5 The BCG Matrix

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Formulating Corporate-Level Strategy:
Diversification Strategy

Related diversification: expansion into new business related to
existing business activities

Unrelated diversification: expansion into new lines of business
Vertical integration: expansion into businesses that supply to the
business or are distributors

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Formulating Business-Level Strategy


Strategy within the business units: How do we compete?



Business-level strategies are developed by Porter’s Five Forces



Web technology is impacting all industries in positive and negative
ways

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.5 Porter’s Five Forces

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Porter’s Competitive Strategies


Differentiation

Distinguishing products and services


Cost Leadership

Cost reductions, cost controls


Focus Strategy

Concentration on a specific region or buyer
Either differentiation or cost leadership approach

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.7 Characteristics of Porter’s Competitive
Strategies

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


Formulating Functional-Level Strategy

Action plans used by major departments

Marketing
Production
Finance
Human Resources
Research and Development

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.8 Global Corporate Strategies

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Strategy Execution

The final step!



“Strategy is easy, but execution is hard”

Most important but most difficult part


Strategy must be skillfully executed



Alignment requires all aspects of the organization to focus on strategy
goals

Everyone is moving in the same direction

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.


8.9 Factors that Contribute to the Failure of
Strategy Execution

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8.10 Tools for Putting
Strategy into Action

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.



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