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Strategy
Formulation
andImplementationChapter
8Strategic
PlanningStrategic
planning
has
taken
onnewimportance
in
today’s
world
ofglobalization,
deregulation,
advancingtechnology,
and
changing
demographics,and
lifestylesManager’s
Challenge:
NintendoCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.2Strategy
Formulation
andImplementationCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.3Strategic
ManagementDefinitionComponentsModel
of
Strategic
ManagementProcessModels
of
Strategy
FormationManagerial
Tools
toImplement
StrategicPlansTopics:Chapter
8Thinking
StrategicallyCopyright
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division
of
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Learning.
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rights
reserved.4
Strategic
ManagementCopyright
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a
division
of
Thomson
Learning.
All
rights
reserved.5Set
of
decisions
and
actions
used
toimplement
strategies
that
will
provide
acompetitively
superior
fit
between
theorganization
and
its
environment
so
astoachieve
organizational
goalsResponsibility
=
top
managers
&chief
executiveStrategic
ManagementCopyright
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division
of
Thomson
Learning.
All
rights
reserved.6Managers
ask
such
questions
as...What
changes
and
trends
areoccurring?Who
are
our
customers?What
products
or
services
should
we
offer?How
can
we
offer
these
products
or
servicesmost
efficiently?Grand
Strategy
General
plan
of
major
action
to
achievelong-term
goalsFalls
into
three
general
categoriesGrowthStabilityRetrenchmentA
separate
grandstrategy
can
bedefined
for
globaloperationsEthical
Dilemma:
A
Great
Deal
for
Whom?Copyright
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division
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Learning.
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rights
reserved.7Grand
Strategy:
GrowthCopyright
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division
of
Thomson
Learning.
All
rights
reserved.8Growth
can
be
promoted
internally
byinvesting
in
expansion
or
externally
byacquiring
additional
business
divisionsInternal
growth
=
can
include
development
ofnewor
changed
productsExternal
growth
=
typically
involves
diversification–
businesses
related
to
current
product
lines
orinto
new
areasGrand
Strategy:
StabilityCopyright
?
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division
of
Thomson
Learning.
All
rights
reserved.9Stability,
sometimes
called
a
pause
strategy,means
that
the
organization
wantsto
remain
the
same
size
orto
grow
slowly
and
in
a
controlledfashionGrand
Strategy:
RetrenchmentCopyright
?
2005
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a
division
of
Thomson
Learning.
All
rights
reserved.10Retrenchment
=
the
organization
goes
through
aperiod
of
forced
decline
by
either
shrinking
currentbusiness
units
or
selling
off
or
liquidating
entirebusinessesLiquidation
=
selling
off
a
business
nit
for
the
cashvalue
of
the
assets,
thus
terminating
its
existenceDivestiture
=
involves
selling
off
of
businesses
thatno
longer
seem
central
to
thecorporationGlobal
Corporate
StrategiesNeed
for
National
ResponsivenessHighLowTransnationalStrategySeeks
to
balance
globalefficiencies
and
localresponsivenessCombines
standardizationand
customization
forproduct/advertisingstrategiesGlobalizationStrategyTreats
world
as
asingle
global
marketStandardizes
globalproducts/advertisingstrategiesMulti-domestic
StrategyHandles
marketsindependently
for
eachcountryAdapts
product/advertisingto
local
tastes
and
needsNeed
for
Global
IntegrationExportStrategyDomestically
focusedExports
a
fewdomestically
producedproducts
to
selectedcountriesCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.11Global
StrategyCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.12Globalization
=
product
design
andadvertising
strategies
are
standardizedaround
the
worldMulti-domestic
=
adapt
product
andpromotion
for
each
countryTransnational
=
combine
globalcoordinationwith flexibility
to
meetspecific
needs
in
variouscountriesPurpose
of
StrategyThe
plan
of
action
that
prescribesresource
allocation
andotheractivities
for
dealing
with
theenvironment,
achievingacompetitive
advantage,
that
helpthe
organization
attain
its
goalsStrategies
focus
on:l
Core
competenciesl
Developing
synergyl
Creating
value
for
customersCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.13Three
Levels
of
Strategy
in
OrganizationsCorporate-Level
Strategy:What
business
are
we
in?CorporationBusiness-Level
Strategy:How
do
wecompete?Textiles
UnitChemicals
UnitAuto
Parts
UnitFunctional-Level
Strategy:How
dowe
supportthebusiness-levelstrategy?FinanceR&DManufacturingMarketingCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.14Strategic
Management
ProcessImplementStrategy
viaChanges
in:Leadershipculture,Structure,
HR,Information
&controlsystemsSWOTFormulateStrategy
–Corporate,Business,FunctionalDefine
newMissionGoals,
GrandStrategyIdentify
StrategicFactors
–Strengths,WeaknessesIdentify
StrategicFactors
–Opportunities,ThreatsScan
InternalEnvironment
–
CoreCompetence,Synergy,
ValueCreationEvaluate
Current
Mission,Goals,StrategiesScan
ExternalEnvironment
–National,GlobalCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.15Strategy
Formulation
vs.ImplementationStrategy
Formulation
=
stage
of
strategicmanagement
that
involves
planning
and
decisionmaking
that
lead
to
the
establishment
of
theorganization’s
goals
and
of
a
specific
strategicplanStrategy
Implementation
=
stage
of
strategicmanagement
that
involves
the
use
of
managerial
andorganizational
tools
to
direct
resources
towardachieving
strategic
outcomesExperiential
Exercise:
Developing
Strategy
for
a
Small
BusinessCopyright
?
2005
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a
division
of
Thomson
Learning.
All
rights
reserved.16Copyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.Checklist
for
AnalyzingOrganizational
Strengths
and
WeaknessesSources:
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).Management
qualityStaff
qualityDegree
of
centralizationOrganization
chartsPlanning,
information,controlsystemsFinanceProfit
marginDebt-equity
ratioInventory
ratioReturn
on
investmentCredit
ratingDistribution
channelsMarket
shareAdvertising
efficiencyCustomer
satisfactionProductqualityService
reputationSales
force
turnoverProductionPlant
location
Machinery
obsolescencePurchasing
systemQuality
controlProductivity/efficiencyManagement
and
Organization
Marketing Human
ResourcesEmployeeexperience,educationUnion
statusTurnover,
absenteeismWork
satisfactionGrievancesResearch
and
DevelopmentBasic
applied
researchLaboratory
capabilitiesResearch
programsNew-product
innovationsTechnology
innovations17Portfolio
StrategyMix
of
businessunits
and
productlines
that
fittogether
in
alogical
waytoprovide
synergyand
competitiveadvantageBCG
MatrixCopyright
?
2005
bySouth-Western,
a
division
of
Thomson
Learning.
All
rights
reserved.18Five
Forces
Affecting
Industry
CompetitionSource:
Based
on
Michael
E.
Porter,
Competitive
Strategy:
Techniques
for
Analyzing
Industries
and
Competitors
(New
York:
Free
Press,
1980).Internet
reducesbarriers
to
entryInternet
expands
market
size,butcreates
new
substitution
threatsInternet
tends
to
increase
thebargaining
power
of
suppliersInternet
shifts
greater
power to
endconsumersInternet
blurs
differences
amongcompetitors
in
an
industryBargainingPowerofBuyersCopyright
?
2005
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a
division
of
Thomson
Learning.
All
rights
reserved.19Bargaining
Power
of
SuppliersThreat
of
SubstituteProductsPotential
NewEntrantsRivalryamongCompetitorsCompetitive
Edge
ThroughCopyright
?
2005
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a
division
of
Thomson
Learning.
All
rights
reserved.20Competitive
StrategiesDifferentiation
=
attempt
to
distinguish
productsor
services
from
that
ofcompetitorsCost
leadership
=
aggressively
seeks
efficientfacilities,
pursues
cost
reductions,
and
uses
tightcost
controls
to
produceproducts
more
efficientlythan
competitorsFocus
=
concentrates
on
a
specificregionalmarket
or
buyergroupContinuum
of
Partnership
StrategiesOrganizational
CombinationStrategicAlliancesMergersAcquisitionsStrategic
Business
PartneringPreferred
Supplier
ArrangementsLowJoint
VenturesCopyright
?
2005
bySo
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