Corporate Strategy Formulation Corporate Strategy Formulation and Implementationand Implementationfor a large enterprisefor a large enterprise
Strategic PlanningStrategic Planning
Strategic planning has taken on new
importance in today’s world of
globalization, deregulation,
advancing technology, and changing
demographics, and lifestyles
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Strategy Formulation and Strategy Formulation and ImplementationImplementationStrategic Management
◦Definition◦Components◦Model of Strategic Management
Process◦Models of Strategy Formation
Managerial Tools to Implement Strategic Plans
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Thinking StrategicallyThinking 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 ManagementStrategic ManagementSet 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 ManagementStrategic 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 StrategyGrand Strategy
General plan of major action to achieve long-term goals
Falls into three general categories1. Growth2. Stability3. Retrenchment
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A separate grand strategy can be defined for global operations
Grand Strategy: GrowthGrand Strategy: GrowthGrowth 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: StabilityGrand 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: Grand Strategy: RetrenchmentRetrenchmentRetrenchment = 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 Global Corporate StrategiesStrategies
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Need for National Responsiveness HighLow
Low
High Transnational Strategy• Seeks to balance global
efficiencies and local responsiveness
• Combines standardization and customization for product/advertising strategies
Globalization Strategy
• Treats world as a single global market
• Standardizes global products/advertising strategies
Multi-domestic Strategy• Handles markets
independently for each country
• Adapts product/advertising to local tastes and needs
Nee
d f
or
Glo
bal
In
teg
rati
on
ExportStrategy
•Domestically focused
•Exports a few domestically produced products to selected countries
Global StrategyGlobal 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
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Purpose of StrategyPurpose 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
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Three Levels of Strategy in Three Levels of Strategy in OrganizationsOrganizations
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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 R&D Manufacturing Marketing
Strategic Management Strategic Management ProcessProcess
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Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems
SWOT
Formulate Strategy – Corporate, Business, Functional
Define new Mission Goals, Grand Strategy
Identify Strategic Factors – Strengths, Weaknesses
Identify Strategic Factors – Opportunities, Threats
Scan Internal Environment – Core Competence, Synergy, Value Creation
Evaluate Current Mission, Goals, Strategies
Scan External Environment – National, Global
Strategy Formulation vs. Strategy Formulation vs. ImplementationImplementationStrategy Formulation = stage of strategic
management that involves planning and decision making that lead to the establishment of the organization’s 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
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Checklist for AnalyzingChecklist for AnalyzingOrganizational Strengths and WeaknessesOrganizational Strengths and Weaknesses
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Management and Organization
Management qualityStaff quality
Degree of centralization
Organization charts
Planning, information, control systems
Finance
Profit margin
Debt-equity ratio
Inventory ratio
Return on investment
Credit rating
Marketing
Distribution channels
Market share
Advertising efficiency
Customer satisfaction
Product quality
Service reputation
Sales force turnover Production
Plant location Machinery obsolescence
Purchasing system
Quality control
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
Portfolio StrategyPortfolio Strategy
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
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BCG Matrix
Five Forces Affecting Industry CompetitionFive Forces Affecting Industry Competition
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•Internet reduces barriers to entry
•Internet expands market size, but creates new substitution threats
•Internet tends to increase the bargaining power of suppliers
•Internet shifts greater power to end consumers
Internet blurs differences among competitors in an industry
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products
Potential New Entrants
Rivalry among
Competitors
Competitive Edge ThroughCompetitive Edge ThroughCompetitive StrategiesCompetitive 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
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Continuum of Partnership StrategiesContinuum of Partnership Strategies
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Organizational Combination
Strategic Alliances
Preferred Supplier Arrangements
Strategic Business Partnering
Mergers
Acquisitions
Low High
Joint Ventures
Degree of Collaboration
De g
ree
of C
oll a
bor a
ti on
Implementing Strategy ToolsImplementing Strategy Tools
LeadershipStructural designInformation and control systemsHuman resources
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Tools for Putting Tools for Putting Strategy into ActionStrategy into Action
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Environment
Organization
Strategy Performance
Leadership Persuasion Motivation Culture/values
Structural Design Organization Chart Teams CentralizationDecentralization, Facilities, task design
Human Resources Recruitment/selection Transfers/promotions Training Layoffs/recallsInformation and Control Systems
Pay, reward system Budget allocations Information systems Rules/procedures
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