Strategy formulation and

implementation

Planning
• SM and UNILAB are involved in strategic management
• Finding ways to respond to competitors, cope with difficult
environmental changes, meet changing customer needs, and
effectively use available resources

• Research: strategic thinking and planning positively affects a firm’s

performance and financial success

• Strategic planning is important in today’s world of globalization,

deregulation, advancing technology, and changing demographics
and lifestyles.
For-profit organizations Not-for-profit organizations
Pertains to competitive actions Pertains to events in the
in the marketplace external environment

Strategic thinking means to take the long-term view and to see

the big picture, including the organization and the competitive
environment, and to consider how they fit together

Strategic management – set of decisions and actions used to

formulate and implement strategies that will provide a
competitively superior fit between the organization and its
environment so as to achieve organizational goals
Grand strategy – general plan of major actions by which a firm
intends to achieve its long-term goals

The 3 general categories of grand strategies:

1. Growth
• Internal – expansion (eBay)
• External – acquiring additional business divisions; diversify
2. Stability – same size or grow slowly and in a controlled
fashion
3. Retrenchment – period of forced decline
• Shrinking current business units
• Selling off or liquidating entire business
Liquidation – selling off a business unit for the cash value of the
assets

Divestiture – selling off of businesses that no longer seem

central to the corporation

• The grand strategy of growth is a major motivation for both

small and large business going international

• Organizations may want each global affiliate to act

autonomously or activities be standardized and centralized
across countries
Global Corporate Strategies
 Global Transnational Multi-domestic
strategy strategy strategy
Global High High Low
integration
Local Low High High
responsiveness
 The 3 global strategies
1. Globalization – standardization of product design and
advertising strategies through the world

2. Transnational strategy – combines global coordination to

attain efficiency with flexibility to meet specific needs in
various countries

3. Multi-domestic strategy – modification of product design

and advertising strategies to suit the specific needs of
individual countries
India The Republic of the Philippines
 Purpose of Strategy
• The essence of formulating strategy is choosing how the
organization will be different

Strategy – plan of action that prescribes resource allocation and

other activities for dealing with the environment and helping
the organization attain its goals

Core competence – a business activity that an organization

does particularly well in comparison to competitors
 • Superior R & D
• Expert technological know how
• Process efficiency
• Exceptional customer service

A company acquires expertise that

competitors do not have
Continuous ink
Synergy – the organization’s parts interact to produce a joint
effect that is greater than the sum of the parts acting alone
Advantage in:
 Cost
 Market power
 Technology
 Management skill
• Pepsi Cola’s “Power of One”

 Can also be obtained by good relations with suppliers, as at

Dell Computer, or by strong alliances among companies
(Electrolux’s partnership with Ericsson)
Value – the combination of benefits received and costs paid by
the customer
Corporate-level strategy:

• Acquisition of new business

• Addition or divestments of business units, plants, or product lines
• Joint ventures with other corporations in new areas

Question: Some companies acquire existing firms instead of

putting up their own. Why?
Business-level strategy:

• Amount of advertising
• Direction and extent of R & D
• Product changes
• New product development, equipment and facilities
• Expansion or contraction of product lines

Functional-level strategy:
• P & G’s R & D dept. developed new formulation for Tide laundry
detergent
The Strategic Management Process
Strategy
Strategy implement-
formulation tation

Situation analysis?
 Sources of external info:

• Customers
• Gov’t reports
• Professional journals
• Suppliers
• Bankers
• Friends in other organizations
• Consultants
• Association meetings A 3-2-2019
 Sources of internal information:

• Budgets
• Financial ratios
• Profit and loss statements
• Surveys of employee attitudes & satisfaction

The most relevant to strategic behavior include the behavior

of:
• Competitors
• Customers
• Suppliers
• Labor supply
 Formulating Corporate-level Strategy
Portfolio strategy – mix of business units and product lines that
fit together in a logical way to provide synergy and competitive
advantage for the corporation
• Corporations like to have a balanced mix of business divisions
called SBUs

Strategic business units (SBUs) – a division of the organization

that has a unique business mission, product line, competitors,
and markets relative to other SBUs in the same corporation.
BCG matrix - a concept developed by the Boston Consulting
Group tat evaluates SBUs with respect to the dimension of
business growth rate and market share

Business growth rate – how rapidly the entire industry is

increasing

Market share – whether a business unit has a larger or smaller

share than competitors
 Rapid growth and New ventures.
expansion Risky—a few become
stars, others are
Business diversified

Milk to finance No investment.

question marks Keep if some profit.
and stars Consider divestment
 Formulating Business-level Strategy

• The same 3 generic strategies—growth, stability, and

retrenchment—apply at the business level, but they are
accomplished through competitive actions rather the acquisition
or divestment of business divisions

• One model for formulating strategy is Porter’s competitive

strategies, which provides a framework for business unit
competitive action
Porter’s 5 competitive forces in company’s environment
 Porter’s 3 company strategies for competitive edge
1. Differentiation
2. Cost leadership
3. Focus

1. Differentiation – the organization seeks to distinguish its

products or services from competitors through:

• Advertising
• Distinctive product features
• Exceptional service
• New technology to achieve a product perceived as unique
• Profitable because customers are loyal and will pay high prices
for the product/service

2. Cost leadership – the organization aggressively seeks

efficient facilities, cuts costs, and employs tight cost controls
to be more efficient than competitors
• A company can undercut competitor’s prices and still offer
comparable quality and earn a reasonable profit

3. Focus – emphasizes concentration on a specific regional

market or buyer group
 Partnership Strategies
• An alternative approach to strategy emphasizes collaboration
• In some situations, companies can achieve competitive
advantages by cooperating with other firms rather than
competing
• It promotes innovation, expand markets, and pursue joint goals
• Organizations can choose to build cooperative relationships in
many ways:

Preferred supplier Strategic business partnering

Joint ventures Mergers Acquisitions

 Formulating functional-level strategy
Functional-level strategies – action plans adopted by major
departments to support the execution of business-level
strategy

• Finance: borrow money, handle large cash investment, and

authorize construction of new production facilities
• HR: strategy for growth—recruiting additional personnel and
training middle managers for movement into new positions
• Mktg.: test mktg., aggressive advertising campaigns, and
consumer product trials
 Strategy implementation and control
• Implementation requires vision, intuition, and employee
participation

• Once a new strategy is selected, it is implemented through

changes in leadership, structure, information and control
system, and human resources

• All aspects of the organization need to be in congruence with

the strategy
Tools for Putting Strategy into Action
End of presentation