Strategy Formulation and

Implementation

Chapter 8
 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 Topics:
Implementation Chapter 8

Strategic Management
Definition
Components
Model of Strategic Management Process
Models of Strategy Formation

Managerial Tools to Implement Strategic

Plans

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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

1. Growth A separate grand

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

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 Transnational
Globalization Strategy
Strategy Seeks to balance global
Treats world as a
efficiencies and local
single global market
responsiveness
Standardizes global
Combines standardization
products/advertising
and customization for
Need for Global Integration

strategies
product/advertising
strategies

Export
Strategy Multi-domestic Strategy
Handles markets
Domestically focused independently for each
Exports a few country
domestically produced Adapts product/advertising
products to selected to local tastes and needs
countries
Low
Low Need for National Responsiveness High

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 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

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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

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 Strategic Management Process

Scan External Identify Strategic

Environment Factors
National, Opportunities,
Global Threats Implement
Strategy via
Evaluate Formulate Changes in:
Current Define new Strategy Leadership
SWOT Mission culture,
Mission, Goals, Corporate,
Strategies Goals, Grand Business, Structure, HR,
Strategy Functional Information &
control
Scan Internal systems
Identify Strategic
Environment Core
Factors
Competence,
Strengths,
Synergy, Value
Weaknesses
Creation

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 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

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 Checklist for Analyzing
Organizational Strengths and Weaknesses
Management and Organization Marketing Human Resources
Distribution channels Employee experience,
Management quality
Market share education
Staff quality
Degree of centralization Advertising efficiency Union status
Organization charts Customer satisfaction Turnover, absenteeism
Planning, information, Product quality Work satisfaction
control systems Service reputation
Grievances
Sales force turnover
Finance Production Research and Development
Profit margin Plant location Basic applied research
Debt-equity ratio Machinery obsolescence Laboratory capabilities
Inventory ratio Purchasing system Research programs
Return on investment Quality control New-product innovations
Credit rating Productivity/efficiency 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).

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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

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 Implementing Strategy Tools

Leadership
Structuraldesign
Information and control systems
Human resources

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 Tools for Putting
Environment Strategy into Action
Organization
Leadership
Persuasion

Motivation

Structural Design Culture/values
Organization Chart Human Resources
Teams
Strategy Recruitment/selection Performance

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

Pay, reward system

Budget allocations

Information systems
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. Rules/procedures
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