STRATEGY FORMULATION and

IMPLEMENTATION

By: J.S.Broca
B.Tech. (Mech.), PGDBM
Retired Chief Manager (Bank
of India)
 Learning Objectives
 Define the components of strategic management
 Describe the strategic planning process and SWOT
analysis
 Understand Grand Strategies for domestic and
international operations
 Define corporate-level strategies and explain the portfolio
approach
 Describe business-level strategies, including Porter’s
competitive forces and strategies and partnership
strategies
 Explain the major considerations in formulating functional
strategies
 Enumerate the organizational dimensions used for
implementing strategy
What is Strategic Management?

Strategic Management
 Theset 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
 The general plan of major action by which
an organization intends to achieve its long-
term goals.
Three general categories:
1. Growth – can be promoted internally by investing in
expansion or externally by acquiring additional business
divisions.
2. Stability (pause strategy) – that the organization wants to
remain the same size or grow slowly and in a controlled
fashion.
3. Retrenchment – that the organization goes through period
of forced decline by either shrinking current business units
or selling off or liquidating entire business.
 Global Strategy
a separate grand strategy as the focus of
global business.

Three global strategies:

1. Globalization – the standardization of product design and
advertising strategies throughout the world.

2. Multidomestic strategy – the modification of product design

and advertising strategies to suit the specific needs of
individual countries.

3. Transnational strategy – a strategy that combines global

coordination to attain efficiency with flexibility to meet
specific needs in various countries.
 Purpose of Strategy
 Choosing how the organization will be different.

Strategy
 The plan of action that prescribes resource
allocation and other activities for dealing with the
environment and helping the organization attain its
goals.
To remain competitive, companies
develop strategies that focus on:
1. Core competence
 A business activity that an organization does
particularly well in comparison to competitors.

2. Synergy
 The condition that exists when the
organization’s parts interact to produce a joint
effect that is greater than the sum of the parts
acting alone.

3. Value Creation
 The heart of strategy.
 Value can be defined as the combination of
benefits received and costs paid by the
customers.
 Levels of Strategy
 Corporate-Level Strategy
 The level of strategy concerned with the question, “What
business are we in?”. Pertains to the organization as a
whole and the combination of business units and
product lines that make it up.
 Business-Level Strategy
 The level of strategy concerned with the question, “How
do we compete?”. Pertains to each business unit or
product line within the organization.
 Functional-Level Strategy
 The level of strategy concerned with the question, “How
do we support the business-level strategy?”. Pertains to
all of the organization’s major departments.
Three Levels of Strategy in Organization
Corporate-Level Strategy:
What business are we in?

Corporation

Business-Level Strategy:
How do we compete?

Textile Units Chemicals Unit Auto Parts Unit

Functional-Level Strategy:
How do we support the business-level strategy?

Finance R&D Manufacturing Marketing

 Corporate-Level Strategy:
What business are we in?

Corporation

Business-Level Strategy:
How do we compete?

Textile Units

Functional-Level Strategy:
How do we support the business-level strategy?

Finance R&D Manufacturing Marketing

Strategy Formulation Versus Implementation

 Strategy Formulation
 The stage of strategic management that involves
the planning and decision making that lead to the
establishment of the organization’s goals and of a
specific strategic plan.

 Strategy Implementation
 The stage of strategic management that involves
the use of managerial and organizational tools to
direct resources toward achieving strategic
outcomes.
 The Strategic Management Process
Scan External Identify Strategic
Environment: Factors:
• National • Opportunities
• Global • Threat

Implement
Strategy via
Changes in:
• Leadership /
Evaluate Define New: Formulate Culture
Current: • Mission Strategy: • Structure
• Mission SWOT • Goals • Corporate • Human
• Goals • Grand • Business Resources
• Strategies Strategy • Functional • Information
and Control
System

Scan Internal Identify Strategic

Environment: Factors:
• Core • Strengths
Competence • Weaknesses
• Synergy
• Value Creation
 Situation Analysis
 Analysisof the strengths, weaknesses,
opportunities, and threats (SWOT) that affect
organizational performance.
 Strengths
 Positive internal characteristics that the organization can exploit to
achieve its strategic performance goals.
 Weaknesses
 Internal characteristics that might inhibit or restrict the
organization’s performance.
 Opportunities
 Characteristics of the external environment that have the potential
to help the organization achieve or exceed its strategic goals.
 Threats
 Characteristics of the external environment that may prevent the
organization from achieving its strategic goals.
Formulating Corporate-Level Strategy
Portfolio Strategy
 A type of corporate-level strategy that
pertains to the organization’s mix of SBUs
and product lines that fit together in such a
way as to provide the corporation with
synergy and competitive advantage.
 Strategic Business Unit (SBU)
 A division of the organization that has a
unique business mission, product line,
competitors, and markets relative to other
SBUs in the same corporation.
 The BCG Matrix
 A concept developed by the Boston Consulting Group
that evaluates SBUs with respect to the dimension of
business growth rate and market share.
Four Alternative Positions:
 Question Marks
 The business unit has low market share compared to
competitors, however it is doing business in high-growth
market.

 Stars
 The business has high market share compared to
competitors and it is doing business in high-growth
market.
 Cash Cows
 The market is not very attractive – low market growth
rate, however the business has high market share
compared to competitors.

 Dogs
 This business has low market share and operates in
low-growth market.
Formulating Business-Level Strategy
it is a strategy formulation within the strategic
business unit in which the concern is how to
compete.

the same three generic strategies (growth,

stability, and retrenchment) apply at the
business level, but they are accomplished
through competitive actions rather than the
acquisition or divestment of business divisions.
 Porter’s Five Competitive Forces
Internet reduces Potential New
barriers to entry Entrants

Internet blurs differences

among competitors

Threat of Rivalry
Substitute among Bargaining
Products Competitor Power of Buyers
s

Internet creates new

Internet shifts greater
substitution threats
power to end consumers
Bargaining
Power of
Suppliers

Internet tends to increase

bargaining power of
suppliers
 Competitive Strategies
1. Differentiation
 a type of competitive strategy with which the
organization seeks to distinguish its products or
services from competitors.
2. Cost Leadership
 A type of competitive strategy with which the
organization aggressively seeks efficient
facilities, cuts costs, and employs tight cost
controls to be more efficient than competitors.
3. Focus
 A type of competitive strategy that emphasizes
concentration on a specific regional market or
buyer group.
 Partnership Strategies
High

Organizational
Combination Acquisitions

C
O Mergers
D
E L
G L
R A
E B
E O
R Strategic
O A Alliances Joint Ventures
F T
I
O
Strategic Business Partnering
N

Preferred Supplier Arrangements

Low
Formulating Functional-Level Strategy

the action plans adopted by major

departments to support the execution of
business-level strategy.

major organizational functions include

marketing, production, finance, human
resources, and research & development.
Strategy Implementation and Control

Implementation is the final step in the

strategic management process and it is
how strategy put into action.

Some people argue that strategy

implementation is the most difficult and
important part of strategic management.
 Tools for Putting Strategy into Action
Environment Organization
LEADERSHIP
• Use persuasion
• Motivate employees
• Shape culture/values

STRUCTURAL DESIGN HUMAN RESOURCES

• Design organization chart
• Create teams
Strategy • Determine centralization
• Arrange facilities, task
design
• Recruit/select employees
• Manage Performance
transfers/promotions/training
• Direct layoffs/recalls

INFORMATION AND
CONTROL SYSTEMS
• Revise pay, reward system
• Change budget allocations
• Implement information
systems
• Apply rules and procedures
Implementing Global Strategies
In the international arena, flexibility and superb
communication emerge as mandatory leadership
skills.
Structural design must merge successfully with foreign
cultures as well as link foreign operations to the home
country.
Information and control systems must fit the needs
and incentives within local cultures.
Recruitment, training, transfer, promotion, and layoff of
international human resources create array of
problems not confronted from other countries such as
labor laws, guaranteed jobs, and cultural traditions of
keeping unproductive employees on the job.
 THE END

Any clarification?

HAVE A NICE DAY!!! 