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
