Management 12e richard draft chapter 08

Chapter 8
Strategy Formulation and Execution

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Strategy


Every company is concerned with strategy



Strategic management is a specific type of planning

It determines which organizations succeed and which ones struggle
Strategic blunders can hurt a company

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Thinking Strategically


The long-term view of the organization and competition



Thinking strategically impacts performance and financial success



Today’s environment requires everyone to think strategically

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Strategic Management

Decisions and actions used to formulate and execute strategies that will
provide competitively superior fit between the organization and its
environment to achieve organizational goals

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Purpose of Strategy


Explicit strategy is the plan of action



Competitive advantage is the organization’s
meeting customer needs

distinctive edge for

Strategies should:

Exploit Core Competencies
Achieve Synergy
Create Value
Target Customers

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8.1 The Elements of Competitive Advantage

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8.2 Three Levels of Strategy in Organizations

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8.3 The Strategic Management Process

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Strategy Formulation

versus Execution

Formulation:
Assessing the external
environment and internal
problems to create goals and
strategy

Execution:
the use of managerial and organizational
tools to direct
resources toward accomplishing
strategic results

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SWOT Analysis


Formulating strategy often begins with an audit of internal and external
factors

Internal Strengths and Weaknesses
External Opportunities and Threats


Information is acquired from reports, surveys, discussions, and meetings

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8.4 Audit Checklist for Analyzing Organizational Strengths and
Weaknesses

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Formulating Corporate-Level Strategy: Portfolio
Strategy


Strategic Business Units (SBUs) have a unique mission, products, and
competitors



Portfolio strategy pertains to the mix of SBUs and product lines to
provide synergy and competitive advantage



Organizations should not become too dependent on one business

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Formulating Corporate-Level Strategy: The BCG
Matrix


Organizes business along two dimensions

Business growth rate
Market share


Four categories for corporate portfolio

The combination of high/low market share and high/low business growth

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8.5 The BCG Matrix

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Formulating Corporate-Level Strategy:
Diversification Strategy

Related diversification: expansion into new business related to
existing business activities

Unrelated diversification: expansion into new lines of business
Vertical integration: expansion into businesses that supply to the
business or are distributors

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Formulating Business-Level Strategy


Strategy within the business units: How do we compete?



Business-level strategies are developed by Porter’s Five Forces



Web technology is impacting all industries in positive and negative
ways

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8.5 Porter’s Five Forces

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Porter’s Competitive Strategies


Differentiation

Distinguishing products and services


Cost Leadership

Cost reductions, cost controls


Focus Strategy

Concentration on a specific region or buyer
Either differentiation or cost leadership approach

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8.7 Characteristics of Porter’s Competitive
Strategies

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Formulating Functional-Level Strategy

Action plans used by major departments

Marketing
Production
Finance
Human Resources
Research and Development

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8.8 Global Corporate Strategies

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Strategy Execution

The final step!



“Strategy is easy, but execution is hard”

Most important but most difficult part


Strategy must be skillfully executed



Alignment requires all aspects of the organization to focus on strategy
goals

Everyone is moving in the same direction

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8.9 Factors that Contribute to the Failure of
Strategy Execution

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8.10 Tools for Putting
Strategy into Action

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