Chapter 8 Strategy Formulation and Execution 2016 Cengage

Strategy v Every company is concerned with strategy v. It determines which organizations succeed

Thinking Strategically v The long-term view of the organization and competition v Thinking strategically

Strategic Management Decisions and actions used to formulate and execute strategies that will provide

Purpose of Strategy v Explicit strategy is the plan of action v Competitive advantage

8. 1 The Elements of Competitive Advantage © 2016 Cengage Learning. All Rights Reserved.

8. 2 Three Levels of Strategy in Organizations © 2016 Cengage Learning. All Rights

8. 3 The Strategic Management Process © 2016 Cengage Learning. All Rights Reserved. May

Strategy Formulation versus Execution Formulation: Assessing the external environment and internal problems to create

SWOT Analysis v Formulating strategy often begins with an audit of internal and external

8. 4 Audit Checklist for Analyzing Organizational Strengths and Weaknesses © 2016 Cengage Learning.

Formulating Corporate-Level Strategy: Portfolio Strategy Ø Strategic Business Units (SBUs) have a unique mission,

Formulating Corporate-Level Strategy: The BCG Matrix v Organizes business along two dimensions v. Business

8. 5 The BCG Matrix © 2016 Cengage Learning. All Rights Reserved. May not

Formulating Corporate-Level Strategy: Diversification Strategy v. Related diversification: expansion into new business related to

Formulating Business-Level Strategy within the business units: How do we compete? v Business-level strategies

8. 5 Porter’s Five Forces © 2016 Cengage Learning. All Rights Reserved. May not

Porter’s Competitive Strategies Differentiation v. Distinguishing products and services v Cost Leadership v. Cost

8. 7 Characteristics of Porter’s Competitive Strategies © 2016 Cengage Learning. All Rights Reserved.

Formulating Functional-Level Strategy Action plans used by major departments v. Marketing v. Production v.

8. 8 Global Corporate Strategies © 2016 Cengage Learning. All Rights Reserved. May not

Strategy Execution The final step! v “Strategy is easy, but execution is hard” v.

8. 9 Factors that Contribute to the Failure of Strategy Execution 23 © 2016

8. 10 Tools for Putting Strategy into Action © 2016 Cengage Learning. All Rights

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Strategy v Every company is concerned with strategy v. It determines which organizations succeed and which ones struggle v. Strategic blunders can hurt a company v Strategic management is a specific type of planning © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2

Thinking Strategically v The long-term view of the organization and competition v Thinking strategically impacts performance and financial success v Today’s environment requires everyone to think strategically © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3

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 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4

Purpose of Strategy v Explicit strategy is the plan of action v Competitive advantage is the organization’s distinctive edge for meeting customer needs Strategies should: v. Exploit Core Competencies v. Achieve Synergy v. Create Value v. Target Customers © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5

8. 2 Three Levels of Strategy in Organizations © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7

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 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9

SWOT Analysis v Formulating strategy often begins with an audit of internal and external factors v. Internal Strengths and Weaknesses v. External Opportunities and Threats v Information is acquired from reports, surveys, discussions, and meetings © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10

8. 4 Audit Checklist for Analyzing Organizational Strengths and Weaknesses © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11

Formulating Corporate-Level Strategy: Portfolio Strategy Ø Strategic Business Units (SBUs) have a unique mission, products, and competitors Ø Portfolio strategy pertains to the mix of SBUs and product lines to provide synergy and competitive advantage Ø Organizations should not become too dependent on one business © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12

Formulating Corporate-Level Strategy: The BCG Matrix v Organizes business along two dimensions v. Business growth rate v. Market share v Four categories for corporate portfolio v. The combination of high/low market share and high/low business growth © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13

Formulating Corporate-Level Strategy: Diversification Strategy v. Related diversification: expansion into new business related to existing business activities v. Unrelated diversification: expansion into new lines of business v. Vertical integration: expansion into businesses that supply to the business or are distributors © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15

Formulating Business-Level Strategy within the business units: How do we compete? v Business-level strategies are developed by Porter’s Five Forces v Web technology is impacting all industries in positive and negative ways v © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16

Porter’s Competitive Strategies Differentiation v. Distinguishing products and services v Cost Leadership v. Cost reductions, cost controls v Focus Strategy v. Concentration on a specific region or buyer v. Either differentiation or cost leadership approach v © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18

8. 7 Characteristics of Porter’s Competitive Strategies © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19

Formulating Functional-Level Strategy Action plans used by major departments v. Marketing v. Production v. Finance v. Human Resources v. Research and Development © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20

Strategy Execution The final step! v “Strategy is easy, but execution is hard” v. Most important but most difficult part v Strategy must be skillfully executed v Alignment requires all aspects of the organization to focus on strategy goals v. Everyone is moving in the same direction © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22

8. 9 Factors that Contribute to the Failure of Strategy Execution 23 © 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.