Strategy Formulation and Implementation Strategic Management Set of decisions and actions used to implement strategies that will

l provide a competitively superior fit between the organization and its environment so as to achieve organizational goals Responsibility = top managers and chief executive Grand Strategy General plan of major action to achieve longterm goals Falls into three general categories 1. Growth 2. Stability 3. Retrenchment A separate grand strategy can be defined for global operations 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 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 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 Global Corporate Strategies Globalization Strategy Treats world as a single global market Standardizes global products/advertising strategies Transnational Strategy Seeks to balance global efficiencies and local responsiveness

Combines standardization and customization for product/advertising strategies Export Strategy Domestically focused Exports a few domestically produced products to selected countries Multi-domestic Strategy Handles markets independently for each country Adapts product/advertising to local tastes and needs Global Strategy Globalization = product design and advertising strategies are standardized around the world Multi-domestic = adapt product and promotion for each country Transnational = combine both globalization and national responsiveness 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 Three Levels of Strategy in Organizations

CORPORATE-LEVEL STRATEGY Pertains o the organization as a whole and the combination of business units and product lines that make up the corporate entity Strategic actions at this level usually relate to the acquisition of new businesses; additions or divestments of business units, plants or product lines; and joint ventures with other corporations in new areas

Portfolio Strategy Related diversification

When the new business is related to the companys existing business activities Vertical integration Means the company expands into businesses either produce the supplies needed to make products or than distribute and sell those products to consumer

Portfolio Strategy The Boston Consulting Group Approach STARS - Stars are high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. EvenStars are high-growth, high-share businesses or products. They often need heavy investments to finance their rapid growth. CASH COWS - Cash cows are low-growth, highshare businesses or products. These established and successful SBUs need less investment to hold their market share. Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment. QUESTION MARKS - Question marks are low-share business units in high-growth markets. They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out. DOGS - Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves but do not promise to be large sources of cash. DIVERSIFICATION STRATEGY The strategy of moving into new lines of business Related diversification Unrelated diversification Vertical integration Unrelated diversification When an organization expands into a totally new line of business

BUSINESS-LEVEL STRATEGY Five Forces Affecting Industry Competition Rivalry among Competitors - Internet blurs differences among competitors in an industry Potential New Entrants - Internet reduces barriers to entry Threat of Substitute Products - Internet expands market size, but creates new substitution threats Bargaining Power of Suppliers - Internet tends to increase the bargaining power of suppliers Bargaining Power of Buyers - Internet shifts greater power to end consumers 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 Implementing Strategy Tools Leadership Structural design Information and control systems Human resources Tools for Putting Strategy into Action Environment Organization Leadership Persuasion Motivation Culture/values Structural Design Organization Chart Teams Centralization Decentralization, Facilities, task design Human Resources o Recruitment/selection o Transfers/promotions o Training o Layoffs/recalls o Information and Control Systems o Pay, reward system o Budget allocations o Information systems o Rules/procedures