The Levels

And Formulat
ion Of Strateg
y
1 Definition

2 Process of Strategy

3 Levels of Strategy

4 Types of Strategy
Other Type of Strategic
5
Formulation
Definition
“A vision without a strategy
remains an illusion.”
Lee Bolman
 Why do we strategize?
Why do some firms outperform others
over time?
To succeed long-term, companies must compete
effectively and out-perform their rivals in a dynamic, and
often turbulent environment (Thompson, 1997)

Competitive Advantage
 What is a strategy?
 Means to an end

 The game plan management is using to stake out a

market position, attract and please customers, compete
successfully, conduct operations, and achieve
organizational objectives.
 Importance or Benefits of
1. Strategy
Source of Economic Gain
2. Provides a framework for Resource Allocation
3. Guides the firm’s decisions regarding
management and organization
 Competitive Advantage
 Goal of Strategic Thinking

 Derives primarily from the firm’s ability to

build and defend resources and capabilities
that are more productive than others
Determining Profitability
1. Macroeconomic Forces
2. Industry Factors
3. Firms’ Market Position
 Strategic management
Process by which organizations:
determine their purpose or objective;
decide and implement actions;
and assess progress and results
Identifying a Company’s
Strategy
 Proactive and Partly
Reactive
1. Pro-active and purposeful actions on the part
of company managers

2. As needed reactions to unanticipated

developments and fresh market conditions
Strategy is about making choices, trad
e-offs;
it’s about deliberately choosing to be
different.”
Michael Porter
Process of Strat
egy
 Developing a Strategic
Vision

Setting Objectives

Crafting a Strategy

Implementing and Executing

the Strategy
Evaluating Performance and
Initiating Corrective
Adjustments Process of Strategy
 Strategic
Vision and Mission
Phase I
Strategic Vision- a road map of a company’s
future;
it creates a picture of a company’s destination and
provides a rationale for going there
“Where are we
going?”
Portrays a company’s future business scope
Mission- “Who are we?”
“What we do”
“Why we are here”

Mission Statement- always stress the

company’s present products and services and the
types of
customer it serves
Describes the present business scope and
business purpose
Communicating the Strategic
Vision
Strategic vision become real only when
the vision statement is imprinted in the
minds of organization members and
then translated into hand objectives
and strategies
 Setting
Objectives
Phase II
Objectives- organization’s
performance targets the results and outcomes
it wants to
achieve
quantifiable/measurable, contain a
deadline for achievement

What kinds of objective to

set:
Two very distinct types of performance:
 Achieving acceptable financial results is crucial

Of equal or greater importance is a company’s

performance on the measures

Of its strategic well-being its competitiveness and market

position

A balanced score card for measuring company

performance thus
requires setting both financial and strategic objective and
tracking their achievement
Crafting a
Strategy
Phase III
“A strategy is ethical only if all its pieces ar
e
consistent with the ethical duty managem
ent
has to owners/shareholders, employees,
customers, suppliers, and the community
Crafting a Strategy
at large.”
 Crafting a Strategy
PHASE III
Merging the Strategic Vision, Objectives, and
Strategy into a Strategic Plan
Strategic
Plan
lays out its mission and future direction,
performance targets, and strategy
 Crafting a Strategy
PHASE III
The more wide-ranging a company’s operations, the more that strategy
making is a collaborative team effort involving managers (and
sometimes key employees) down through the whole organization
hierarchy.

Every company manager typically has a strategy-making, strategy-

executing role-ranging from major to minor-for the area he or she heads.

A company’s strategy is at full power only when its many pieces are united.
 Crafting a Strategy
PHASE III
What makes a
Goodness of Fit
strategy a Test
winner?

Competitive Performanc
Advantage e Test
Test
Implementing and
Executing the
Strategy
Phase IV
“Managing the implementation and execution
of
strategy is an operations-oriented, make-thing
s-happen
activity aimed at shaping the performance of c
ore
business activities in a strategy-supportive man
ner.”
Implementing and Executing the Strategy
PHASE IV
Implementing and Executing the Strategy
PHASE IV

Reward
Structure
Organization’s
Strategy Work, Climate,
and Culture
Internal
Operating
Organizati Systems
onal
Capabilitie
Evaluating Performance
and
Initiating Corrective
Adjustments
Phase V
 Trigger point for deciding whether to
continue or change the company’s vision,
objectives, and/or strategy execution met
hods.

Evaluating Performance and Initiating Corrective Adjustments

PHASE V
 The Strategy-Making,
Strategy-Executing Process

Strategic
Strategic Objectives
Objectives Strategy
Strategy Implementation
Implementation Evaluation
Evaluation and
and
Vision
Vision and
and And
And Corrective
Corrective
Mission
Mission Execution
Execution Adjustments
Adjustments

Revise
Revise as
as Revise
Revise as
as Improve/
Improve/ Improve/
Improve/ Change
Change
needed
needed needed
needed Change
Change as
as as
as needed
needed
needed
needed Recycle
Recycle as
as needed
needed
What is the role of the BOD in the strategy-
making,
strategy-executing process?
The central roles of a company’s board of directors
are:
1) To critically appraise and ultimately approves
strategic action plans, and

2) To evaluate the strategic leadership skills of

the CEO and others in line to succeed the
incumbent CEO
Levels of Strat
egy
 two-way Corporate
influence
Strategy

Business
Strategy
two-way Functional
influence
-area
Strategies

Operating
Strategies two-way
influence
Levels of Strategy
 Levels/ Hierarchy of a Company’s
Corporat Strategy
Function Operatin
Business
e al-area g
Strategy
Strategy General managers of
Strategy
Heads of major
Strategy
Heads of major
CEO and other each of the functional activities functional activities
senior executives company’s different within a particular within a particular
lines of business business business
Add relevant detail Add detail and
How to strengthen to the how's of completeness to
market position overall business business and
The company wide and build strategy functional strategy.
game plan for competitive Provide a game Provide a game
managing a set of advantage plan for managing a plan for managing
business Actions to build particular activity specific lower-
competitive in ways that echelon activities
capabilities support the overall with strategic
business significance
 two-way Corporate In case of a
influence
Strategy single-
business
Business company,
Strategy these
two levels
two-way Functional
influence
-area merge
Strategies into one
level-
Operating Business
Strategies two-way
influence Strategy-
Levels of Strategy that is
 “A company’s strategy is at full
power only when its many pieces
are united
(Thompson, 2004).”

Levels of Strategy
Types of Strate
gy
LIIIST
 Corporate Strategy

Business Strategy

Functional Strategy

Operational Strategy

Types of Strategy
 Shapes the direction of the organization

Corporate
Shapes the direction of the organization
Strategy
Types of Corporate Strategy
Growth Strategy
 Concentration Strategy
a) Product Development
b) Market Development
c) Market Penetration

Types of
Types of Corporate Strategy
Retrenchment Stability Strategy
 No change Strategy
Strategy  Profit Strategy
 Corporate Turnaround
 Pause Strategy
 Divesture
 Liquidation

Types of
 Line-of-Business
“how do we compete effectively in this
Strategy
particular
business”
 Line-of-Business Strategy
1. Strategies based on Striving to be the lowest producer
2. Differentiation Strategy
3. Focus or Specialization Strategy

Types of
 Functional Strategy
“how do we compete effectively in this
particular
business”
 Functional Strategy
 Marketing Strategy
pricing, selling and
distributing products
 Research and Development
Strategy
constant innovation

 Human Resource Strategy

management of people Types of
“The key to long-term success
Operational is being abl
Strategy
e to do
certain things better than your competitor
”
Improving Process Capabilities
 Total Quality Management-
encouraging continuous flow of
incremental improvements from
bottom to top organization

 Core Process
Reengineering- radical
changes on how processes are
designed Types of
Other Type of S
trategic Formulat
ion
International Strategy
Thank you!!