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Strategy Formulation and

Implementation
CHAPTER 8
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Learning Objectives

 Define the components of strategic

management.
 Describe the strategic planning process and
SWOT analysis.
 Understand grand strategies for domestic and
international operations.
 Define corporate-level strategies and explain
the portfolio approach.

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Learning Objectives (contd.)

 Describe business-level strategies, including

Porter’s competitive forces and strategies and
partnership strategies.
 Explain the major considerations in formulating
functional strategies.
 Discuss the organizational dimensions used for
implementing strategy.

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Strategic Management

 Set of decisions and actions used to

implement strategies that will provide a
competitively superior fit between the
organization and its environment so as
to achieve organizational goals

 Responsibility = top managers and

chief executive

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Strategic Management

Managers ask such questions as...

 What changes and trends are occurring?
 Who are our customers?
 What products or services should we offer?
 How can we offer these products or services
most efficiently?

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Grand Strategy

 General plan of major action to achieve

long-term goals
 Falls into three general categories

1. Growth
2. Stability
3. Retrenchment
A separate grand
strategy can be
defined for global
operations

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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

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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

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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

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Global Corporate Strategies

Exhibit 8.1
High Transnational
Globalization Strategy
Strategy • Seeks to balance global
• Treats world as a
efficiencies and local
single global market
responsiveness
Need for Global Integration

• Standardizes global
• Combines standardization
products/advertising
and customization for
strategies
product/advertising
strategies

Export
Strategy Multi-domestic Strategy
•Domestically focused • Handles markets
independently for each
•Exports a few country
domestically produced • Adapts product/advertising
products to selected
countries to local tastes and needs

Low
Low Need for National Responsiveness High
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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

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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

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Three Levels of Strategy in Organizations

Three Levels of Strategy in Organizations

Exhibit 8.2

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Strategic Management Process

Exhibit 8.3

Scan External Identify Strategic

Environment – Factors –
National, Opportunities,
Global Threats Implement
Strategy via
Evaluate Formulate Changes in:
Current Define new Strategy – Leadership
SWOT Mission culture,
Mission, Goals, Corporate,
Strategies Goals, Grand Business, Structure, HR,
Strategy Functional Information &
control
Scan Internal systems
Identify Strategic
Environment – Core
Factors –
Competence,
Strengths,
Synergy, Value
Weaknesses
Creation

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Strategy Formulation vs. Implementation

 Strategy Formulation = stage of strategic

management that involves planning and
decision making that lead to the
establishment of the organization’s goals and
of a specific strategic plan
 StrategyImplementation = stage of strategic
management that involves the use of
managerial and organizational tools to direct
resources toward achieving strategic
outcomes

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Checklist for Analyzing Organizational Strengths
and Weaknesses
Exhibit 8.4

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Portfolio Strategy
 Mix of business
units and product BCG Matrix
Exhibit 8.5

lines that fit

together in a
logical way to
provide synergy
and competitive
advantage

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Five Forces Affecting Industry Competition

Exhibit 8.6

•Internet reduces Potential New

barriers to entry Entrants

Internet blurs differences among

competitors in an industry

Threat of Substitute Rivalry Bargaining

Products among Power of
Competitors Buyers
•Internet expands market size, but •Internet shifts greater power
creates new substitution threats to end consumers

•Internet tends to increase the

bargaining power of suppliers Bargaining Power of Suppliers

Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).

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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

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Continuum of Partnership Strategies

Exhibit 8.8

Organizational Combination Acquisitions

Mergers
Degree of Collaboration

Joint Ventures
Strategic
Alliances
Strategic Business Partnering

Preferred Supplier Arrangements

Low High
Degree of Collaboration

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Implementing Strategy Tools

 Leadership
 Structuraldesign
 Information and control systems
 Human resources

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Tools for Putting Strategy into
Action
Environment Exhibit 8.9
Organization
Leadership
 Persuasion

Motivation

Structural Design Culture/values
 Organization Chart Human Resources
 Teams 
Strategy Recruitment/selection Performance

Centralization 
Decentralization, Transfers/promotions
 Facilities, task design  Training
Layoffs/recalls
 Systems
Information and Control

 Pay, reward system

 Budget allocations

Information systems
Source: Adapted from Jay R. Galbraith and Robert K. Kazanjian, strategy Implementation: Structure, Systems and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115,
Used with permission.  Rules/procedures
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