MGMT 405: Chpt. 8 Strategy Formulation and Execution

Audit Checklist for Analyzing Organizational Strengths and Weaknesses

Management, Marketing, HR, Finance, Production, R&D

Strategic Management Process

build flexibility, actively/interactively, key partnerships, creative execution.

opportunities

characteristics of the external environment that have the potential to help the organization achieve its strategic goals.

threats

characteristics of the external environment that may prevent the organization from achieving its strategic goals.

Strategic Business Units (SBUs)

has a unique business mission, product-line, competitors, and markets relative to other SBUs in the corporation.

cost leadership strategy

in which managers aggressively seek efficient facilities, cut costs, and use tight cost controls to be more efficient than others in the industry.

Boston Consulting Group (BCG)

organizes businesses along two dimensions --business growth rate (how rapidly the market is increasing) and market share (whether a business unit has a larger or smaller share than competitors).

strategic planning: for profit

pertains to competitive actions in the marketplace.

strategic planning: non-profit

pertains to events in the external environment.

Formulating Corporate-Level Strategy

portfolio strategy, BCG matrix, and diversification.

Execution

the most important, but also the most difficult, part of strategy.

Three levels of Strategy

Corporate, Business, Functional-Level Strategies.

focus strategy

managers use either differentiation or cost leadership approach, but they concentrate on a specific regional market or buyer group.

Functional-Level strategy: How do we support the business-level strategy?

pertains to the major functional departments within the business unit. Strategies involve all of the major functions, including finance, research and development, marketing, and manufacturing.

Corporate-Level strategy: What business are we in?

pertains to the organization as a whole, and combination of business units and product lines that make up the corporate entity. Strategic actions at this level relate to acquisition of new businesses, additions or divestment's of business units, plants, or product lines; and joint ventures with other corporations in new areas.

SWOT analysis

A planning exercise in which managers identify organizational (internal) strengths (S) and weaknesses (W) and environmental opportunities (O) and threats (T). Managers obtain external information about opportunities and threats from a variety of sources, including customers, government reports, professional journals, suppliers, bankers, friends in other organizations, consultants, or association meetings.

multi-domestic strategy

The modification of product design and advertising strategies to suit the specific needs of individual countries.

globalization strategy

adopts standardized products and advertising for use worldwide, based on the assumption that people everywhere want to buy the same products and live the same way.

transnational strategy

an international strategy through which the firm seeks to achieve both global coordination to achieve efficiency and local flexibility to meet needs in different countries.

task environment sectors

are the most relevant to strategic behavior and include the behavior of competitors, customers, suppliers, and the labor supply.

SM: first step

define an explicit strategy or plan of action that describes resource allocation and activities for dealing with the environment, achieving a competitive advantage, and attaining the organization's goals.

vertical integration

expanding into businesses that either provide the supplies needed to make products or distribute and sell the company's products.

strategic issues

factors that alter a company's ability to achieve its goals.

differentiation strategy

in which managers seek to distinguish the organization's products and services from those of others in the industry.

Strategy formulation

includes assessing the external environment and internal problems to identify strategic issues, then integrating the results into goals and strategy.

general environment

includes technological developments, the economy, legal-political and international events, the natural environment, and socio-cultural changes.

strategic thinking

means to take the long-term view; see the big-picture, including the organization and the competitive environment, and consider how they work together.

internal weaknesses

negative internal characteristics that might inhibit or restrict the organization's performance.

strategic formulators

often use their skill in creating whole new strategies.

strategic implementors

often work with strategic improvements and implementations.

Business-Level strategy: How do we compete?

pertains to each business unit or product line. This level concerns amount of advertising, direction and extent of research and development, product changes, new-product development, equipment and facilities, and expansion or contraction of product and service lines.

portfolio strategy

pertains to the mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation.

internal strengths

positive internal characteristics that the organization can exploit to achieve its strategic performance goals.

Tools for Putting Strategy into Action

primary tools that managers use to implement strategy effectively; visible leadership, clear roles and accountability, candid communication, and appropriate HR practices.

Strategic management (SM)

set of decisions and actions used to formulate and execute strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals.

competitive advantatge

sets the organization apart from others and provides it with a distinctive edge for meeting customer or client needs in the marketplace.

diversification

strategy of moving into new lines of business to expand the firms operations to produce new kinds of valuable products and services. Related & Unrelated --totally new.

Michael E. Porter

studied a number of business organizations and proposed that business-level strategies are the result of understanding competitive forces in the company's environment.

Organizational Characteristics of Porter's Competitive Strategies

suggests a company can adopt one of three strategies: differentiation, cost leadership, or focus.

Elements of Competitive Advantage

target specific customers, focus on core competencies, provide synergy, and create value.

Strategy execution

use of managerial and organizational tools to direct resources toward accomplishing strategic results; the administration and implementation of the strategic plan.

Global Corporate Strategies

using your company's resources in order to reach goals, and develop the strategies in the same areas where you created objectives.