MANAGEMENT RICHARD L. DAFT Strategy Formulation and Implementation CHAPTER 7 chapter7 Learning Outcomes • Define the components of strategic management and discuss the levels of strategy. • Describe the strategic management process and SWOT Analysis. • Define corporate-level strategies and explain the portfolio and diversification approaches. • Describe Porter’s competitive forces and strategies. • Discuss new trends in strategy, including innovation from within and partnership strategies. • Discuss the organizational dimensions used for strategy execution. 3 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 What’s Your Strategy Strength? • How do you handle challenges and issues? • How did Best Buy overtake Circuit City as the player to beat in consumer electronics retailing? • The strategies managers choose are important. • Strategies must be implemented effectively to work. Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. 4 chapter7 Strategy Basics • Why has Apple been so successful with the iPod, iTouch, iPhone? • Why has McDonald’s healthier menu been effective? • Finding ways to respond to competitors, and cope with change is strategy. 5 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Thinking Strategically • The long-term view • Seeing the big picture – The organization – Competition How do these fit together? • Strategy are your competitive actions in the market 6 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. What is Strategic Management? chapter7 • Plans and actions that lead to superior competitive standing Who are our competitors and what are their strengths and weaknesses? Who are our customers? What products or services should we offer? What does the future hold for our industry? How can we change the rules of the game? 7 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Purpose of Strategy • Strategy: – Plan of action – Resource allocation – Activities for dealing with the environment – Achieving competitive advantage • Strategy should: – Exploit Core Competence – Build Synergy – Deliver Value 8 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Three Levels of Strategy in Organizations 9 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Levels of Strategy What business are we in? Corporate-level strategy How do we compete? Business-level strategy How do we support the business-level strategy? Functional-level strategy Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. 10 chapter7 Strategy Formulation Versus Execution • Strategy Formulation – Assess environment and internal problems – Planning – Decision making – Establishment of goals • Strategy Execution – Directing resources – Accomplishing results – Changes in structure – Use managerial and organizational tools Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. 11 chapter7 The Strategic Management Process 12 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 SWOT Analysis Assessment of internal and external factors • Organizational strengths, weaknesses, opportunities, and threats – – – – Reports Budgets Financial ratios Employee Surveys • External information about opportunities and threats – – – – – – Customers Government reports Professional journals Bankers Consultants Association meetings 13 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Analyzing Organizational Strengths and Weaknesses 14 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. Formulating CorporateLevel Strategy chapter7 • Portfolio Strategy – A diverse mix of business units – Strategic Business Units (SBU) have different products, mission, markets and competitors • The BCG Matrix – Organizes businesses along two dimensions—growth and market share • Diversification Strategy – Movement into new lines of business 15 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 The BCG Matrix 16 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Formulating Business-Level Strategy • Porter’s Five Forces – analyzing a company’s position in the industry Potential New Entrants Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitute Products Rivalry Among Competitors 17 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Porter’s Five Forces 18 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Porter’s Competitive Strategies • Porter suggests that a company can adopt one of three strategies after analyzing the forces 19 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 New Trends in Strategy • Mergers and acquisitions • Enhancing organizational capacity • Innovation from within • Strategic partnerships • Companies are focusing on internal innovation as well as innovation through strategic partnerships 20 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Global Strategy • Finding strategies in the world marketplace • Synergy among world operations • Organizations differ in their global strategies – Globalization – Export – Transnational – Multidomestic 21 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Global Corporate Strategies 22 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Strategy Execution • How will the strategy be implemented—put into action? • The organization must be congruent with the strategy • Execution involves several tools: – Leadership – Structural Design – Human Resources – Information and Control Systems 23 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved. chapter7 Tools for Putting Strategy into Action 24 Copyright ©2010 by South-Western, a division of Cengage Learning. All rights reserved.