Strategy Formulation &

Implementation
Think Strategically
• To think strategically means to take the long-term view and see the
big picture.

• Managers in all types of organizations, including businesses, nonprofit

organizations, and government agencies, have to think about how the
organization fits in the environment.
What is Strategy & Strategic
Management

• Strategic management involves formulating and executing strategies

that align the organization with its environment to achieve its goals
and gain a competitive advantage.

• A Strategy is a plan of action that describes resource allocation and

activities for dealing with the environment, achieving a competitive
advantage, and attaining goals.
What is Strategic Management?
What is Strategic Management
• An effective strategy involves targeting specific customers and understanding
their needs.

• Identifying and utilizing core competencies that set the organization apart from
competitors is crucial.

• Building synergy by integrating different organizational parts to create a joint

effect greater than the sum of its parts can provide a significant advantage.

• Delivering value to customers, through benefits received and costs paid, is

essential for success.
Levels of Strategic Management

Strategic management involves considering three levels of strategy:

• corporate-level strategy,
• business-level strategy
• functional-level strategy.
• Corporate-level strategy focuses on the overall organization, including the combination of
business units and product lines. It involves decisions on acquisitions, divestments, and joint
ventures.
• Business-level strategy pertains to individual business units or product lines. It includes
decisions on advertising, R&D, product changes, and expansion or contraction of product and
service lines.
• Functional-level strategy is specific to major functional departments within a business unit,
such as finance, R&D, marketing, and manufacturing. It involves making strategic decisions for
each department to support the overall business-level strategy.
Strategic Management Process
Strategic Management Process
• Strategic management involves evaluating the current position of the
organization with respect to its mission, goals, and strategies.
• Managers need to scan both the internal and external environments to identify
strategic issues that may require change.
• Effective communication and crisis management are crucial for maintaining
reputation during challenging situations.
• Long-term strategic planning should involve reevaluating strategies, such as the
construction of larger ships, to mitigate risks and ensure the ability to handle
emergencies.
• The execution of the new strategy is the final stage in the strategic management
process and must be effectively implemented.
SWOT
Analysis
Strategic Management Process

• Strategy Formulation is the stage of strategic management that

includes the planning and decision-making that lead to the
establishment of the organization’s goals and a specific strategic plan.

• Strategy Execution is the stage of strategic management that involves

the use of managerial and organizational tools to direct resources
toward achieving strategic outcomes. The execution of the new
strategy is the final stage in the strategic management process and
must be effectively implemented.
Corporate Level Strategy
Frameworks for corporate-level strategy include:

• Portfolio Strategy
• The BCG Matrix
• Diversification Strategy
Portfolio Strategy
• Diversification is important in investment portfolios as well as in corporate
business divisions.

• Corporations aim to have a balanced mix of business divisions called strategic

business units (SBUs) to reduce dependency on a single business.

• Each SBU has a unique business mission, product line, competitors, and
markets.

• Portfolio strategy involves selecting and arranging business units and product
lines to create synergy and competitive advantage for the corporation.
The BCG (Boston Consulting Group)
Matrix
The BCG (Boston Consulting Group)
Matrix
• The BCG matrix is a useful tool for portfolio strategy, organizing businesses based
on their market share and business growth rate.
• A star business has a large market share in a rapidly growing industry and should
be invested in for future growth and profits.
• A cash cow business operates in a mature, slow-growth industry but has a
dominant market share, generating positive cash flow that can be invested in other
businesses.
• A question mark business operates in a new, rapidly growing industry but has a
small market share, making it a risky investment that could become a future star.
• A dog business has a small market share in a slow-growth market and is a poor
performer, providing little profit and potentially targeted for divestment or
liquidation.
Diversification Strategy
• Diversification is a strategy that involves entering new lines of business to expand
operations and offer new products or services.
• Related Diversification occurs when the new business is connected to the
company's existing activities, while Unrelated Diversification involves entering a
completely new line of business.
• Most companies are moving away from unrelated diversification and focusing on
core areas.
• Managers can pursue diversification through vertical integration, which involves
expanding into businesses that produce supplies needed or distribute/sell
products and services.
• There has been a recent trend towards vertical integration as companies seek
more control over materials, manufacturing, and distribution.
Business
Level
Strategy
Porter’s Five Competitive Forces
Porter's Five Competitive Forces model helps determine a company's position vis-a-vis
competitors in the industry environment.

• Potential barriers to entry, such as capital requirements and economies of scale, can deter
new competitors.
• The internet has empowered customers by providing easy access to information about
products, services, and competitors, increasing their bargaining power.
• The concentration of suppliers and the availability of substitutes impact supplier power,
which can be influenced by the Internet.
• Threats of substitute products can be influenced by changes in cost, trends, and new
approaches made possible by the internet.
• Rivalry among competitors is influenced by the preceding forces, as well as cost and
product differentiation, and the internet has intensified the competition.
Porter’s Five Competitive Forces
• Managers can adopt one of three competitive strategies: Differentiation,
Cost Leadership, or Focus.
• Differentiation Strategy involves distinguishing products or services through
creative advertising, unique features, exceptional service, or new technology.
• Cost leadership Strategy focuses on achieving cost reductions, efficient
facilities, and tight cost controls to produce products more efficiently than
competitors.
• Focus Strategy involves targeting a specific regional market or buyer group,
using either a differentiation or cost leadership approach.
• Each strategy has its own benefits and costs, requiring different activities and
resources.
Formulating Functional-Level
Strategy
• Functional-level strategies support the execution of business-level strategies
and are adopted by major departments to achieve strategic goals.
• Different functional departments, such as HR, marketing, finance, and
production, need to align their strategies with the overall business strategy.
• The choice between a globalization strategy and a multi domestic strategy
depends on the organization's goals and market characteristics.
• A globalization strategy involves standardizing product design and advertising
globally, reaping efficiencies and cost savings.
• A multi-domestic strategy involves adapting marketing, advertising, and
product design to meet specific needs in different countries.
Strategy
Execution
Strategy Execution
• Even the most creative strategies have no value if they cannot be translated into
action.
• Execution is the most important, but also the most difficult, part of strategy.
• One key to effective execution is embeddedness, which means that there is a deep
understanding and acceptance of organizational direction and purpose throughout
the organization.
• With embeddedness, all aspects of the organization are in alignment and moving in
the same direction to support strategic intent.
• Managers use visible leadership, clear roles and accountability, candid
communication, and appropriate HR practices to execute strategy effectively.
• Microsoft is training hundreds of thousands of employees to work in retail stores to
showcase and explain products that feature the company’s new software.