Chapter 8

Strategy Formulation and Execution

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 Strategy
 Every company is concerned with strategy
 It determines which organizations succeed and which ones
struggle
 Strategic blunders can hurt a company

 Strategic management is a specific type of planning

 Strategy:
- Achieves competitive advantage
- Serves customers’ needs, adapts to environmental changes.
- Long-term period.

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© 2012 Cengage
© 2016 Learning.
Cengage Learning. All Reserved.
All Rights Rights Reserved. May not
May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 © 2012 Cengage Learning. All Rights Reserved. May not be
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to ascanned, copied or duplicated,
publicly accessible website, inor posted
whole or to a publicly
in part.
accessible website, in whole or in part.
 Thinking Strategically
 The long-term view of the organization and
competition
 Thinking strategically impacts performance and
financial success
 Today’s environment requires everyone to think
strategically

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 Strategic Management

Decisions and actions used to formulate and execute

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

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 Purpose of Strategy
 Explicit strategy is the plan of action

 Competitive advantage is the organization’s

distinctive edge for meeting customer needs

Strategies should:
Exploit Core Competencies
Achieve Synergy
Create Value
Target Customers
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 8.1 The Elements of Competitive
Advantage

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 8.2 Three Levels of Strategy in
Organizations

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 8.3 The Strategic Management
Process

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 Strategy Formulation
versus Execution

Formulation: Execution:
Assessing the external the use of managerial
environment and and organizational
internal problems to tools to direct
create goals and resources toward
strategy accomplishing
strategic results

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 SWOT Analysis
 Formulating strategy often begins with an audit of
internal and external factors
Internal Strengths and Weaknesses
External Opportunities and Threats

 Information is acquired from reports, surveys,

discussions, and meetings

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 8.4 Audit Checklist for Analyzing
Organizational Strengths and Weaknesses

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 Formulating Corporate-Level
Strategy: Portfolio Strategy
 Strategic Business Units (SBUs) have a unique
mission, products, and competitors
 Portfolio strategy pertains to the mix of SBUs and
product lines to provide synergy and competitive
advantage
 Organizations should not become too dependent on
one business

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 Formulating Corporate-Level
Strategy: The BCG Matrix
 Organizes business along two dimensions
Business growth rate
Market share

 Four categories for corporate portfolio

The combination of high/low market share and
high/low business growth

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 8.5 The BCG Matrix

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 Formulating Corporate-Level
Strategy: Diversification Strategy
Related diversification: expansion into new
business related to existing business activities

Unrelated diversification: expansion into new

lines of business

Vertical integration: expansion into businesses

that supply to the business or are distributors

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 Related Diversification
Car
Components
Backward Vertical Integration

Other car Car

Vertical
manufacturer manufacturer
integration
Forward Vertical Integration

• Car
Retailing
• Repairs, service
• Autoproducts

Horizontal integration
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 Formulating Business-Level
Strategy
 Strategy within the business units: How do we
compete?
 Business-level strategies are developed by Porter’s
Five Forces
 Web technology is impacting all industries in
positive and negative ways

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 8.5 Porter’s Five Forces

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 Porter’s Competitive Strategies
 Differentiation => Research&Development
Department
Distinguishing products and services
 Cost Leadership => all departments
Cost reductions, cost controls
 Focus Strategy
Concentration on a specific region or buyer
Either differentiation or cost leadership approach

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 8.7 Characteristics of Porter’s
Competitive Strategies

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© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Formulating Functional-Level
Strategy
Action plans used by major departments
Marketing
Production
Finance
Human Resources
Research and Development

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 8.8 Global Corporate Strategies

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 Strategy Execution

The final step!

 “Strategy is easy, but execution is hard”
Most important but most difficult part
 Strategy must be skillfully executed
 Alignment requires all aspects of the organization to
focus on strategy goals
Everyone is moving in the same direction

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 8.9 Factors that Contribute to the
Failure of Strategy Execution

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 8.10 Tools for Putting
Strategy into Action

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