Strategy Formulation and

Implementation
What is Strategy

 Strategy is that which top management does that is of great

importance to the organization.
 Strategy refers to basic directional decisions, that is, what
are the purpose and mission of the organization.
 Strategy consists of the important actions necessary to
realize these purpose and mission
 Strategy answers the question: What should the
organization be doing?
 Strategy answers the question: What are the ends we seek
and how should we achieve them?
Strategy According to Henry
Mintzberg

 Strategy is a plan, a "how," a means of getting from

here to there.
 Strategy is a pattern in actions over time; for example,
a company that regularly markets very expensive
products is using a "high end" strategy.
 Strategy is position; that is, it reflects decisions to
offer particular products or services in particular
markets.
 Strategy is perspective, that is, vision and direction.
Strategy According to Michael
Porter

 Competitive strategy is "about being different." It

means deliberately choosing a different set of
activities to deliver a unique mix of value." It is about
competitive position, about differentiating yourself in
the eyes of the customer, about adding value through
a mix of activities different from those used by
competitors.
Thinking Strategically

 Answers to the following define an overall

direction for the organization's grand strategy
 Where is the organization now?
 Where does the organization want to be?
 What challenges do competitors pose?
 What courses of action will help us achieve our
goals?
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 & chief executive

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?
Grand Strategy

 General plan of major action to achieve long-term

goals
 Falls into three general categories
1. Growth
2. Stability
3. Retrenchment
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
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
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 unit 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
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
 Three Levels of Strategy in Organizations
Corporate-Level Strategy:
What business are we in?
Corporation

Business-Level Strategy:
How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

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

Finance R&D Manufacturing Marketing

Strategic Management Process

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
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

 Strategy Implementation = stage of strategic

management that involves the use of managerial and
organizational tools to direct resources toward
achieving strategic outcomes
 Checklist for Analyzing
Organizational Strengths and Weaknesses
Management and Organization Marketing Human Resources
Management quality Distribution channels Employee experience,
Staff quality Market share education
Degree of centralization Advertising efficiency Union status
Organization charts Customer satisfaction Turnover, absenteeism
Planning, information, Product quality
Work satisfaction
control systems Service reputation
Grievances
Sales force turnover
Finance Production Research and Development
Profit margin Plant location Basic applied research
Debt-equity ratio Machinery obsolescence Laboratory capabilities
Inventory ratio Purchasing system Research programs
Return on investment Quality control New-product innovations
Credit rating Productivity/efficiency Technology innovations
Sources: Based on Howard H. Stevenson, “ Defining Corporate Strengths and Weaknesses,” Sloan Management Review 17 (spring 1976), 51-68; and M.L.Kastens,
Long-Range Planning for Your Business (New York: American Management Association, 1976).
 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
 Tools for Putting
Environment Strategy into Action
Organization
Leadership
 Persuasion

Motivation

Structural Design Culture/values
 Human Resources
Organization Chart 
Strategy Recruitment/selection Performance
 Teams

 Centralization Transfers/promotions
Decentralization,  Training
Information and Control  Layoffs/recalls
 Facilities,Systems task design
 Pay, reward system
 Budget allocations

Information systems
Implementation: Structure, Systems and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115,
Source: Adapted from Jay R. Galbraith and Robert K. Kazanjian, strategy
Used with permission.
Rules/procedures