Strategy Formulation

1
Strategy Formulation

• Corporate Level, Business Unit Level and
  Functional Level

2
Strategy Formulation

• Defined
• Development of long-range plans for the effective
  management of environmental opportunities and
  threats in light of organizational strengths and
  weaknesses.

3
Strategy Formulation

• Mission Statement
• Purpose or reason for the orgs existence
• Promotes shared expectations among employees
• Communicates a public image important to
  stakeholders
• Defines who we are, what we do, and what we would
  like to become

4
Strategy Formulation

• A goal is an open-ended statement of what one
  wants to accomplish with no quantification of
  what is to be achieved and no time criteria for
  completion.

5
Strategy Formulation

• An objective are specific and quantifiable,
  versions of goals.

6
Strategy Formulation

• Corporate goals objectives include
• Profitability (net profits in or )
• Growth (increase in assets, net new
• customers or sales)
• Utilization of resources (ROI or ROE)
• Market Leadership (market share)

7
Goals Stakeholders

• Owners or shareholders
• Members of the board of directors
• Top management
• Employees
• Customers
• Suppliers
• Creditors
• Distributors
• General Public
• Government

8
Specific Strategies

• Defined
• Specific strategies of a corporation form a
  comprehensive master plan stating how the
  corporation will achieve its mission and its
  objectives. It seeks to maximize competitive
  advantage and minimize competitive disadvantage.

9
Specific Strategies

• Three Types of Specific Strategies
• 1. Corporate Level Strategies (Chap 7)
• 2. Business Unit Level Strategies (Chap 6)
• 3. Functional Level Strategies (Chap 5)

10
Corporate Level Strategy

• Amounts to determining the overall direction that
  will enable the organization to best fulfill its
  purpose and achieve its strategic goals through
  the business(es) it chooses to be in.

11
Corporate Level Strategy

• Growth Strategies
• Concentration (internal growth)
• Products
• Current
  New

Product-Mrkt Exploitation
Product Development
Current
Customers
Market Development
Product-Mrkt Diversification
New
12
Corporate Level Strategy

• Concentration (internal growth)
• Advantage
• 1. Become very good at what one does
• 2. Preserves orgs culture, image,
  efficiency quality
• Disadvantage
• 1. Slow
• 2. Subject to environmental shifts
• 3. Bureaucratic coordinating costs

13
Corporate Level Strategy

• Horizontal Integration
• Growth through acquisition of other businesses in
  ones own industry

14
Corporate Level Strategy

• Horizontal Integration of Related Businesses
• Growth through acquisition of businesses outside
  ones present scope of operations, but related to
  the organizations core competencies.

15
Synergy

• Defined
• The higher effectiveness and efficiency yielded
  by the combination of two firms that is greater
  than that represented by both firms separately.

16
Corporate Level Strategy

• Horizontal Unrelated Diversification
• Conglomerate
• Diversifying into completely different industries
  from an orgs current business.

17
Corporate Level Strategy

• Vertical Integration
• Merging into the orgn various stages of
  activities backward ito sources of supply or
  forward in the direction of final consumers.

18
Corporate Level Strategy

• Vertical Integration
• Merging into the orgn various stages of
  activities backward ito sources of supply or
  forward in the direction of final consumers.

19
Corporate Level Strategy

• International Expansion
• A firm may expand globally using any one of the
  previous mentioned growth strategies of
  concentration (internal growth), horizontal
  integration, horizontal integration of related or
  unrelated businesses or though vertical
  integration.

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Benefits Disadnvantages of International
Expansion

• Economies of scale lowering operating costs
• Supplements domestic growth
• Enables firm to become a stronger competitor

• Poses greater financial risks
• Managing strategically becomes more complex
  challenging
• Difficulty in finding similarities in mrkts or
  operating capabilities
• Capturing exploiting advantages not easy or
  automatic

21
Stages of International Development

• Stage 1 Domestic company
• Stage 2 Domestic company w/export division
• Stage 3 Primarily domestic company
  w/international division
• Stage 4 Multinational corporation with
• multidomestic emphasis
• Stage 5 Global Company
• Stage 6 Transnational Company

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Implementation of Growth Strategies

• Internal growth or development
• Merger
• Acquisition
• Joint Venture
• Long Term Contract
• Strategic Alliance

23
Stability Strategy

• When managerial efforts are reqd to enhance
  competitive postures
• When sr mgrs consider the cost of adding new
  businesses to be greater than benefits
• When the industry is experiencing upheaval
• When the industry is facing slow or no growth
• When a firm is large and in the mature stage of
  the industry life cycle w/good profits
• When a small entreprenureal or family business is
  satisfied with status quo

24
Retrenchment Strategies

• Turnaround Strategy
• Purpose is to transform the orgn into a leaner
  and more effective firm

25
Retrenchment Strategies

• Divestment Strategy
• When an orgn sells or spins off any number of
  its poorer performing business units or those
  business units that dont contribute to synergy.

26
Retrenchment Strategies

• Liquidation Strategy
• Amounts to the strategy of last resort where
  turnaround or divestment has failed to succeed
  and the assets of the orgn are sold off and the
  orgn ceases to exist.