Formulation

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Formulation
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Formulation Overview

• Want to create a sustainable competitive
  advantage
• Grounded in mission, objectives, and strategies
• Identify rich range of strategic alternatives
• Balanced evaluation of and - of alternatives
• Decide on alternatives to be implemented/recommend
  ed

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Three Levels of Strategy

• Corporate level strategy
• Competitive (business level) strategy
• Functional strategies
• all need to be consistent and in alignment

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Corporate Level Strategy

• Directional strategy (retrenchment through
  growth)
• Portfolio strategy (what LOBs for future)
• Parenting strategy (allocation of resources
  connections)

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Directional Growth Strategies

• Concentration
• Vertical integration
• Horizontal growth
• Diversification
• Related (concentric)
• Unrelated (conglomerate)
• Mergers, acquisitions, strategic alliances

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Other Directional Strategies

• Stability
• Retrenchment
• often more appropriate than growth
• strategies, which tend to be overused

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Competitive Strategy

• (Sometimes called business level strategy)
• How we will compete within each line of business
  (LOB) or strategic business unit (SBU)
• We are trying to create a (sustainable)
  competitive advantage

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• Consider our strengths relative to key success
  factors in the industry
• Uniqueness
• Imitability
• Practicality
• Porters four generic competitive strategies
• Variations plus tactics

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Generic Competitive Strategies
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Requirements for Price Strategy

• Industry is largely commodity
• Buyer switching costs are low
• Buyers are powerful
• We have low costs

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Requirements for Differentiation

• Buyers have different needs or uses
• Buyers are willing to pay for special features
• Product/technological innovations are important
• We have some (sustainable) competitive advantages

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Functional Level Strategy

• More localized and shorter-horizon strategies
• Deal with how each functional area will carry out
  its activities to be effective and maximize
  resource productivity

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Need to ensure that the set of recommended
strategies address all the critical issues well
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Exercise in Groups

• Identify the main competitive strategy of Reebok,
  with reasons for your conclusion
• Do the same for Steinway Sons
• Do the same for Kroger

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Strategic Thinking
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Strategic Thinking

• Identify focus on important issues
• Select key, relevant information
• Recognize systemic properties
• Understand through
• Distinguishing causes from effects
• Clarifying (tacit) underlying assumptions
• Considering issue in a larger context
• Maintaining a long-term view

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Strategic Thinking (cont.)

1. Appreciate implications consequences
2. Generate alternatives evaluate objectively
3. Integrate logical/rational
   creative/generative thinking
4. Remain flexible
5. Act in the face of emotional discomfort

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Strategic Thinking (1 page)

• Identify focus on important issues
• Select key, relevant information
• Recognize systemic properties
• Understand through
• Distinguishing causes from effects or symptoms
• Clarifying (often tacit) underlying assumptions
• Considering the issue or situation in a larger
  context
• Maintaining a long-term view
• Appreciate implications consequences
• Generate alternatives evaluate objectively
• Integrate logical/rational creative/generative
  thinking
• Remain flexible
• Act in the face of emotional discomfort

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Another View of Strategic Thinking

• Thinking more deeply to distinguish underlying
  causes and issues from more obvious symptoms
• Thinking more broadly to recognize systemic
  linkages, interactions, and patterns
• Thinking long-term as well as short-term about
  implications and consequences

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Strategic Thinking Case

• Apply strategic thinking to the case, making
  notes for yourself
• Discuss in groups
• Report out with total class discussion