griffin chap 08
TRANSCRIPT
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Slide content created by Charlie Cook, The University of West Alabama
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Chapter Eight
Managing Strategyand Strategic
Planning
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Learning Objectives
After studying this chapter, you should be able to:
1. Discuss the components of strategy, types of strategicalternatives, and the distinction between strategy formulationand strategy implementation.
2. Describe how touse SWOT analysis in formulating strategy.
3. Identify and describe various alternative approaches tobusiness-level strategy formulation.
4. Describe how business-level strategies are implemented.
5. Identify and describe various alternative approaches to
corporate-level strategy formulation.6. Describe how corporate-level strategies are implemented.
7. Discuss international and global strategies.
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The Nature of Strategic
Management Strategy
A comprehensive plan for accomplishing anorganizations goals.
Strategic Management A way of approaching business opportunities andchallenges aimed at formulating and implementingeffective strategies.
Effective Strategies Strategies that promote a superior alignment
between the organization and its environment andthe achievement of its goals.
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Components of Strategy
Distinctive Competence Something an organization
does exceptionally well.
Scope Range ofmarkets in whichan organization willcompete.
Resource Deployment How an organization will
distribute its resourcesacross the areas in which itcompetes.
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Types of Strategic Alternatives
Business-Level Strategy
The set of strategic alternatives that an
organization chooses from as it conducts business
in a particular industry or a particularmarket. Corporate-Level Strategy
The set of strategic alternatives that an
organization chooses from as it manages its
operations simultaneously across severalindustries and several markets.
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Strategy Formulation and
Implementation
Strategy Formulation
The set ofprocesses involved in creating or
determining the organizations strategies; it
focuses on the content of strategies. Strategy Implementation
The methods by which strategies are
operationalized or executed within the
organization; it focuses on the processes throughwhich strategies are achieved.
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Strategy Formulation and
Implementation (contd)
Deliberate Strategy
A plan, chosen and implemented tosupport specific goals, that is the result of a
rational, systematic, and planned processof strategy formulation and implementation.
Emergent Strategy
A pattern of action that develops over time
in the absence of goals ormissions, ordespite goals and missions.
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Figure 8.1: SWOT ANALYSIS
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Using SWOT Analysis to
Formulate Strategy Evaluating Organizational Strengths
Organizational strengths are skills and abilities enabling an organization to
conceive of and implement strategies.
Common organizational strengths are organizational capabilities possessed by numerous
competing firms.
Distinctive competencies are useful for competitive advantage and superior
performance.
Imitation of distinctive competencies is duplicating another firms distinctive competence.
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Using SWOT Analysis to
Formulate Strategy (contd) Evaluating Organizational Strengths (contd)
Sustained competitive advantage occurs when a distinctive competence cannot be easily
duplicated.
is what remains after all attempts at strategic imitationshave ceased.
Strategic imitation is difficult when: Distinctive competence is based on unique historical
circumstances.
Competitors do not understand the nature or characterofa firms competence.
The competence is based on a complex phenomenon,such as organizational culture.
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Using SWOT Analysis to
Formulate Strategy (contd) Evaluating Organizational Weaknesses
Organizational weaknesses Skills and capabilities that do not enable an organization
to choose and implement strategies that support its
mission. Weaknesses can be overcome by:
investments toobtain the strengths needed.
modification of the organizations mission so it can beaccomplished with the current workforce.
Competitive disadvantage A situation in which an organization fails to implement
strategies being implemented by competitors.
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Using SWOT Analysis to
Formulate Strategy (contd)
Evaluating an Organizations
Opportunities and Threats
Organizational opportunities
Areas in the organizations environment that
may generate high performance.
Organizational threats
Are areas in the organizations environmentthat make it difficult for the organization to
achieve high performance.
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Formulating
Business-Level Strategies Porters Generic Strategies
Differentiation strategy An organization seeks to distinguish itself from
competitors through the quality of its products or
services. Overall cost leadership strategy
An organization attempts to gain competitive advantageby reducing its costs below the costs of competing firms.
Focus strategy
An organization concentrates on a specific regionalmarket, product line, or groupof buyers.
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Table 8.1: Porters
Generic Strategies
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Table 8.2: The Miles
and Snow Typology
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Figure 8.2: The
Product Life Cycle
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Implementing Business-Level
Strategies (contd) Implementing Miles and Snows Strategies
Pr ospector Encourage creativity to seek out new marketopportunities and to take risks.
Develop the flexibility tomeet changing marketconditions by decentralizing its organizational structure.
Defender Focus on defending its current markets by lowering its
costs and/or improving the performance of current
products. Analyzer
Incorporate elements of both the prospector and thedefender strategies maintain business and to besomewhat innovative.
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Implementing Business-Level
Strategies (contd) Implementing Porters Generic Strategies
Differentiation Marketing and salesmust emphasize high-quality, high-
value image of the organizations products or services.
Overall Cost Leadership Marketing and sales focus on simple product attributes
and how these product attributes meet customer needsin a low-cost and effective manner.
Focus
Either differentiation or cost leadership, depending onwhich one is the proper basis for competing in or for aspecific market segment, product category, or groupbuyers.
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Formulating Corporate-Level
Strategies
Strategic Business Units
Each business or groupof businesses within an
organization is engaged in serving the same
markets, customers, orproducts. Diversification
The numberof businesses an organization is
engaged in and the extent to which these
businesses are related toone another
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Formulating Corporate-Level
Strategies (contd)
Single-Product Strategy
An organization manufactures one product or
service and sells it in a single geographic market.
Related Diversification A strategy in which an organization operates in
several different businesses, industries, or
markets that are somehow linked.
Avoids the disadvantages and risks of a single-product strategy.
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Table 8.3: Bases of
Relatedness in Implementing
Related Diversification
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Formulating Corporate-Level
Strategies (contd) Advantages of Related Diversification
Reduces an organizations dependence on anyone of its business activities and thus reduceseconomic risk.
Reduces overhead costs associated withmanaging any one business through economies ofscale and economies of scope.
Allows an organization to exploit its strengths and
capabilities in more than one business.
Synergyexists among a set of businesses whenthe businesses value together is greater than theireconomic value separately.
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Formulating Corporate-Level
Strategies (contd) Unrelated Diversification
An organization operates multiple businesses thatare not logically associated with one another.
Advantages Stable ofperformance over time due to business cycle
differences among the multiple businesses.
Allocation of resources to areas with the highest returnpotentials tomaximize corporate performance.
Disadvantages
Poorperformance due to the complexity ofmanaging adiversity of businesses.
Failing to exploit key synergies puts the firm at acompetitive disadvantage to firms with relateddiversification strategies.
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Implementing Corporate-Level
Strategies Becoming a Diversified Firm
Internal development of new products Developing products and services within the boundariesof traditional business operations.
Replacement of suppliers and customers Backward vertical integration
Beginning a business that furnishes resources previouslyhandledby a supplier.
Forward vertical integration Beginning a business previously handled by anintermediary andsellingmore directly to customers.
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Implementing Corporate-Level
Strategies (contd) Becoming a Diversified Firm (contd)
Merger Purchase ofone firm by another firmof approximately
the same size.
Acquisition Purchase of a firm by another firm that is considerably
larger.
Purposes ofmergers and acquisitions To diversify through vertical integration.
To acquire complementary products or services linked bya common technology and common customers.
To create or exploit synergies that reduce the combinedorganizations costs of doing business to increaserevenues.
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Managing Diversification
Major Tools for Managing Diversification Organization structure
A detailed discussion oforganization structure iscontained in
Chapter12. Portfoliomanagement techniques
Methods that diversified organizations use tomakedecisions about what businesses to engage in and howtomanage these multiple businesses tomaximizecorporate performance.
Two important portfoliomanagement techniques The BCG Matrix
The GE Business Screen
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Managing Diversification
(contd) BCG Matrix
A method of evaluating businesses relative to thegrowth rate of theirmarket and the organizationsshare of the market.
The matrix classifies the types of businesses thata diversified organization can engage as:
Dogs have small market shares and no growthprospects.
Cash cows have large shares ofmature markets.
Question marks have small market shares in quicklygrowing markets.
Stars have large shares of rapidly growing markets.
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Figure 8.3: The BCG Matrix
Source: Perspectives, No. 66, The Product Portfolio. Adapted by permission from The Boston Consulting Group, Inc., 1970.
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Managing Diversification
GE Business Screen
A method of evaluating business in a diversifiedportfolio along two dimensions, each of whichcontains multiple factors:
Industry attractiveness.
Competitive position (strength) of each firm in theportfolio.
In general, the more attractive the industry and the
more competitive a business is, the moreresources an organization should invest in thatbusiness.
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Figure 8.4: The GE
Business Screen
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International and
Global Strategies Developing International and Global
Strategies Global efficiencies
Location efficienciesseeking lower input cost locations
Economies of scalelarger facilities result in lower costs
Economies of scopebroadening pro
Multimarket flexibility International businesses may respond to a change in one
country by implementing a change in another country.
Worldwide learning The diverse operating environments ofmultinational
corporations (MNCs) contribute toorganizational learningthat can be transferred tootheroperating environments.
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Strategic Alternatives for
International Business
Home Replication
Utilizing a core competency or firm specific
advantage developed at home as a main
competitive weapon in foreign markets. Multi-Domestic Strategy
Managing a corporation as a collection of
independent operating subsidiaries frees it to
customize its products, its marketing campaigns,and operating techniques tomeet local customer
needs.
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Strategic Alternatives for
International Business (contd) Global Strategy
Viewing the world as a single marketplace andhaving as a primary goal the creation ofstandardized goods
and services that will address the needs ofcustomers worldwide.
Transnational Strategy Attempting to combine the benefits of scale
efficiencies pursued by a global corporation, withthe benefits and advantages of localresponsiveness of a multi-domestic corporation.
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Key Terms
strategy
strategic management
distinctive competence
scope
resource deployment
business-level strategy
corporate-level strategy
strategy formulation
strategy implementation
deliberate strategy
emergent strategy
SWOT
organizational strength
common strength
strategic imitation
sustained competitiveadvantage
organizationalweaknesses
competitivedisadvantage
organizational threat
organizationalopportunity
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Key Terms (contd)
differentiation strategy overall cost leadership
strategy
focus strategy
prospector strategy
defender strategy
analyzer strategy
reactor strategy
product life cycle
diversification
single-product strategy
related diversification
unrelated diversification backward vertical
integration
forward verticalintegration
merger
acquisition
BCG matrix
GE Business Screen
home replicationstrategy
multidomestic strategy
global strategy
transnational strategy