1. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
STRATEGY FORMULATION and
IMPLEMENTATION
MANAGEMENT 6th Ed.
By: Richard Daft

2. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Learning Objectives
• Define the components of strategic management
• Describe the strategic planning process and SWOT analysis
• Understand Grand Strategies for domestic and international
operations
• Define corporate-level strategies and explain the portfolio
approach
• Describe business-level strategies, including Porter’s
competitive forces and strategies and partnership strategies
• Explain the major considerations in formulating functional
strategies
• Enumerate the organizational dimensions used for
implementing strategy

3. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
What is Strategic Management?
Strategic Management
• The set of decisions and actions used to formulate and
implement strategies that will provide a competitively
superior fit between the organization and its
environment so as to achieve organizational goals.

4. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Grand Strategy
• The general plan of major action by which an
organization intends to achieve its long-term
goals.
Three general categories:
1. Growth – can be promoted internally by investing in expansion
or externally by acquiring additional business divisions.
2. Stability (pause strategy) – that the organization wants to
remain the same size or grow slowly and in a controlled fashion.
3. Retrenchment – that the organization goes through period of
forced decline by either shrinking current business units or
selling off or liquidating entire business.

5. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Global Strategy
• a separate grand strategy as the focus of global
business.
Three global strategies:
1. Globalization – the standardization of product design and
advertising strategies throughout the world.
2. Multidomestic strategy – the modification of product design and
advertising strategies to suit the specific needs of individual
countries.
3. Transnational strategy – a strategy that combines global
coordination to attain efficiency with flexibility to meet specific
needs in various countries.

6. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Purpose of Strategy
• Choosing how the organization will be different.
Strategy
 The plan of action that prescribes resource allocation
and other activities for dealing with the environment
and helping the organization attain its goals.

7. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
To remain competitive, companies develop
strategies that focus on:
1. Core competence
» A business activity that an organization does
particularly well in comparison to competitors.
2. Synergy
» The condition that exists when the organization’s
parts interact to produce a joint effect that is
greater than the sum of the parts acting alone.
3. Value Creation
» The heart of strategy.
» Value can be defined as the combination of
benefits received and costs paid by the customers.

8. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Levels of Strategy
• Corporate-Level Strategy
• The level of strategy concerned with the question, “What
business are we in?”. Pertains to the organization as a whole
and the combination of business units and product lines that
make it up.
• Business-Level Strategy
• The level of strategy concerned with the question, “How do
we compete?”. Pertains to each business unit or product
line within the organization.
• Functional-Level Strategy
• The level of strategy concerned with the question, “How do
we support the business-level strategy?”. Pertains to all of
the organization’s major departments.

9. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Three Levels of Strategy in Organization
Corporation
Textile Units Chemicals Unit Auto Parts Unit
Finance R & D Manufacturing Marketing
Corporate-Level Strategy:
What business are we in?
Business-Level Strategy:
How do we compete?
Functional-Level Strategy:
How do we support the business-level strategy?

10. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Corporation
Textile Units
Finance R & D Manufacturing Marketing
Corporate-Level Strategy:
What business are we in?
Business-Level Strategy:
How do we compete?
Functional-Level Strategy:
How do we support the business-level strategy?

11. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Strategy Formulation Versus Implementation
• Strategy Formulation
• The stage of strategic management that involves the
planning and decision making that lead to the
establishment of the organization’s goals and of a
specific strategic plan.
• Strategy Implementation
• The stage of strategic management that involves the
use of managerial and organizational tools to direct
resources toward achieving strategic outcomes.

12. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
The Strategic Management Process
Scan External
Environment:
• National
• Global
Identify Strategic
Factors:
• Opportunities
• Threat
Scan Internal
Environment:
• Core
Competence
• Synergy
• Value Creation
Identify Strategic
Factors:
• Strengths
• Weaknesses
Define New:
• Mission
• Goals
• Grand
Strategy
Formulate
Strategy:
• Corporate
• Business
• Functional
Evaluate
Current:
• Mission
• Goals
• Strategies
SWOT
Implement
Strategy via
Changes in:
• Leadership /
Culture
• Structure
• Human
Resources
• Information
and Control
System

13. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Situation Analysis
• Analysis of the strengths, weaknesses,
opportunities, and threats (SWOT) that affect
organizational performance.
 Strengths
 Positive internal characteristics that the organization can exploit to
achieve its strategic performance goals.
 Weaknesses
 Internal characteristics that might inhibit or restrict the organization’s
performance.
 Opportunities
 Characteristics of the external environment that have the potential to
help the organization achieve or exceed its strategic goals.
 Threats
 Characteristics of the external environment that may prevent the
organization from achieving its strategic goals.

14. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Formulating Corporate-Level Strategy
Portfolio Strategy
 A type of corporate-level strategy that pertains
to the organization’s mix of SBUs and product
lines that fit together in such a way as to
provide the corporation with synergy and
competitive advantage.
 Strategic Business Unit (SBU)
 A division of the organization that has a unique
business mission, product line, competitors,
and markets relative to other SBUs in the same
corporation.

15. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
The BCG Matrix
• A concept developed by the Boston Consulting Group that
evaluates SBUs with respect to the dimension of business
growth rate and market share.

16. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Four Alternative Positions:
– Question Marks
• The business unit has low market share compared to
competitors, however it is doing business in high-growth
market.
– Stars
• The business has high market share compared to
competitors and it is doing business in high-growth market.
– Cash Cows
• The market is not very attractive – low market growth rate,
however the business has high market share compared to
competitors.
– Dogs
• This business has low market share and operates in low-
growth market.

17. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku

18. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Formulating Business-Level Strategy
it is a strategy formulation within the strategic
business unit in which the concern is how to
compete.
the same three generic strategies (growth, stability,
and retrenchment) apply at the business level, but
they are accomplished through competitive actions
rather than the acquisition or divestment of business
divisions.

19. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Porter’s Five Competitive Forces
Rivalry
among
Competitors
Threat of
Substitute
Products
Potential New
Entrants
Bargaining Power
of Buyers
Bargaining Power
of Suppliers
Internet tends to increase bargaining power of
suppliers
Internet reduces
barriers to entry
Internet blurs differences
among competitors
Internet creates new
substitution threats
Internet shifts greater
power to end consumers

20. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Competitive Strategies
1. Differentiation
• a type of competitive strategy with which the
organization seeks to distinguish its products or
services from competitors.
2. Cost Leadership
• A type of competitive strategy with which the
organization aggressively seeks efficient facilities, cuts
costs, and employs tight cost controls to be more
efficient than competitors.
3. Focus
• A type of competitive strategy that emphasizes
concentration on a specific regional market or buyer
group.

21. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Partnership Strategies
Organizational
Combination
Strategic
Alliances
Acquisitions
Mergers
Joint Ventures
Strategic Business Partnering
Preferred Supplier Arrangements
High
D
E
G
R
E
E
O
F
C
O
L
L
A
B
O
R
A
T
I
O
N
Low

22. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Formulating Functional-Level Strategy
the action plans adopted by major
departments to support the execution of
business-level strategy.
major organizational functions include
marketing, production, finance, human
resources, and research & development.

23. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Strategy Implementation and Control
Implementation is the final step in the
strategic management process and it is how
strategy put into action.
Some people argue that strategy
implementation is the most difficult and
important part of strategic management.

24. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
STRUCTURAL DESIGN
• Design organization chart
• Create teams
• Determine centralization
• Arrange facilities, task design
LEADERSHIP
• Use persuasion
• Motivate employees
• Shape culture/values
HUMAN RESOURCES
• Recruit/select employees
• Manage
transfers/promotions/training
• Direct layoffs/recalls
INFORMATION AND CONTROL
SYSTEMS
• Revise pay, reward system
• Change budget allocations
• Implement information systems
• Apply rules and procedures
OrganizationEnvironment
Strategy
Performance
Tools for Putting Strategy into Action

25. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
Implementing Global Strategies
In the international arena, flexibility and superb
communication emerge as mandatory leadership skills.
Structural design must merge successfully with foreign
cultures as well as link foreign operations to the home
country.
Information and control systems must fit the needs and
incentives within local cultures.
Recruitment, training, transfer, promotion, and layoff of
international human resources create array of problems
not confronted from other countries such as labor laws,
guaranteed jobs, and cultural traditions of keeping
unproductive employees on the job.

26. Chapter 07 - Managerial Planning and Goal SettingChandra Kodituwakku
THE END
Any clarification?
HAVE A NICE DAY!!! 
Prepared by:
GREGAR DONAVEN E. VALDEHUEZA, MBA
Lourdes College Instructor
Google from:
Uploaded to refferance for MBA Student of Uni of Colombo