STRATEGY

FORMULATION & IMPLEMENTATION

Presented By: David Gotera

Objectives
• Discuss the components of strategy, type of strategic options, and
differentiate between strategy formulation and strategy
implementation.
• Describe how to use the SWOT analysis in formulating strategy.
• Managing diversification – Understand product-life cycle, BCG matrix
and GE matrix for formulation of business-level strategy.
• Describe how business-level strategies are implemented.
• Identify and describe various options to corporate-level strategy
formulation.
• Describe how corporate-level strategies are implemented.
• Discuss international and Global strategies.
Definition
• Strategy - A system of finding, formulating, and developing a doctrine
that will ensure long-term success if followed faithfully.
• Strategy Formulation - Involves analyzing the environment in which
the organization operates, then making a series of strategic decisions
about how the organization will compete. Formulation ends with a
series of goals or objectives and measures for the organization to
pursue.
• Strategy Implementation - involves decisions regarding how the
organization's resources (i.e., people, process and IT systems) will be
aligned and mobilized towards the objectives. Implementation results
in how the organization's resources are structured (such as by
product or service or geography), leadership arrangements,
communication, incentives, and monitoring mechanisms to track
progress towards objectives, among others.
Strategy Formulation vs Implementation
2 Types of Strategic Options

Business-Level Strategy
The set of strategic options that an organization chooses from as
it conducts business in a particular industry or a particular
market.

Corporate-Level Strategy
The set of strategic options that an organization chooses from as
it manages its operation simultaneously across several industries
and several markets.
 5 Types of Strategies:
• Strategy as plan – a directed course of action to achieve an intended set
of goals; similar to the strategic planning concept;
• Strategy as pattern – a consistent pattern of past behavior, with a
strategy realized over time rather than planned or intended. Where the
realized pattern was different from the intent, he referred to the strategy
as emergent;
• Strategy as position – locating brands, products, or companies within the
market, based on the conceptual framework of consumers or other
stakeholders; a strategy determined primarily by factors outside the firm;
• Strategy as ploy – a specific maneuver intended to outwit a competitor;
and
• Strategy as perspective – executing strategy based on a "theory of the
business" or natural extension of the mindset or ideological perspective
of the organization.
SWOT Analysis
Understanding SWOT’s
Using SWOT Analysis to Formulate Strategies
Evaluating Organizational Strengths
Sustained Competitive Advantage
• Occurs when a distinctive competence cannot be easily duplicated.
• Is what remains after all attempts at strategic imitation have ceased.

Strategic Imitation is difficult when:

• Distinctive competence is based on unique historical circumstances.
• Competitors do not understand the nature or character of a firm’s
competence.
• The competence is based on a complex phenomenon, such as
organizational culture.
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 to obtain the strengths needed.
• Modification of the organizations mission so it can be accomplished with
the current workforce.

Competitive Disadvantage
• A situation in which an organization fails to implement strategies being
implemented by competitors.
Evaluating an Organization’s Opportunities and
Threats
Organizational Opportunities
• Areas in the organization’s environment that may generate high
performance.

Organizational Threats
• Are areas in the organization’s environment that make it difficult for
the organization to achieve high performance.
 Porter's 5 Forces

1. Competition in the industry;

2. Potential of new entrants into
the industry;
3. Power of suppliers;
4. Power of customers;
5. Threat of substitute products.
 Formulating Business-Level strategies
Porter’s 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 advantage by reducing its costs
below the costs of competing firms.

Focus Strategy
• An organization concentrates on a specific regional market, product line, or
group of buyers.
Implementing Business-Level Strategies
Implementing Porter’s Generic strategies

Differentiation
• Marketing and sales must emphasize high-quality, high-value image of the
organization’s products or services.

Overall Cost Leadership

• Marketing and sales focus on simple product attributes and how these product
attributes meet customer needs in a low-cost and effective manner.

Focus
• Either in differentiation or cost leadership, depending on which one is the proper
basis for competing in or for a specific market segment, product category, or
group buyers.
Formulating Corporate-Level Strategies
Strategic Business Units
• Each business or group of businesses within an organization is engaged in serving the
same markets, customers, or products.

Diversification
• The number of businesses an organization is engaged in and the extent to which these
businesses are related to one another.

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.
Formulating Corporate-Level Strategies
Advantages of Related Diversification
• Reduces an organization’s dependence on any one of its business
activities and thus reduces economic risk.
• Reduces overhead costs associated with managing any one business
through economies of scale and economies of scope.
• Allows an organization to exploit its strengths and capabilities in more
than one business.
• Synergy exists among a set of business when the businesses’ value
together is greater than their economic value separately.
Formulating Corporate-Level Strategies
Unrelated Diversification
• An organization operates multiple businesses that are not logically associated
with one another.

Advantages
• Stable performance over time due to business cycle differences among the
multiple businesses.
• Allocation or resources to areas with the highest return potential to maximize
corporate performance.

Disadvantage
• Poor performance due to the complexity of managing a diversity of businesses.
• Failing to exploit key synergies puts the firm at a competitive disadvantage to
firms with related diversification strategies.
Implementing Corporate-Level Strategies
Becoming a Diversified Firm

Internal Development of New Products

• Developing products and services within the boundaries of traditional
business operation.

Replacement of Suppliers and Customers

• Backward Vertical Integration
- Beginning a business that furnishes resources previously handled by
a supplier.
• Forward Vertical Integration
- Beginning a business previously handled by an intermediary and
selling more directly to customers.
Implementing Corporate-Level Strategies
Becoming a Diversified Firm

Merger
• Purchase of one firm by another firm of approximately the same size.

Acquisition
• Purchase of a firm by another firm that is considerably larger.

Purposes of Mergers and Acquisitions

• To diversify through vertical integration.
• To acquire complementary products or services linked by a common
technology and common customers.
• To create or exploit synergies that reduce the combined organization’s cost
of doing business to increase revenues.
Managing Diverification
Major Tools for Managing Diversification

Organization Structure
• An organizational structure consists of activities such as task allocation, coordination and
supervision, which are directed towards the achievement of organizational aims.

Portfolio Management Techniques

• Purchase of a firm by another firm that is considerably larger.

Purposes of Mergers and Acquisitions

• Methods that diversified organizations use to make decisions about what businesses to
engage in and how to manage these multiple businesses to maximize corporate performance

Two Important Portfolio Management Techniques:

• BCG Matrix
• GE Business Screen
International & Global Strategies
Developing International and Global Strategies

Global Efficiencies
• Location Efficiencies – seeking lower input cost locations
• Economics of Scale – larger facilities result in lower costs
• Economies of Scope – broadening product profiles

Multimarket Flexibility
• International businesses may respond to a change in one country by implementing a
change in another country.

Global Learning
• The diverse operating environments of multinational corporations (MNCs) contribute
to organizational learning that can be transferred to other operating environments.
Strategic Options 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 to meet local customer needs.
Strategic Options for International Business
Global Strategy
• Viewing the world as a single marketplace and having as a primary
goal the creation of standardized goods and services that will address
the needs of customers worlwide.

Transnational Strategy
• Attempting to combine the benefits of scale efficiencies pursued by a
global corporation, with the benefits and advantages of local
responsiveness of a multi-domestic corporation.
Thank You!
References:
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acquisitions-definition-examples-quiz.html