strategy formulation corporate level, business unit level and functional level
TRANSCRIPT
Strategy Formulation
Corporate Level, Business Unit Level and Functional Level
Strategy Formulation
Defined:
Development of long-range plans for the effective management of environmental opportunities and threats in light of organizational strengths and weaknesses.
Strategy Formulation
Mission StatementPurpose or reason for the org’s
existencePromotes shared expectations among
employeesCommunicates a public image
important to stakeholdersDefines who we are, what we do, and
what we would like to become
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.
Strategy Formulation
An objective are specific and quantifiable, versions of goals.
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)
Goals & Stakeholders
Owners or shareholders Members of the board of directors Top management Employees Customers Suppliers Creditors Distributors General Public Government
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.
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)
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.
Corporate Level Strategy
Growth StrategiesConcentration (internal growth)
Products Current New
Product-MrktExploitation
Market Development
Product-MrktDiversification
ProductDevelopment
CustomersCurrent
New
Corporate Level Strategy
Concentration (internal growth)Advantage
1. Become very good at what one does2. Preserves org’s culture, image,
efficiency & qualityDisadvantage
1. Slow2. Subject to environmental shifts3. Bureaucratic & coordinating costs
Corporate Level Strategy
Horizontal Integration
Growth through acquisition of other businesses in one’s own industry
Corporate Level Strategy
Horizontal Integration of Related Businesses
Growth through acquisition of businesses outside one’s present scope of operations, but related to the organization’s core competencies.
Synergy
Defined:
The higher effectiveness and efficiency yielded by the combination of two firms that is greater than that represented by both firms separately.
Corporate Level Strategy
Horizontal Unrelated DiversificationConglomerate
Diversifying into completely different industries from an org’s current business.
Corporate Level Strategy
Vertical Integration
Merging into the org’n various stages of activities backward ito sources of supply or forward in the direction of final consumers.
Corporate Level Strategy
Vertical Integration
Merging into the org’n various stages of activities backward ito sources of supply or forward in the direction of final consumers.
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.
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
Stages of International Development
Stage 1: Domestic companyStage 2: Domestic company w/export divisionStage 3: Primarily domestic company
w/international divisionStage 4: Multinational corporation with
multidomestic emphasisStage 5: Global CompanyStage 6: Transnational Company
Implementation of Growth Strategies
Internal growth or developmentMergerAcquisitionJoint VentureLong Term ContractStrategic Alliance
Stability Strategy
When managerial efforts are req’d to enhance competitive postures
When sr mgrs consider the cost of adding new businesses to be greater than benefits
When the industry is experiencing upheavalWhen the industry is facing slow or no growthWhen a firm is large and in the mature stage of the
industry life cycle w/good profitsWhen a small entreprenureal or family business is
satisfied with status quo
Retrenchment Strategies
Turnaround Strategy
Purpose is to transform the org’n into a leaner and more effective firm
Retrenchment Strategies
Divestment Strategy
When an org’n sells or “spins off” any number of its poorer performing business units or those business units that don’t contribute to synergy.
Retrenchment Strategies
Liquidation Strategy
Amounts to the strategy of “last resort” where turnaround or divestment has failed to succeed and the assets of the org’n are sold off and the org’n ceases to exist.