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Chapter 8
Strategic Planning
Strategic planning has taken on new importance in todays world of globalization, deregulation, advancing technology, and changing demographics, and lifestyles
Managers Challenge: Nintendo
Topics: Chapter 8
Strategic Management
Thinking Strategically
Answers to the following define an overall direction for the organization's grand strategy Where is the organization now? Where does the organization want to be? What changes are among competitors? What courses of action will help us achieve our goals?
Strategic Management
Set of decisions and actions used to implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals
Strategic Management
Managers ask such questions as...
What changes and trends are occurring? Who are our customers? What products or services should we offer? How can we offer these products or services most efficiently?
Grand Strategy
General plan of major action to achieve long-term goals Falls into three general categories A separate grand 1. Growth strategy can be 2. Stability defined for global 3. Retrenchment operations
Ethical Dilemma: A Great Deal for Whom?
Growth can be promoted internally by investing in expansion or externally by acquiring additional business divisions
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Internal growth = can include development of new or changed products External growth = typically involves diversification businesses related to current product lines or into new areas
Stability, sometimes called a pause strategy, means that the organization wants
Retrenchment = the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses Liquidation = selling off a business nit for the cash value of the assets, thus terminating its existence Divestiture = involves selling off of businesses that no longer seem central to the corporation
Transnational Strategy
Seeks to balance global efficiencies and local responsiveness Combines standardization and customization for product/advertising strategies
Export Strategy
Domestically focused Exports a few domestically produced products to selected countries
Multi-domestic Strategy Handles markets independently for each country Adapts product/advertising to local tastes and needs
Low
Low
High
Global Strategy
Globalization = product design and advertising strategies are standardized around the world Multi-domestic = adapt product and promotion for each country Transnational = combine global coordination with flexibility to meet specific needs in various countries
Purpose of Strategy
The plan of action that prescribes resource allocation and other activities for dealing with the environment, achieving a competitive advantage, that help the organization attain its goals Strategies focus on: Core competencies Developing synergy Creating value for customers
R&D
Manufacturing
Marketing
SWOT
Implement Strategy via Changes in: Leadership culture, Structure, HR, Information & control systems
Strategy Formulation = stage of strategic management that involves planning and decision making that lead to the establishment of the organizations goals and of a specific strategic plan Strategy Implementation = stage of strategic management that involves the use of managerial and organizational tools to direct resources toward achieving strategic outcomes
Experiential Exercise: Developing Strategy for a Small Business
Profit margin
Debt-equity ratio Inventory ratio Return on investment Credit rating
Plant location Machinery obsolescence Laboratory capabilities Research programs Purchasing system New-product innovations Quality control
Productivity/efficiency Technology innovations
Sources: Based on Howard H. Stevenson, Defining Corporate Strengths and Weaknesses, Sloan Management Review 17 (spring 1976), 51 -68; and M.L.Kastens, Long-Range Planning for Your Business (New York: American Management Association, 1976).
Portfolio Strategy
BCG Matrix
Mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage
Source: Based on Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).
Differentiation = attempt to distinguish products or services from that of competitors Cost leadership = aggressively seeks efficient facilities, pursues cost reductions, and uses tight cost controls to produce products more efficiently than competitors Focus = concentrates on a specific regional market or buyer group
Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.
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ORGANIZATIONAL CHARACTERISTICS
Differentiation
Acts in a flexible, loosely knit way, with strong coordination among departments Strong capability in basic research Creative flair, thinks `out of the box` Strong marketing abilities Rewards employee innovation Corporate reputation for quality and technological leadership
Cost leadership
Strong central authority; tight cost control Maintains standard operating procedures easy-to-use manufacturing technologies Highly efficient procurement and distribution systems Close supervision; finite employee empowerment Frequent, detailed control reports
Focus
May use combination of above policies directed at particular strategic target Values and rewards flexibility and customer intimacy Measures cost of providing service and maintaining customer loyalty Pushes empowerment to employees with customer contact
Mergers
Strategic Alliances
Joint Ventures
Degree of Collaboration
Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.
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High
Environment
Organization
Strategy
Structural Design Organization Chart Teams Centralization Decentralization, Facilities, task design
Performance
Information and Control Systems Pay, reward system Budget allocations Information systems Rules/procedures
Source: Adapted from Jay R. Galbraith and Robert K. Kazanjian, strategy Implementation: Structure, Systems and Process, 2d ed. (St. Paul, Minn.: West, 1986), 115, Used with permission. Copyright 2005 by South-Western, a division of Thomson Learning. All rights reserved.
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