Chapter 08

Report
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Learning Objectives
1. Discuss the components of strategy, the types of
strategic alternatives, and the distinction between
strategy formulation and strategy implementation.
2. Describe how to use SWOT (Strengths, Weaknesses,
Opportunities, and Threats) analysis in formulating
strategy.
3. Identify and describe various alternative approaches to
business-level strategy formulation.
4. Describe how business-level strategies are
implemented.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–2
Learning Objectives (cont’d)
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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–3
The Nature of Strategic Management
• Strategy
 Is a comprehensive plan for accomplishing an
organization’s goals.
• Strategic Management
 Involves formulating and implementing strategies to
take advantage of business opportunities and meet
competitive challenges.
• Effective Strategies
 Promote superior alignment between an organization,
its environment, and its goals.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–4
Components of Strategy
Components of Effective Strategies
Distinctive
Competence
Competitive
Scope
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Resource
Deployment
8–5
Strategic Alternatives
Corporate-level strategy
Market A
Market B
Business-level strategy
Business-level strategy
Functional-level strategy
Functional-level strategy
Operations-level strategy
Operations-level strategy
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–6
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 particular market.
• Corporate-Level Strategy
 The set of strategic alternatives that an organization
chooses from as it manages its operations
simultaneously across several industries and several
markets.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–7
Strategy Formulation and Implementation
• Strategy Formulation
 The set of processes involved in creating or
determining the organization’s 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 through which strategies are achieved.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–8
Management Challenge
• If it is important that all employees be involved
in strategy implementation, then what are the
most important responsibilities for managers in
helping them participate?
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–9
Types of Strategies
• Deliberate Strategy
 A plan, chosen and implemented to support specific
goals, that is the result of a rational, systematic, and
planned process of strategy formulation and
implementation.
• Emergent Strategy
 A pattern of action that develops over time in the
absence of goals or missions, or despite goals and
missions.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–10
8.1 SWOT Analysis
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–11
SWOT Analysis and 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

removes the competitive advantage of the competency.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–12
SWOT Analysis and Strategy (cont’d)
• Evaluating Organizational Strengths (cont’d)
 Sustained competitive advantage


occurs when a distinctive competence cannot be easily
duplicated.
is what remains after all attempts at strategic imitations
cease.
 Strategic imitation of a distinctive competence is
difficult when:



it is based on unique historical circumstances.
it is difficult for competitors to understand its nature or
character.
it is based on a complex phenomenon (e.g., organizational
culture).
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–13
SWOT Analysis and Strategy (cont’d)
• 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 organization’s mission so it can be
accomplished with the current workforce.
 Competitive disadvantage

occurs when an organization fails to implement strategies
being implemented by competitors.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–14
SWOT Analysis and Strategy (cont’d)
• Evaluating an Organization’s Opportunities and
Threats
 Organizational opportunities

are 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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–15
Formulating Business-Level Strategies
Porter’s Generic
Strategies
Differentiation
strategy
Overall cost
leadership
strategy
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Focus
strategy
8–16
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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–17
8.1
Porter’s Generic Strategies
Strategy Type
Definition
Examples
Differentiation
Distinguish products
or services
Rolex (watches)
Godiva (chocolate)
Mercedes-Benz (automobiles)
Nikon (cameras)
Cross (writing instruments
Overall cost
leadership
Reduce manufacturing
and other costs
Timex (watches)
Hershey (chocolate)
Kia (automobiles)
Kodak (cameras)
BIC (writing instruments)
Focus
Concentrate on specific
regional market, product
market, or group of buyers
Tag Heuer (watches)
Vosges (chocolate)
Fiat, Alfa Romeo (automobiles)
Hasselblad (cameras)
Waterman (writing instruments)
Fisher-Price (handheld calculators)
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–18
Implementing Porter’s Generic Strategies
• Differentiation
 Marketing and sales 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 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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–19
Miles and Snow’s Strategy Types
Strategic Types of Organizations
Prospectors
Defenders
Analyzers
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Reactors
8–20
Miles and Snow’s Strategy Types
• Prospector
 Encourages creativity to seek out new market opportunities and
to take risks.
 Develops the flexibility to meet changing market conditions by
decentralizing its organizational structure.
• Defender
 Focuses on defending its current markets by lowering its costs
and/or improving the performance of its current products.
• Analyzer
 Incorporates elements of both the prospector and the defender
strategies to maintain business and to be somewhat innovative.
• Reactor
 Has no clear strategy, reacts to changes and events.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–21
8.2
The Miles and Snow Typology
Strategy Type
Definition
Examples
Prospector
Is innovative and growth oriented,
searches for new markets and new growth
opportunities, encourages risk taking
Amazon.com
3M
Rubbermaid
Defender
Protects current markets, maintains stable
growth, serves current customers
BIC
eBay
Mrs. Fields
Analyzer
Maintains current markets and current
customer satisfaction with moderate
emphasis on innovation
DuPont
IBM
Yahoo!
Reactor
No clear strategy, reacts to changes in the
environment, drifts with events
International Harvester
(now doing business as Navistar)
Joseph Schlitz Brewing Co.
Kmart
Montgomery Ward
(no longer in business)
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–22
8.2 The Product Life Cycle
High
Stages
Growth
Maturity
Decline
Sales Volume
Introduction
Low
Time
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–23
Management Challenge Questions
• Which of Porter’s generic strategies are best
suited for which stages of the product life cycle?
• Which of the Miles and Snow’s types of effective
strategic organizations are most appropriate for
which stage of the product life cycle?
• Do your answers support the concept that
structure must follow strategy?
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–24
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
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–25
Corporate-Level Strategies
Strategic Choices
Single-product
strategy
(simplicity)
Related
diversification
(synergy)
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Unrelated
diversification
(risk/return)
8–26
Corporate-Level Strategies
• 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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–27
8.3
Bases of Relatedness in Implementing
Related Diversification
Basis of Relatedness
Examples
Similar technology
Philips, Boeing, Westinghouse
Common distribution
and marketing skills
Kraft Foods, Philip Morris, Procter & Gamble
Common brand name
and reputation
Disney, Universal
Common customers
Merck, IBM, AMF-Head
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–28
Advantages of Related Diversification
• Reduces economic risk by avoiding dependence
on a specific business or activity.
• Reduces overhead costs through economies of
scale and economies of scope.
• Increases overall economic value through
complementary strengths and capabilities
synergies gained by managing the set of
businesses together rather than separately.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–29
Unrelated Diversification
• Unrelated Diversified 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 of resources to areas with the highest return
potentials to maximize corporate performance.
 Disadvantages


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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–30
Becoming a Diversified Firm
Diversification Alternatives
Development of
new products
Vertical
integration
Merger with
another firm
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Acquisition of
another firm
8–31
Becoming a Diversified Firm
• 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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–32
Becoming a Diversified Firm (cont’d)
• 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 organizations’ costs of doing business to
increase revenues.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–33
Managing Diversification
• Major Tools for Managing Diversification
 Organization structure

A detailed discussion of organization structure
is contained in Chapter 12.
 Portfolio management techniques

Methods used by diversified firms to make decisions
about what businesses to engage in and how to manage
these businesses to maximize corporate performance.
 Two important portfolio management techniques

The BCG Matrix

The GE Business Screen
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–34
Managing Diversification (cont’d)
• BCG Matrix
 Evaluates a portfolio of businesses on the growth rate
of their respective markets and each business’s
relative share of its market.
 Classifies the types of businesses in a diversified
firm’s portfolio as:

“Dogs” have small market shares and no growth prospects.

“Cash cows” have large shares of mature markets.

“Question marks” have small market shares in quickly
growing markets.

“Stars” have large shares of rapidly growing markets.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–35
8.3 The BCG Matrix
Market Growth Rate
High
Stars
Question
marks
Cash Cows
Dogs
Low
High
Relative Market Share
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Low
8–36
Managing Diversification (cont’d)
• GE Business Screen
 A method of evaluating businesses in a diversified
portfolio along two dimensions, each of which
contains multiple factors:

Industry attractiveness.

Competitive position (strength) of each firm in the portfolio.
 In general, the more attractive the industry and the
more competitive a business is, the more resources
an organization should invest in that business.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–37
Industry Attractiveness
8.4 The GE Business Screen
High
Winner
Winner
Question
mark
Medium
Winner
Average
business
Loser
Profit
producer
Loser
Loser
Low
Good
Medium
Poor
Competitive Position
Competitive Position
Industry Attractiveness
1.
2.
3.
4.
5.
6.
1.
2.
3.
4.
Market share
Technological know-how
Product quality
Service network
Price competitiveness
Operation costs
Market growth
Market size
Capital requirements
Competitive intensity
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–38
International and Global Strategies
Developing International
and Global Strategies
Global
efficiencies
Multimarket
flexibility
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Worldwide
learning
8–39
International and Global Strategies
• Developing International and Global Strategies
 Global efficiencies

Location efficiencies—seeking lower input cost locations

Economies of scale—larger facilities result in lower costs

Economies of scope—broadening product lines
 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 of multinational
corporations (MNCs) contribute to organizational learning that
can be transferred to other operating environments.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–40
Strategic Alternatives for
International Businesses
Strategic
Alternatives
Home replication
Multi-domestic strategy
Global strategy
Transnational strategy
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–41
Strategic Alternatives for
International Businesses
• Home Replication
 Utilizing a core competency or a 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 a firm to customize its
products, its marketing campaigns, and operating
techniques to meet local customer needs.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–42
Strategic Alternatives for
International Businesses (cont’d)
• 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
worldwide.
• 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.
© 2013 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8–43

similar documents