strategic management and strategy formulation

strategic management

1. •STRATEGIC MANAGEMENT

2. •COURSE OBJECTIVES

3. STRATEGIC MANAGEMENT & BUSINESS POLICY
THOMAS L. WHEELEN J. DAVID HUNGER

4. Functional strategy- the approach a functional
area takes to achieve corporate and business
unit objectives and strategies by maximizing
resource productivity

5. Marketing strategy deals with pricing, selling and
distributing a product

6. Market development strategy- provides the
ability to:
• Capture a larger market share
–Market saturation
–Market penetration
•Develop new uses and/or markets for current
products

7. Product development strategy- provides the
ability to:
•Develop new products for existing markets
•Develop new products for new markets

8. •Line extension- using a successful brand name to
market other products
•Push strategy- promotions to gain or hold shelf
space in retail outlets
•Pull strategy- advertising to “pull” products through
the distribution channels

9. •Skim pricing- offers the opportunity to “skim the
cream” from the top of the demand curve with a
high price while the product is novel and
competitors are few
•Penetration pricing- attempts to hasten market
development and offers the pioneer the opportunity
to use the experience curve to gain market share
with low price and then dominate the industry

10. Financial Strategy- examines the financial
implications of corporate and business-level
strategic options and identifies the best financial
course of action
Financial strategy includes the management of:
•Dividends
•Stock price
•Sales of company patents

11. Research and Development Strategy- deals with
product and process innovation and improvement
•Technological leader- pioneers innovation
•Technological follower- imitates the products of
competitors
•Open innovation- use of alliances and connections
with corporate, government, academic labs and
consumers to develop new products and processes

12. Operations Strategy- determines how and where a
product or service is to be manufactured, the level
of vertical integration in the production process, the
deployment of physical resources and relationships
with suppliers
Manufacturing Types include
•Connected line batch flow
•Flexible manufacturing systems
•Mass production systems
•Continuous improvement
•Mass customization

13. Purchasing Strategy- deals with obtaining raw
materials, parts and supplies needed to perform the
operations function
Options include:
•Sole suppliers
•Just-in-time

14. Logistics Strategy- deals with the flow of products
into and out of the manufacturing process

Trends include:
•Centralization
•Outsourcing

15. Human Resource Strategy
Trends include:
•Self-managed teams
•360-degree appraisal
•Diverse workforce

16. Information Technology Strategy
Trends include:
•Follow the sun management
•Internet
•Extranet
•Intranet

17. Outsourcing- purchasing from someone else a
product or service that had been previously
provided internally
•Avoid outsourcing distinctive competencies
Offshoring- the outsourcing of an activity or a function
to a wholly-owned company or an independent
provider in another country

18. Disadvantages of outsourcing and offshoring
•Customer complaints
•Long-term contracts
•Ability to learn new skills and develop new core
competencies
•Lack of cost savings
•Poor product quality
•Increased transportation costs

19. Errors in Outsourcing Efforts
•Outsourcing the wrong activities
•Selecting the wrong vendor
•Poor contracts
•Personnel issues
•Lack of control
•Hidden costs
•Lack of an exit strategy

20. STRATEGIC MANAGEMENT & BUSINESS POLICY
THOMAS L. WHEELEN J. DAVID HUNGER

21. Incorporating Managers
•Prepare a competitive profile of the company in
terms of its strengths and weaknesses
•Draft a profile of what the ideal combined
company should look like
•Develop action plans to close the gap between
actual and ideal
•Establish training programs to unit the combined
company and make it more competitive

22. Successful Incorporating Managers
•Deep knowledge of the acquiring company
•Flexible management style
•Ability to work in cross-functional teams
•Willingness to work independently
•Sufficient emotional and cultural intelligence to
work in a diverse environment

23. Staffing Follows Strategy
•Training and development
•Executive types
–Dynamic industry expert
–Analytical portfolio manager
–Cautious profit planner

24. Selection and Management Development
Executive succession- replacing a key top manager
Succession planning
•Identifying candidates below the top layer of
management
•Measuring internal candidates against external
candidates
•Providing financial incentives

25. Identifying Abilities and Potential
Performance appraisal system identifies good
performers with promotion potential
Assessment centers evaluates a person’s
suitability for an advanced position
Job rotation- ensures employees are gaining a mix
of experience to prepare them for future
responsibilities

26. Problems in Retrenchment
Downsizing the planned eliminated of positions or
jobs
•Can damage the learning capacity of an
organization

27. Successful Downsizing
•Eliminate unnecessary work instead of making
across the board cuts
•Contract out work that others can do cheaper
•Plan for long-run efficiencies
•Communicate the reasons for actions
•Invest in the remaining employees
•Develop value added jobs to balance out job
elimination

28. International Issues in Staffing
•Culture differences
•Management styles
•Human resource practices
•Communication and coordination
•Lack of international management with
experience

29. Implementation involves leading and
coaching people to use their abilities and
skills most effectively and efficiently to
achieve organizational objectives

30. Managing Corporate Culture
•Strong cultures are resistant to change
•Change in strategy should be followed by
change in culture

31. Managing Cultural Change Through
Communication
•CEO and top management communicated the
strategic vision throughout the organization
•Current performance was compared to
competition and constantly updated
•Vision was translated into key elements needed
to accomplish the vision

32. Managing Diverse Cultures Following an
Acquisition
Methods of managing two different cultures
•Integration- balanced give and take of cultures
•Assimilation- domination of one culture over the
other
•Separation of the two cultures
•Assimilation- disintegration of one culture
resulting from pressure form the other to impose
its culture and practices

33. Action plan- what actions are going to be taken, by
whom, during what time frame, and with what
expected results
1.Specific actions to be taken to make the program
operational
2.Dates to begin and end each action
3.Person responsible for carrying out each action
4.Person responsible for monitoring the timeliness and
effectiveness of each action
5.Expected financial and physical consequences of each action
6.Contingency plans

34. Importance of Action plans
•Serve as a link between strategy formulation
and evaluation and control
•Specifies what needs to be done differently from
current operations
•Evaluation and control processes appraise
performance and identify remedial actions

35. Management by Objectives (MBO)- encourages
participative decision making through shared
goal setting and performance assessment based
on achieving stated objectives
•Establishing and communicating organizational
objectives
•Setting individual objectives
•Developing an action plan to achieve objectives
•Performance review (periodic and annual)

36. Total Quality Management (TQM)- philosophy
that is committed to customer satisfaction and
continuous improvement

37. Essential Ingredients
1.Intense focus on customer satisfaction
2.Internal as well as external customers
3.Accurate measurement of every critical variable
in a company’s operations
4.Continuous improvement of products and
services
5.New work relationships based on trust and
teamwork

38. Dimensions of National Culture
1.Power distance
2.Uncertainty avoidance
3.Individualism-collectivism
4.Masculinity-femininity
5.Long-term orientation

39. •THANKYOU

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