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Chapter 8

Strategic management involves formulating and implementing strategies to provide competitive alignment between an organization and its environment to achieve objectives. There are three levels of strategy - corporate, business, and functional. The strategic management process involves assessing the current position, analyzing internal/external environments, formulating new strategies when needed, and implementing strategies. Strategy formulation focuses on creating goals and strategies by assessing opportunities/threats and strengths/weaknesses via SWOT analysis. Strategy execution uses management tools to implement strategies. Key aspects of strategy formulation include developing corporate, business, and functional strategies and considering trends like strategic flexibility, partnerships, and globalization. Effective strategy execution is critical but difficult, requiring all organizational aspects to focus on strategic objectives.

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533 views4 pages

Chapter 8

Strategic management involves formulating and implementing strategies to provide competitive alignment between an organization and its environment to achieve objectives. There are three levels of strategy - corporate, business, and functional. The strategic management process involves assessing the current position, analyzing internal/external environments, formulating new strategies when needed, and implementing strategies. Strategy formulation focuses on creating goals and strategies by assessing opportunities/threats and strengths/weaknesses via SWOT analysis. Strategy execution uses management tools to implement strategies. Key aspects of strategy formulation include developing corporate, business, and functional strategies and considering trends like strategic flexibility, partnerships, and globalization. Effective strategy execution is critical but difficult, requiring all organizational aspects to focus on strategic objectives.

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Cfacfa In
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We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 8 Strategy Formulation and Execution

strategy

• Each company is concerned with strategy

- strategy Determine which organizations succeed and which struggle

- Strategic errors can hurt the company

Strategic management is a specific type of planning

Thinking Strategically

Long-term view of the organization and competition

Thinking strategically affects performance and financial success

Today's environment requires everyone to think strategically

Strategic Management Strategic management refers to a set of decisions and procedures used to
formulate and implement strategies that will provide a competitive alignment between the organization
and its environment to achieve organizational objectives.

Purpose of Strategy

Explicit strategy is the action plan Describes resource allocation and environmental activities,
achieving competitive advantage and achieving the organization's objectives.

Competitive advantage is the distinctive feature of the enterprise to meet customer needs

Strategies should:

1. Exploitation of core competencies: Something the organization does well compared to its
competitors.
2. Building synergies: occur When the regulatory parts interact to produce a more common
effect than the sum of the parts that operate on their own.
3. Deliver value :the core of the strategy is to deliver the value to the customer

Three Levels of Strategy in Organizations

1- Corporate-level strategy: (What Business Are We In? ) Relating to the organization as a whole
and a mix of business units and production lines that constitute the entity of the company
2- business level strategy: (How Do We Compete?) relates to each business unit or product line.
3- Functional-level strategy (How Do We Support the Business-Level Strategy?) Related to the
main functional departments inside the business unit.

The Strategic Management Process


1- It begins when experts assess their current position with regard to the mission, objectives and
strategies.
2- They then survey the internal and external environments of the organization and identify
strategic factors that may require change.
3- For all institutions, internal or external events sometimes indicate the need to formulate a
new strategy at the corporate, business or career level.
4- The final stage of the strategic management process is the implementation of the new
strategy.

Strategy Formulation versus Execution

Formulation:
Assess the external environment and internal problems to create goals and strategy

Execution:
The use of administrative and management tools to channel resources towards strategic
outcomes.

SWOT Analysis:
an accurate assessment of strengths, weaknesses, opportunities and threats that affect
organizational performance.

External information on opportunities and threats are obtained from a many source, such as
clients, government reports, professional magazines, suppliers, bankers, friends in other
organizations, consultants, or meetings of associations.

The internal information on strength and weakness are obtained from a variety of reports,
such as budgets, financial ratios, profit and loss data, and staff position surveys and
satisfaction.

Formulating Corporate-Level Strategy: Portfolio Strategy:

Three ways to understand strategy at the corporate level


1- Portfolio Strategy: Strategic Business Units (SBUs) have a unique mission, products and
competitors, Companies manage a mix of business units (SBUs) for synergy and
competitive advantage, Organizations should not become highly dependent on a single
business
2- The BCG Matrix: Organizes works on two dimensions
a- Business growth rate : Related to the rapid development of the entire industry.
b- Market share: Determines whether a business unit has a larger or smaller share in
terms with competitors.
3- Diversification Strategy: it is a strategy of moving into new lines of business which means
Expanding the company's business operations to produce new types of valuable products
and services.
Types of diversification
1- related diversification.: when the new business is related to the firm’s actual business
2- unrelated diversification: when the firm transfer to new lines of business
3- Vertical integration: Means that the company is expanding into a business that
produces supplies or distributes and sells products and services to customers.

Formulating Business-Level Strategy


1- How do we compete? Strategy within the business units.
2- Porter’s Five Forces: Business-level strategies
 potential new entrants
 bargaining power of buyers and suppliers
 threat of sub products
 all centered around rivalry competitors
3- Web technology is affecting all industries in positive and negative means.

Competitive Strategies : a company can adopt one of three strategies:

1- Differentiation: Distinguish products and services by using creative ads, product features,
exceptional service, or new technology to achieve a product that is unique.

2- Cost Leadership: the organization aggressively seeks effective facilities, seeks to reduce
costs, and uses strict cost controls to deliver products more efficiently than competitors.

3- a focus strategy: The organization focuses on a specific regional market or buyer group.
using methods of differentiation or cost Leadership.

Formulating Functional-Level Strategy


Functional strategies are plans used by key departments to support the implementation
of a business-level strategy. These plans are :
1- Marketing
2- Production
3- Finance
4- Human Resources
5- Research and Development

New Trends in Strategy


1- Strategic Flexibility: managers must be ready to change and adjust
strategy quickly
2- Strategic Partnerships: It is important to cooperate with other
organizations
3- Global Strategy: Organizations seek to focus particularly on global
business
Strategy Execution:

the final step


1- "Strategy is easy, but implementation is difficult"
2- The most important part but the hardest
3- Strategy must be implemented skillfully
4- Harmonization requires that all aspects of the organization focus on the objectives of
the strategy
5- Everyone moves in the same direction

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