CHAPTER
FOUR
STRAGY
FORMULATION
AND
IMPLEMENTATION
Determining
the
OrganizaBon’s
Mission
and
Goals
Defining
the
Business
To
define
the
business,
managers
must
ask
three
related
ques6ons
about
a
company’s
products:
(1)
Who
are
our
customers?
(2)
What
customer
needs
are
being
sa6sfied?
(3)
How
are
we
sa6sfying
customer
needs?
q IN
strategy
formula6on
managers
work
to
develop
the
set
of
strategies
(corporate,
divisional,
and
func6onal)
that
will
allow
an
organiza6on
to
accomplish
its
mission
and
achieve
its
goals.
q S t r a t e g y
f o r m u l a 6 o n
b e g i n s
w i t h
m a n a g e r s ’
systema6cally
analyzing
the
factors
or
forces
inside
an
organiza6on
and
outside
in
the
global
environment
that
affect
the
organiza6on’s
ability
to
meet
its
goals
now
and
in
the
future.
q
SWOT
analysis
and
the
five
forces
model
are
two
handy
techniques
managers
can
use
to
analyze
these
factors.
SWOT
Analysis
SWOT
analysis
is
a
planning
exercise
in
which
managers
iden6fy
are
:
o Internal
organiza6onal
strengths
(S)
o
Weaknesses
(W)
and
o
External
environmental
Opportuni6es
(O)
o
Threats
(T).
q
Based
on
a
SWOT
analysis,
managers
at
the
different
levels
of
the
organiza6on
select
the
corporate,
business,
and
func6onal
strategies
to
best
posi6on
the
organiza6on
to
achieve
its
mission
and
goals
.
SWOT
ANALYSIS
SWOT
ANALYSIS
The
Five
Forces
Model
A
well-‐known
model
that
helps
managers
focus
on
the
five
most
important
compe66ve
forces,
or
poten6al
threats,
in
the
external
environment
is
Michael
Porter’s
five
forces
model.
PORTER
FIVE
FORCES
MODEL
PORTER’S FIVE FORCES MODEL
Buyer power
high when buyers have many choices and low when their
choices are few.
Supplier power
high when buyers have few choices and low when
choices are many The opposite of buyer power.
Threat of substitute products and services
high when there are many alternatives for buyers and
low when there are few alternatives.
Threat of new entrants
high when it is easy for competitors to enter the
market and low when entry barriers are significant.
Rivalry among existing competitors
high when competition is fierce and low when
competition is more complacent.
FORMULATING
BUSINESS
STRATEGY
q According
to
Porter,
to
obtain
these
higher
profits
managers
must
choose
between
two
basic
ways
of
increasing
the
value
of
an
organiza6on’s
products:
differen6a6ng
the
product
to
increase
its
value
to
customers
or
lowering
the
costs
of
making
the
product.
q Porter
also
argues
that
managers
must
choose
between
serving
the
whole
market
or
serving
just
one
segment
or
part
of
a
market.
Based
on
those
choices,
managers
choose
to
pursue
one
of
four
business-‐level
strategies:
o Low
Cost,
o Differen6a6on
o Focused
Low
Cost
o Focused
Differen6a6on
Low-‐Cost
Strategy
With
a
low-‐cost
strategy
managers
try
to
gain
a
compe66ve
advantage
by
focusing
on
driving
the
company’s
costs
down
below
the
costs
of
its
industry
rivals.
DifferenBaBon
Strategy
Managers
try
to
gain
a
compe66ve
advantage
by
focusing
on
dis6nguishing
the
organiza6on’s
products
from
those
of
compe6tors
on
one
or
more
important
dimensions,
low-‐cost
strategy
serve
one
or
a
few
segments
of
the
overall
market
and
aim
to
make
their
organiza6on
the
lowest-‐cost
company
serving
that
segment.
focused
differenBaBon
strategy
serve
just
one
or
a
few
segments
of
the
market
and
aim
to
make
their
organiza6on
the
most
differen6ated
company
serving
that
segment.
PORTER’S
BUSINESS
STRATEGIES
FormulaBng
Corporate-‐Level
Strategies
Is
a
plan
of
ac6on
that
involves
choosing
:
In
which
industries
and
countries
a
company
should
invest
its
resources
to
achieve
its
mission
and
goals.
In
choosing
a
corporate-‐level
strategy,
managers
ask,
How
should
the
growth
and
development
of
our
company
be
managed
to
increase
its
ability
to
create
value
for
customers
(and
thus
increase
its
performance)
over
the
long
run?
Managers
of
effec6ve
organiza6ons
ac6vely
seek
new
opportuni6es
to
use
a
company’s
resources
to
create
new
and
improved
goods
and
services
for
customers.
IMPLEMENTING
A
STRATEGY
AZer
iden6fying
appropriate
business
and
corporate
strategies
managers
confront
the
challenge
of
pu[ng
those
strategies
into
ac6on.
Strategy
implementaBon
is
a
five-‐step
process:
1.
Alloca6ng
responsibility
for
implementa6on
to
the
appropriate
individuals
or
groups.
2.
DraZing
detailed
ac6on
plans
that
specify
how
a
strategy
is
to
be
implemented.
3.
Establishing
a
6metable
for
implementa6on
that
includes
precise,
measurable
goals
linked
to
the
a\ainment
of
the
ac6on
plan.
4.
Alloca6ng
appropriate
resources
to
the
responsible
individuals
or
groups.
5.
Holding
specific
individuals
or
groups
responsible
for
the
a\ainment
of
corporate,
divisional,
and
func6onal
goals.
THANK
YOU
