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CHAPTER 8 STRATEGY STRATEGY FORMULATION AND EXECUTION EXE CUTION CHAPTER OUTLINE What Is Your Strategy Strength? I. Thinking Str Strategically New Manager Self-Test: Self-Test: Your Your Approach to Studying, art ! II. II. What What Is Stra Strate tegi gicc Man Manag agem emen ent? t? A. Purpos Purposee of of Strate Strategy gy B. Level Levelss of Stra Strate tegy gy III. III. The The Stra Strate tegi gicc Manag Managem ement ent Pro Proce cess ss A. Strategy Strategy ormulati ormulation on !ersus !ersus "#ecuti "#ecution on B. SW SW$T $T Anal Analys ysis is I!. I!. ormul ormulati ating ng %orpor %orporate ate&Le &Level vel Strate Strategy gy A. Portfo Portfolio lio Strate Strategy gy B. The The B%' B%' Mat Matri ri# # %. (ivers (iversifi ificat cation ion Stra Strateg tegy y !. orm ormul ulat atin ing g Bus Busin ines ess& s&Le Leve vell Stra Strate tegy gy A. The %ompet %ompetit itive ive "nviro "nvironme nment nt B. Porter) Porter)ss %ompet %ompetiti itive ve Strate Strategie giess !I. ormul ormulati ating ng uncti unctional onal&Lev &Level el Strate Strategy gy !II. !II. 'lo*a 'lo*all Str Strat ateg egy y A. 'lo*al 'lo*ali+a i+ati tion on Strat Strategy egy B. Multi Multi,om ,omest estic ic Strate Strategy gy %. Trans Transnat nation ional al Strate Strategy gy !III. !III. Strategy Strategy "#ecution "#ecution
ANNOTATED LEARNING OBJECTIVES After stu,ying this chapter- stu,ents shoul, *e a*le to /. "efine the co#ponents of strategic #anage#ent and discuss the le$els of strategy% strategy% Strategic management is the set of ,ecisions an, actions use, to formulate an, implement strategies that 0ill provi,e a competitively superior fit *et0een the organi+ation an, its environment so as to achieve organi+ational goals. A strategy strategy consists of target target customers- a core competence- synergy- an, value creation. &orporate-le$el strategy asks strategy asks the 1uestion- 2What *usiness *usiness are 0e in?3 It pertains to the 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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organi+ation as a 0hole an, the com*ination of *usiness units an, pro,uct lines that make up the corporate entity. 'usiness-le$el strategy asks the 1uestion- 2:o0 ,o 0e compete?3 It pertains to each *usiness unit or pro,uct line 0ithin the organi+ation. (unctional- le$el strategy asks the 1uestion- 2:o0 ,o 0e support the *usiness&level strategy?3 It pertains to the ma;or functional ,epartments 0ithin the *usiness unit. 4. )*plain the strategic #anage#ent process% The strategic management process *egins 0hen e# ecutives evaluate their current position 0ith respect to mission- goals- an, strategies. Managers then scan the organi+ation)s internal an, e#ternal environments an, i,entify strategic issues that may re1uire change. Internal or e#ternal events may in,icate a nee, to re,efine the mission or goals or to formulate a ne0 strategy at the corporate- *usiness- or functional level. The final stage in the strategic management process is e#ecution of the ne0 strategy. +%
Su##arie how SWT analysis can .e used to e$aluate a co#pany/s strengths, wea0nesses, opportunities, and threats.
The SW$T analysis revie0s the strengths
)*plain three approaches to corporate-le$el strategy: portfolio, the 'oston &onsulting 2roup 3'&24 #atri*, and di$ersification.
%orporate&level strategy pertains to the organi+ation as a 0hole an, the com*ination of *usiness units an, pro,uct lines that make up the corporate entity. Strategic actions at this level usually relate to the ac1uisition of ne0 *usinesses- a,,itions or ,ivestments of *usiness units- plants- or pro,uct lines- an, ;oint ventures 0ith other corporations in ne0 areas. The B%'
*usiness gro0th rate an, market share. 'usiness growth rate pertains to ho0 rapi,ly the entire in,ustry is gro0ing. Mar0et share ,efines 0hether a *usiness unit has a larger or smaller share than competitors. The com*ination of market share an, *usiness gro0th rate provi,es four categories to ;u,ge SBs 0ithin a corporate portfolio The star has a large market share in a rapi,ly gro0ing in,ustry@ The cash cow e#ists in a mature- slo0&gro0th in,ustry *ut has a large market share@ The 5uestion #ar0 e#ists in a ne0- rapi,ly gro0ing in,ustry *ut only has small market share@ an, The dog is a poor performer 0ith small market share of a slo0&gro0th market.
The portfolio approach pertains to the mi# of *usiness units an, pro,uct lines that fit together in a logical 0ay to provi,e synergy an, competitive a,vantage for the corporation. %orporations like to have a *alance, mi# of *usiness ,ivisions calle, strategic *usiness units
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The ,iversification approach involves e#pan,ing the firm)s *usiness operations to pro,uce ne0 kin,s of valua*le pro,ucts an, services *y moving into ne0 lines of *usiness. When the ne0 *usiness is relate, to the company)s e#isting *usiness activities- the organi+ation is implementing a strategy of relate, ,iversification. nrelate, ,iversification occurs 0hen an organi+ation e#pan,s into a totally ne0 line of *usiness. 6%
"escri.e Michael orter/s co#petiti$e strategies%
Porter propose, that *usiness&level strategies are the result of competitive forces in the c ompany)s environment. To fin, a competitive e,ge 0ithin the specific *usiness environment- Porter suggests that a company can a,opt one of three strategies.
6.
"ifferentiation. The ,ifferentiation strategy involves an attempt to ,istinguish the firm)s pro,ucts or services from others in the in,ustry. &ost 7eadership. With a cost lea,ership strategy- the organi+ation aggressively seeks efficient facilities- pursues cost re,uctions- an, uses tight cost controls to pro,uce pro,ucts more efficiently than competitors. (ocus. With a focus strategy- the organi+ation concentrates on a specific regional market or *uyer group.
&o#pare and contrast the glo.aliation, #ultido#estic, and transnational strategies for glo.al .usiness% A glo.aliation strategy means that product design and advertising strategies are standardized throughout the world. This approach is based on the assumption that a single global market exists for many consumer and industrial products. A #ultido#estic strategy means that competition in each country is handled independently of industry competition in other countries. Thus, a multinational company is present in many countries, but it encourages marketing, advertising, and product design to be modied and adapted to the specic needs of each country A transnational strategy seeks to achieve both global standardization and national responsiveness. A true transnational strategy is dicult to achieve, though, because one goal reuires close global coordination while the other reuires local !exibility.
.
)*plain organiational di#ensions that #anagers use to e*ecute strategy%
The final step in the strategic management process is e#ecution- 0hich is ho0 strategy is put into action. Strategy e#ecution is the most ,ifficult an, important part of strategic management. "#ecution re1uires changes in the organi+ation)s *ehavior. These changes can *e implemente, *y changes in lea,ership- can,i, communication- clear roles an, accounta*ility- an, human resources.
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LECTURE OUTLINE W8AT IS Y9 STAT)2Y ST)N2T8? This e#ercise helps stu,ents i,entify their strengths concerning strategy formulation an, implementation. This e#ercise helps stu,ents think a*out how they handle challenges and issues in their school or ;o*. I. T:IDEID' ST7AT"'I%ALLF Strategic planning in for&profit organi+ations pertains to competitive actions in the marketplace. In nonprofit organi+ations- strategic planning pertains to events in the e#ternal environment. Strategic thinking means to take the long&term vie0 an, to see the *ig picture of the organi+ation an, its environment to achieve organi+ational goals. n,erstan,ing the strategy concept- the levels of strategy- an, strategy formulation versus implementation is an important start to0ar, strategic thinking. N)W MANA2) S)7(-T)ST: Y9 AA&8 T ST9"YIN2, AT ! Four approach to stu,ying may reveal 0hether you have the a*ility to think strategically. The items in this test represent a strategic approach to stu,ying. Strategy means kno0ing your ,esire, outcomes- ho0 to ac1uire factual kno0le,ge- thinking clearly a*out tactics an, cause& effect relationships- an, implementing *ehaviors that 0ill achieve the ,esire, outcomes. A score of 6 or a*ove suggests a strategic approach to stu,ying that 0ill likely translate into strategic management a*ility as a ne0 manager II. W:AT IS ST7AT"'I% MADA'"M"DT? Strateg%) "a&age"e&t is the set of ,ecisions an, actions use, to formulate an, implement strategies that provi,e a superior fit *et0een the organi+ation an, its environment to achieve organi+ational goals. It helps managers ans0er 1uestions such as What changes an, tren,s are occurring in the competitive environment? What pro,ucts or services shoul, 0e offer? :o0 can 0e offer those pro,ucts an, services most efficiently? Ans0ers to these 1uestions help managers make choices a*out ho0 to position their organi+ation in the environment 0ith respect to rival companies.
A. Purpose of Strategy
"#hi*it 9./
/. Strateg is the plan of action that ,escri*es resource allocation an, activities for ,ealing 0ith the environment- achieving a competitive a,vantage- an, attaining the organi+ation)s goals.
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4. C!"pet%t%*e a'*a&tage refers to 0hat sets the organi+ation apart from others an, provi,es it 0ith a ,istinctive e,ge in the marketplace. The essence of formulating strategy is choosing ho0 the organi+ation 0ill *e ,ifferent. To remain competitivecompanies ,evelop strategies that focus on targeting specific customers- core competencies- provi,e synergy- an, create value for customers. a. Target &usto#ers% An effective strategy ,efines the customers an, their nee,s 0hich are to *e serve, *y the company. Managers ,efine target market geographically- ,emographically- or *y other means. Some firms target people 0ho purchase primarily over the Internet 0hereas others aim to serve people 0ho like to shop. *. )*ploit &ore &o#petence. A company)s )!re )!"pete&)e is something the organi+ation ,oes especially 0ell in comparison to its competitors. A core competence represents a competitive a,vantage *ecause the company ac1uires e#pertise that competitors ,o not have. A core competence may *e in the area of superior research an, ,evelopment- e#pert technological kno0&ho0- process efficiency- or e#ceptional customer service. c. 'uild Synergy. S&erg occurs 0hen organi+ational parts interact to pro,uce a ;oint effect that is greater than the sum of its parts acting alone. The organi+ation may attain a special a,vantage 0ith respect to cost- market po0er- technology- or management skill. When properly manage,- synergy can create a,,itional value 0ith e#isting resources- provi,ing a *ig *oost to the *ottom line. ,. "eli$er ;alue. (elivering value to customers shoul, *e the heart of strategy. !alue can *e ,efine, as the com*ination of *enefits receive, an, costs pai,. Managers help their companies create value *y ,evising strategies that e#ploit core competencies an, attain synergy. (iscussion Guestion H/ 'ased on your 0nowledge of the following co#panies, how effecti$e would you say any one of the followingac5uisitions were in ter#s of creating synergy a4 Microsoft/s purchase of No0ia/s #o.ile handset and ser$ices .usiness? .4 2oogle/s purchase of YouTu.e? c4 epsi&o/s purchase of (rito-7ay? d4
"#hi*it 9.4
/. What .usiness are we in? C!rp!rate+$e*e$ ,trateg pertains to the organi+ation as a 0hole an, the com*ination of *usiness units an, pro,uct lines that make up the 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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corporate entity. Strategic actions at this level usually relate to ac1uisition of ne0 *usinesses- a,,itions or ,ivestments of *usiness units- plants- or pro,uct lines- an, ;oint ventures 0ith other corporations in ne0 areas. 4. 8ow do we co#pete? B#,%&e,,+$e*e$ ,trateg pertains to each *usiness unit or pro,uct line 0ithin the organi+ation. Strategic ,ecisions focus on a,vertising,irection an, e#tent of 7J(- pro,uct changes an, ,evelopment- e1uipment an, facilities- an, e#pansion or contraction of pro,uct an, service lines. 8. 8ow do we support the .usiness- le$el strategy? F#&)t%!&a$+$e*e$ ,trateg pertains to the ma;or functional ,epartments 0ithin the *usiness unit. unctional strategies involve all of the ma;or functions- inclu,ing finance- research an, ,evelopmentmarketing- an, manufacturing. (iscussion Guestion H 8arley-"a$idson, which once .oasted that it #ade =.ig toys for .ig .oys,> is trying to lure #ore wo#en to the .rand to #a0e up for declining sales in a slow econo#y% 8ow do you thin0 this #o$e will co#ple#ent or confound the co#pany/s differentiation strategy, which has long .een .ased on a #acho i#age? D$T"S
III. T:" ST7AT"'I% MADA'"M"DT P7$%"SS
"#hi*it 9.8
The strategic management process *egins 0hen e#ecutives evaluate their current position 0ith respect to mission- goals- an, strategies. Then they scan the organi+ation)s internal an, e#ternal environments an, i,entify strategic factors that might re1uire change. "vents might in,icate a nee, to re,efine the mission or goals or to formulate a ne0 strategy at either the corporate- *usiness- or function level. The final stage in the strategic management process is e#ecution of the ne0 strategy. A. Strategy ormulation versus "#ecution /. Strateg -!r"#$at%!& inclu,es the planning an, ,ecision making that lea, to the esta*lishment of the firm)s goals an, the ,evelopment of a specific strategic plan. It inclu,es assessing the e#ternal environment an, the internal pro*lems an, integrating the results into goals an, strategy. 4. Strateg e(e)#t%!& is the use of managerial an, organi+ational tools to ,irect resources to0ar, achieving strategic outcomes. Managers may use persuasion- ne0 e1uipment- changes in organi+ation structure- or a revise, re0ar, system to ensure that employees an, resources are use, to make formulate, strategy a reality.
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(iscussion Guestion H8 You are a #iddle #anager helping to i#ple#ent a new corporate costcutting strategy, and you/re #eeting s0epticis#, resistance, and in so#e cases, outright hostility fro# your su.ordinates% In what ways #ight you or the co#pany ha$e .een a.le to a$oid this situation? Where do you go fro# here? D$T"S B. SW$T Analysis
"#hi*it 9.C
/. SW$T analysis inclu,es strengths- 0eaknesses- opportunities- an , threats>that affect organi+ational performance. "#ternal information a*out opportunities is o*taine, from customers- government reports- professional ;ournals- suppliers *ankers- frien,s- an, consultants. Internal information comes from reports- *u,getsfinancial ratios- surveys of employee attitu,es- an, meetings. a. Internal Strengths an, Weaknesses
Strengths are positive internal characteristics organi+ations can e#ploit to achieve strategic performance goals. Wea0nesses are internal characteristics that may inhi*it or restrict the organi+ation)s performance. The information sought pertains to specific functions such as marketing- finance- pro,uctionor 7J(.
*. "#ternal $pportunities an, Threats
pportunities are characteristics of the e#ternal environment that have the potential to help the organi+ation achieve or e#cee, its strategic goals. Threats are characteristics of the e#ternal environment that may prevent the organi+ation from achieving its strategic goals. The task environment sectors are the most relevant to strategic *ehavior an, inclu,e the *ehavior of customers- competitors- suppliers- an, the la*or supply. The general environment inclu,es technological ,evelopments- the economy- legal& political an, international events- an, sociocultural changes.
(iscussion GuestionHC Netfli* has successfully adapted to a nu#.er of challenges in its industry% What do you see as so#e e#erging opportunities and threats for the co#pa ny? D$T"S I!. $7MLATID' %$7P$7AT"&L"!"L ST7AT"'F
"#hi*it 9.K
A. Portfolio Strategy 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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/. P!rt-!$%! ,trateg pertains to the mi# of *usiness units an, pro,uc t lines that fit together in a logical 0ay to provi,e synergy an, competitive a,vantage for the corporation. %orporations like to have a *alance, mi# of *usiness ,ivisions calle, ,trateg%) .#,%&e,, #&%t, /SBU,0 . 4. An SB has a uni1ue *usiness mission- pro,uct line- competitors- an, markets relative to other SBs in the corporation. Senior corporate managers generally ,efine the gran, strategy an, then *ring together a portfolio of SBs to achieve the strategy. B. The B%' Matri# /. The BCG
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/. The strategy of moving into ne0 lines of *usiness is calle, '%*er,%-%)at%!& . The purpose of ,iversification is to e#pan, the firm)s *usiness operations to pro,uce ne0 kin,s of valua*le pro,ucts an, services. When the ne0 *usiness is relate, to the company)s e#isting *usiness activities- the organi+ation is implementing a strategy of re$ate' '%*er,%-%)at%!& . U&re$ate' '%*er,%-%)at%!& occurs 0hen an organi+ation e#pan,s into a totally ne0 line of *usiness. 4. Managers may also pursue ,iversification opportunities to create value through a strategy of vertical integration. Vert%)a$ %&tegrat%!& means the company e#pan,s into *usinesses that either pro,uce the supplies nee,e, to make pro,ucts or that ,istri*ute an, sell those pro,ucts to customers. (iscussion Guestion H4 8ow #ight a corporate #anage#ent tea# go a.out deter#ining whether the co#pany should di$ersify? What factors should they consider? What 0inds of infor#ation should they collect? D$T"S
!. $7MLATID' BSID"SS&L"!"L ST7AT"'F
"#hi*it 9.6
The focus of *usiness&level strategy is ho0 to compete. 'eneric strategies at the *usiness level are the same as at the corporate level gro0th- sta*ility- an, retrenchment. A popular an, effective mo,el for formulating strategy is Porter)s competitive strategies. A. The %ompetitive "nvironment The competitive environment is ,ifferent for ,ifferent kin,s of *usinesses. Most large companies have separate *usiness lines an, ,o an in,ustry analysis for each line of *usiness or SB. B. Porter)s %ompetitive Strategies Porter propose, that *usiness&level strategies are the result of competitive forces in the company)s environment. To fin, a competitive e,ge 0ithin the specific *usiness environment- Porter suggests that a company can a,opt one of three strategies. "#hi*it 9. /. "ifferentiation% The ,ifferentiation strategy is an attempt to ,istinguish the firm)s pro,ucts or services from others in the same in,ustry. The organi+ation may use a,vertising- ,istinctive pro,uct features- e#ceptional service- an, ne0 technology to achieve a pro,uct perceive, as uni1ue. The ,ifferentiation strategy can *e profita*le *ecause customers are loyal an, 0ill pay high prices for the pro,uct. %ompanies that 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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pursue ,ifferentiation nee, strong marketing a*ilities- a creative flair- an, a reputation for lea,ership. This strategy can re,uce rivalry 0ith competitors if *uyers are loyal. 4. &ost 7eadership% With a cost lea,ership strategy- the organi+ation seeks efficient facilities- pursues cost re,uctions- an, uses tight cost controls to pro,uce pro,ucts more efficiently than competitors. A lo0&cost position means the company can un,ercut competitors) prices an, still offer compara*le 1uality an, earn a reasona*le profit. 8. (ocus% With a focus strategy- the organi+ation concentrates on a specific regional market or *uyer group. The firm may use a ,ifferentiation or cost lea,ership approach *ut only for a narro0 target market. (iscussion Guestion H6 9sing orter/s co#petiti$e strategies, how would you descri.e the strategies of Wal#art, Macy/s, and Target? D$T"S
!I. $7MLATID' D%TI$DAL&L"!"L ST7AT"'F unctional&level strategies are the action plans use, *y ma;or ,epartments to support the e#ecution of *usiness&level strategy. Ma;or organi+ational functions inclu,e marketing pro,uction- finance- human resources- an, research an, ,evelopment. Managers in these an, other ,epartments a,opt strategies that are coo r,inate, 0ith the *usiness&level strategy to achieve the organi+ation)s strategic goals. (iscussion Guestion HK (ortune #againe and the 8ay 2roup found that a clear, sta.le strategy is one of the defining characteristics of co#panies on the list of =The World/s Most Ad#ired &o#panies%> Why #ight this .e the case? D$T"S !II. 'L$BAL ST7AT"'F
"#hi*it 9.9
In glo*al strategy- management tries to formulate coherent strategies to provi,e synergy among 0orl,0i,e operations for the purpose of fulfilling common goals. irms that pursue further international e#pansion must ,eci,e 0hether they 0ant each glo*al affiliate to act autonomously or to stan,ar,i+e an, centrali+e activities. This choice lea,s managers to select a *asic strategy alternative such as glo*ali+ation versus multi,omestic strategy- or transnational strategy. 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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A. 'lo*ali+ation Strategy /. In a strategy of g$!.a$%1at%!& - pro,uct ,esign an, a,vertising strategies are stan,ar,i+e, throughout the 0orl,. This is *ase, on the theory that people every0here 0ant to *uy the same pro,ucts an, live the same 0ay. 4. A glo*ali+ation strategy can help an organi+ation reap efficiencies *y stan,ar,i+ing pro,uct ,esign an, manufacturing- using common suppliers- intro,ucing pro,ucts aroun, the 0orl, faster- coor,inating prices- an, eliminating overlapping facilities. B. Multi,omestic Strategy /. In a "#$t%'!"e,t%) ,trateg - pro,uct ,esign- marketing- an, a,vertising are mo,ifie, to suit the specific nee,s of each country. 4. Many companies re;ect the i,ea of a single glo*al market. %. Transnational Strategy /. A tra&,&at%!&a$ ,trateg seeks to achieve *oth glo*al stan,ar,i+ation an, national responsiveness. This is ,ifficult to achieve- as one goal re1uires close glo*al coor,ination 0hile the other goal re1uires local fle#i*ility. %aterpillar Inc. uses a transnational strategy *y ,esigning pro,ucts to use many i,entical components *ut a,,ing certain pro,uct features to meet local nee,s. 4. Although most multinational companies 0ant to achieve some ,egree of glo*al integration to hol, costs ,o0n- even glo*al pro,ucts may re1uire some customi+ation to meet government regulations in various countries or some tailoring to meet customer preferences. (iscussion Guestion H/5 If you are the &) of a glo.al co#pany, how #ight you deter#ine whether a glo.aliation, #ultido#estic, or transnational strategy would wor0 .est for your enterprise? What factors would influence your decision? D$T"S
!III. ST7AT"'F ""%TI$D
"#hi*it 9.
The final step in the strategic management process is strategy e#ecution. "#ecution may *e the most ,ifficult an, important part of strategic management. In to,ay)s competitive environment- there is an increasing recognition of the nee, for more ,ynamic approaches to 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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e#ecuting strategies. Strategy is not a static- analytical process. It re1uires vision- intuition an, employee participation. Managers check that all aspects of the organi+ation are coor,inate, to *e supportive of the strategies ,esigne, to achieve those goals. "#hi*it 9./5 4- $nce a ne0 strategy is selecte,- it is e#ecute, through changes in lea,ership- clear roles an, accounta*ility- can,i, communication- an, human resources.
/.
A .
Visible leadership. The primary key to successful strategy implementation is lea,ership. Lea,ership is the a*ility to influence people to a,opt the *ehaviors nee,e, for strategy e#ecution. Lea,ership means using persuasion- motivating employees- shaping culture an, values to support the ne0 strategy.
B.
Clear roles and accountability. People nee, to un,erstan, ho0 their in,ivi,ual actions can contri*ute to achieving the strategy. To e#ecute strategy effectively- top e#ecutives clearly ,efine roles an, ,elegate authority to in,ivi,uals an, teams 0ho are accounta*le for results.
%.
Candid communication. Managers openly an, avi,ly promote their i,eas- *ut they also listen to others an, encourage ,isagreement an, ,e*ate. "ffective strategy e#ecution re1uires can,i, communications 0ith sharehol,ers- customers- an, other stakehol,ers.
(.
Appropriate human resource practices. The human resource function recruitsselects- trains- compensates- transfers- promotes- an, lays off employees to achieve strategic goals.
(iscussion Guestion H9 As an ad#inistrator for a #ediu#-sied hospital, you and the .oard of directors ha$e decided to change to a drug dependency hospital fro# a short-ter#, acute-care facility% 8ow would you go a.out e*ecuting this strategy? D$T"S
A&,2er, t! E&'+!-+Chapter D%,)#,,%!& 3#e,t%!&, /. 'ased on your 0nowledge of the following co#panies, how effecti$e would you say any one of the followingac5uisitions were in ter#s of creating synergy a4 Microsoft/s purchase of No0ia/s #o.ile handset and ser$ices .usiness? .4 2oogle/s purchase of YouTu.e? c4 epsi&o/s purchase of (rito-7ay? 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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You are a #iddle #anager helping to i#ple#ent a new corporate cost-cutting strategy, and you/re #eeting s0epticis#, resistance, and in so#e cases, outright hostility fro# your su.ordinates% In what ways #ight you or the co#pany ha$e .een a.le to a$oid this situation? Where do you go fro# here? Implementing a ne0 strategy represents change- an, change al0ays involves the potential for loss of some kin,- 0hether it)s loss of po0er- loss of relationships- loss of status- loss of security- or something else. People naturally resist loss. $ne goo, 0ay to prevent skepticism- resistance- an, hostility is to give people 0ho 0ill *e affecte, *y the ne0 strategy all the information- you can- ahea, of time so that they kno0 0hat)s going to happen to them. This 0ill go a long 0ay to0ar, easing their suspicions of impen,ing loss. Perhaps an even *etter 0ay to prevent this sort of reaction is to get those 0ho 0ill *e affecte, *y the ne0 strategy intimately involve, in ,eveloping the implementation plan for the strategy. 7ather than coming up 0ith a ne0 strategy an, telling employees ho0 it 0ill *e implemente,- give them the strategy an, let them figure out ho0 to implement it. That shoul, *e the approach from this point for0ar,. 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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C.
Chapter 8
Netfli* has successfully adapted to a nu#.er of challenges in its industry% What do you see as so#e e#erging opportunities and threats for the co#pany? Stu,ents 0ill en;oy *rain&storming to ,etermine 0hat opportunities an, threats e#ist for Detfli#. :ere are a fe0 possi*ilities . pportunities: De0 technology for 0atching movies
K. (ortune #againe and the 8ay 2roup found that a clear, sta.le strategy is one of the defining characteristics of co#panies on the list of =The World/s Most Ad#ired &o#panies%> Why #ight this .e the case? A clear strategic ,irection is a key factor ,istinguishing 0inners from losers. 'ran, goals have to *e translate, into a clear *lue print for e#ecution- so that everyone)s actions are in line 0ith mangers) strategic intentions. Sta*le markets account for *ig portion of sales an, profits. :ence- ortune maga+ine an, the :ay 'roup foun, that a clear- sta*le strategy is one of the ,efining characteristics of companies on the list of 2The Worl,)s Most A,mire, %ompanies.3 6.
9sing orter/s co#petiti$e strategies, how would you descri.e the strategies of Wal#art, Macy/s, and Target? This ans0er 0ill ,epen, on ho0 stu,ents perceive these companies. A reasona*le ans0er is that Walmart)s overall strategy can *e characteri+e, 0ithin the Porter)s mo,el as a cost lea,ership strategy. Walmart has a 0ell&controlle, an, tightly manage, internal system- *ut it is innovative 0ith respect to ne0 an, more efficient internal technology- an, is aggressively gro0ing an, e#pan,ing in a ,ynamic environment. Walmart is kno0n for its lo0 prices- 0hich are a result of internal efficiency an, are typical of a cost lea,ership strategy in the Porter)s mo,el. Walmart has sustaine, capital investment- pro,ucts are selecte, for ease of ,istri*ution- it has a lo0&cost ,istri*ution system- it has ,etaile, control reports- an, incentives are *ase, on meeting 1uantitative targets. Macy)s has a focus strategy in the Porter)s mo,el. Macy)s focus strategy emphasi+es ,ifferentiation *ecause it is a high&class store targete, at a particular market segment. Macy)s has strong marketing- a creative flair- a reputation for retail lea,ership- an, the amenities to attract creative retail people. In the Porter)s mo,el- Target might uses a com*ination of cost lea,ership an, ,ifferentiation to some e#tent- although it is not particularly strong in either category. Target ,ifferentiates itself from Walmart some0hat *y selling many pro,ucts from a slightly higher&1uality tier than Walmart)s pro,uct line- an, Target competes 0ith higher&en, stores as a lo0 cost provi,er- *ut not to the same ,egree as Walmart.
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Walt "isney &o#pany has four #a@or strategic .usiness units: #o$ies 3including i*ar and 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
Strateg F!r"#$at%!& a&' E(e)#t%!&
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Touchstone4,the#e par0s 3Walt "isney World and "isneyland4, consu#er products 3the "isney Store4, and tele$ision 3the A'&"isney Tele$ision 2roup and )SN4% lace each of these S'9s on the '&2 #atri* .ased on your 0nowledge of the#% Stu,ents may not *e familiar 0ith each of these ,ivisions- *ut can attempt to place them on the mo,el *ase, on their e#perience as consumers. Movies 0oul, *e consi,ere, a star on the B%' matri# *ecause Pi#ar an, Touchstone are ,oing so 0ell. The *usiness gro0th rate is high- an, Pi#ar an, Touchstone hol, a significant market share. Theme parks 0oul, *e consi,ere, a cash co0 *ecause they are 0ell esta*lishe, an, have a large market share- although gro0th rate is lo0. %onsumer pro,ucts 0oul, *e consi,ere, a 1uestion mark on the B%' matri#. Walt (isney characters are no0 appearing on %oke cans- T&shirts- an, on hun,re,s of other pro,ucts. The ,ivision is succee,ing an, may soon *ecome a star. AB% T! an, the ca*le television net0ork are e#tremely successful. (espite the onslaught of ca*le television competition- AB% T! is ,oing 0ell in the me,ia in,ustry- an, (isney)s ca*le channels can no0 also *e categori+e, as stars. (isney television has high market share an, continues to gro0. 9. As an ad#inistrator for a #ediu#-sied hospital, you and the .oard of directors ha$e decided to change to a drug dependency hospital fro# a short-ter#, acute-care facility% 8ow would you go a.out e*ecuting this strategy? This is a ma;or change in strategy. 7ather than provi,e facilities for recovery from operations an, ,iseases- the hospital 0ill receive patients 0ho have pro*lems 0ith alcoholism an, ,rug ,epen,ency. This 0ill re1uire a ,ifferent type of staff- an, patients 0ill *e house, for t0o 0eeks to one month- ,epen,ing on the severity of their ,epen,ency. A ma;or aspect of e#ecution 0ill *e human resources. 7ather than tra,itional ,octors an, nurses- the facility 0ill have to recruit psychologists an, ,rug counselors. De0 technology 0ill also *e re1uire,- 0hich 0ill *e reflecte, in the ,esign of *uil,ings an, the techni1ues an, proce,ures use, for treating patients. "ffective management 0ill *e a thir, ma;or component for strategy e#ecution- inclu,ing communication of the changes an, motivation of employees to a,opt ne0 *ehaviors. The other components of strategy e#ecution> structural ,esign- information an, control systems> may also have to reflect the ne0 strategy- *ut they are less critical to e#ecution than are human resources- technology- an, effective management. .
8arley-"a$idson, which once .oasted that it #ade =.ig toys for .ig .oys,> is trying to lure #ore wo#en to the .rand to #a0e up for declining sales in a slow econo#y% 8ow do you thin0 this #o$e will co#ple#ent or confound the co#pany/s differentiation strategy, which has long .een .ased on a #acho i#age?
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Chapter 8
Stu,ents can have a lively ,e*ate a*out ho0 to lure more 0omen to the *ran, 0hich has a macho image. :arley shoul, focus on its core co#petence, something that the organi+ation ,oes particularly 0ell in comparison to others. If :arley offers pro,uct uni1ueness- it 0ill appeal to *oth men an, 0omen. Stu,ents shoul, ,iscuss those elements that give :arley a co#petiti$e ad$antage, setting :arley&(avi,son apart from others an, provi,ing the company it 0ith a ,istinctive e,ge in the marketplace. Stu,ents shoul, i,entify the four elements of competitive a,vantage the target customer- core co mpetencies- synergyan, value. /5. If you are the &) of a glo.al co#pany, how #ight you deter#ine whether a glo.aliation, #ultido#estic, or transnational strategy would wor0 .est for your enterprise? What factors would influence your decision? If the company)s pro,ucts can *e successfully stan,ar,i+e, throughout the 0orl,- meaning people truly ,o 0ant the same pro,uctsservices every0here- then a glo*ali+ation strategy 0ill 0ork *est. If ,eman, for the company)s pro,uctsservices is essentially the same 0orl,0i,e- *ut some mo,ifications are necessary to meet local preferences or government regulations- then a transnational strategy 0ill 0ork *est. If local ,eman, an, government regulations re1uire significant mo,ifications to pro,uctsservices in or,er to *e successfulthen a multi,omestic strategy 0ill 0ork *est. Local preferences for pro,uctsservices an, government regulations 0ill *e the primary factors in this ,ecision.
App$ Y!#r S4%$$,5 E(per%e&t%a$ E(er)%,e Strateg%) Th%&4%&g B$#epr%&t,
Strategic thinking involves a mental *lueprint that inclu,es a ,esire, future- 0ays to achieve that future- an, specific actions nee,e, to arrive at that future. The strategic thinking *lueprint can apply to a company- a ,epartment- or an in,ivi,ual. Strategic thinking can *e ,evelope, through 0ork e#periences in a,,ition to formal stu,y. This e#ercise helps stu,ents un,erstan, the e#tent to 0hich they have ,evelope, their strategic thinking skills.
App$ Y!#r S4%$$,5 S"a$$ Gr!#p Brea4!#t S6OT A&a$,%,
This e#ercise asks each stu,ent to select a local eating esta*lishment an, 0rite a statement of 0hat the stu,ent *elieves is the *usiness)s current strategy- key strengths an, 0eaknesses- an, opportunities an, threats. Stu,ents shoul, then intervie0 the store managers or o0ners of their selecte, esta*lishments to get those persons) perspectives on strategy strengths- 0eaknessesopportunities- an, threats. Stu,ents then set goals for their organi+ations t0o years out an, 0hat steps they recommen, to achieve those goals.
App$ Y!#r S4%$$,5 Eth%)a$ D%$e""a 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
Strateg F!r"#$at%!& a&' E(e)#t%!&
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The Sp%t1er Gr!#p
/. "on/t re5uire Spiter =connectors> to re$eal their affiliation with the corporate word-of#outh #ar0eting ca#paign% They don/t ha$e to reco##end a product they don/t .elie$e in% The situation is a little unclear in the case ,escription- *ut it appears that Spit+er 'roup is running the 0or,&of&mouth marketing campaign for its client. Still- it seems that the ,ecision of 0hether to re1uire 2connectors3 to reveal their affiliation 0ith the client)s corporate marketing campaign may rest largely 0ith the client rather than 0ith Spit+er 'roup. This option ,oes not prevent 2connectors3 from revealing their affiliation@ it ;ust ,oesn)t re1uire them to ,o so. $n the other han,- it 0oul, *e ,eceitful
App$ Y!#r S4%$$,5 Ca,e -!r Cr%t%)a$ A&a$,%, C!,t)!5 A D%--ere&t Path
/. 8a$e you shopped at a &ostco store? 8ow do you thin0 a &ostco store co#pares to Sa#/s &lu., Target, or Wal#art store? What do you $alue #ost when selecting a low-priced store at which to shop?
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Chapter 8
The ans0er 0ill ,epen, on ho0 stu,ents perceive each of the four stores- as 0ell as 0hat they value 0hen choosing 0here to shop. 4. With respect to co#petiti$e strategy, identify and e$aluate &ostco/s target custo#ers, its core co#petencies, and how it .uilds synergy and deli$ers $alue% %ostco)s target customers are those 0ho i,entify themselves as cost&conscious consumers *ut have the income to *e a*le to *uy in *ulk@ %ostco particularly targets small *usinesses 0ith special *usiness mem*erships. %ostco)s core competencies inclu,e provi,ing 1uality merchan,ise at a reasona*le price in a no&frills atmosphere. %ostco *uil,s synergy an, ,elivers value *y using tight cost controls an, an efficient process in or,er to keep its o0n costs- like rent an, inventory- lo0- there*y allo0ing it to offer 1uality compara*le to other stores at a lesser price- all 0ithin an atmosphere that e ncourages shoppers to 2treasure hunt-3 as the merchan,ise is constantly changing. 8. Would you rate &ostco/s co#petiti$e strategy as pursuing differentiation, cost-leadership, focus, or so#e co#.ination? Why? An analysis of %ostco in relation to Porter)s %ompetitive Strategies may lea, a stu,ent to conclu,e that the store pursues a cost&lea,ership strategy. %ostco focuses on offering lo0 prices through stocking a limite, selection of items- offering a self&service shopping environment- provi,ing very fe0 a,,itional services
O& the J!. V%'e! Ca,e A&,2er, The! Ch!)!$ate5 Strateg F!r"#$at%!& a&' E(e)#t%!&
/. "valuate Theo)s ne0 strategy in light of the company)s strengths- 0eaknesses- opportunitiesan, threats. A SW$T analysis for Theo %hocolate *egins *y recogni+ing that Theo has a mission to *e the most love, an, most ethical chocolate company in the 0orl,. Internal strengths that help the company achieve its mission an, goals inclu,e the company)s e#pertise in chocolate makingkno0le,ge of sustaina*le *usiness practices- an, control ov er much of its supply chain. Whinney an, Music o*serve,- ho0ever- that the company)s e#otic pro,uct line 0as too unusual for mainstream markets>a ma;or *arrier to *ecoming the 0orl,)s most love, chocolate company. As Whinney an, Music e#amine, the e#ternal environment for opportunities- they note, that the mainstream can,y market 0as lacking a tra,itional chocolate *ar that coul, claim to have green *enefits. This general analysis is 0hat lea, Theo to come up 0ith a ne0 strategy to launch a pro,uct line that 0oul, appeal mainstream can,y customers yet offer uni1ue environmental *enefits. 45/6 %engage Learning. All 7ights 7eserve,. May not *e scanne,- copie, or ,uplicate,- or poste, to a pu*licly accessi*le 0e*site- in 0hole or in part . e#cept for use as permitte, in a license ,istri*ute, 0ith a certain pro,uct or service or other0ise on a pass0or,&protecte, 0e*site for classroom use.
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4. sing the B%' Matri#- e#plain Theo)s ,ecision to offer a classic line of chocolate *ars after having limite, success 0ith antasy lavor chocolates. Theo *egan as an organic chocolate maker 0ith an e#otic pro,uct line that appeale, to air Tra,e consumers an, sophisticate, chocolate lovers. As creative as Theo)s pro,ucts 0erethey 0eren)t generating high volume sales. $n the B%' Matri#- Theo)s original *usiness represents a 1uestion mark>a risky *usiness unit 0ith small market share in a fast gro0ing organic foo,s marketplace. :o0ever- managers eventually ,eci,e, that they 0ante, a pro,uct line that coul, *ecome a cash co0- an, so Theo *egan making tra,itional milk chocolate can,y *ars 0ith familiar flavors. Theo)s %lassic pro,uct line is situate, in a mature slo0&gro0th market an, is positione, to challenge the market share of large 0ell&kno0n chocolate companies. Accor,ing to foun,er Noe Whinney- Theo 0ill continue to operate its original 1uestion mark *usiness unit in hopes that it 0ill *ecome a star ,ifferentiation- cost lea,ership- or focus>,o you think is right for Theo %hocolate? "#plain. Ans0ers 0ill vary- *ut stu,ents shoul, recogni+e that Theo is *ank ing on its organic an, air Tra,e e#pertise to ,ifferentiate itself from other chocolate makers an, *ran,s <,ifferentiation strategy=. As a small company- Theo cannot offer *etter prices than those offere, *y large chocolate companies>so a cost lea,ership strategy is not a n option. An, 0hile the company seems 0ell suite, for a focus strategy>the company is a hit 0ith green consumers in the Pacific Dorth0est>foun,er Noe Whinney is not satisfie, 0ith a narro0 target market. :e hopes to share his chocolate 0ith mainstream chocolate consumers.
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