Strategy Formulation
• Developing long-range plans to
effectively manage environmental
opportunities and threats in light of
corporate strengths and weaknesses.
• The design of an approach to achieve
the firm's mission.
Thinking Strategically
• To help managers answer questions
such as:
• Where is the organization now?
• Where does the organization want to
be?
• What changes are among competitors?
• What courses of action will help us
achieve our goals?
• Answers define an overall direction for
the organisation's grand strategy.
Grand Strategy
General plan of action to achieve long-term
objectives
1. Growth
2. Stability
3. Retrenchment.
Growth Can be promoted internally by
investing in expansion or externally by acquiring
additional business divisions.
Stability Remain same size or grow steadily
and in a controlled way
Retrenchment Forced decline by either
shrinking current business units or selling off
or liquidating entire businesses.
Purpose of Strategy
Value Creation = use core competence and
synergy to provide increased benefits received
with lower costs paid.
• CORE COMPETENCE: something the
organization does especially well in
comparison to its competitors
* Superior research and development
* Mastery of a technology
* Superior customer service.
SYNERGY: when organizational parts
interact to produce a joint effect that is
greater than the sum of its parts acting
alone.
Strategy Formulation
• Development of the firm's goals and a
specific strategic plan
• Assessing the external environment and
the internal issues
• Integrating the results into goals and
strategy.
Levels of Strategy
 Corporate
 Business
 Functional
Corporate-Level Strategy
• Acquisition of new businesses
• Additions or divestment of business
units, plants, or product lines
• Joint ventures with other companies in
new areas.
 Portfolio Strategy

The organizational mix of Strategic

Business Units and product lines to
provide synergy and a competitive
advantage.

Business-Level Strategy

• Advertising/marketing

• Direction and extent of R&D

• Product changes

• New product development

• Equipment and facilities

• Expansion or contraction of product

lines.

Function-Level Strategy

• Production

• Distribution

• Finance.

• Marketing

• HR

• R&D

Porter’s generic strategies