Chapter 3: Managing Strategy and Structure: Planning

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Chapter 3: Formulating Strategy

Current

situation analysis -> goals

SWOT Analysis:

Strengths: i.e. High quality

skills marketing

Weaknesses: i.e. Rising

Manufacturing costs, outdated technology

Opportunities: i.e. Exploit

new market segments

Threats:

i.e. Rise in new or substitute products.

Micheal Porter’s Five Forces Model

Level Rivalry: Competition – lowering prices – increasing

advertising – lower profits – less profit

Potential Entry: Easier = brand loyalty low – industry prices/profits

low.

Suppliers: Increase prices, lower profits

Customers: Bargain lower prices:

Substitute product: i.e. plastic substitute steel. Cannot demand high

prices

Hypercompetition:

changing customer tastes, advancements technology

Formulating Corporate Level Strategy

Recourses

– growth – create value – respond threats – respond change – improve

performance

Concentration single business

Concentrate recourses –

strong competitive advantage –

Diversification

Expanding Operations

Newspaper -> online

recourses

Related: New ->

existing industry – add value -> greater than without expansion

.

Synergy: Share Recourses: Manufacturing, distribution channels, advertising

campaigns

i.e. Mars: purchases market leader Wm, Wrigley JR Company –

challenge dominance Cadbury -> worlds largest – Mars: Reduces company

competition + greater market share

b. Unrelated: New industry – buy poorly performing company,

transfer management, turn

business, increase performance, create value

3.

International Expansion

- 1+ national Market

- Different national conditions

- Global Strategy

4. Vertical

Integration:

-Producing own inputs (backward), distributing own

outputs (forward)

Reduce flexibility

Add Value

Lower cost value creation

Changing environmental

conditions

outsourcing

Low Cost Strategy

Focus

– Cost lower rivals – Manufacturing cost reduce, products cost reduce,

development new products, lower costs of attracting customers

Differentiation Strategy

Competitive

Advantage – distinguishing – competitors – product design, quality, after

sales service, support, increase spending on product, charge premium

price. Apple, ‘cool’. Advertising

Middle:

Lower levels performance, however, Campbell, Crisco- low coss & dif - >

highest profits.

Implementing Strategy

Allocate

responsibility

Action plan

Timetable – measureable

Allocate recourses

Allocate individuals, held responsible

Designing Organizational Structure

Communication

– flexible structure, entrepreneurial cultures – decentralise authority,

empower lower level employees, emphasis change & innovation – self-

managed teams – highly skilled

Functional Structure

Functions:

Finance,

Administration,

Merchandizing

Logistics

Marketing

HR

Perform

activities necessary performance

Divisional Structure

Smaller, manageable units

According 2 functions

Separate

Specific

product or specific customer

Product Structure

According 2 product line

Handled by self-contained

division

Each; complete set all

functions

Specialisation

Geographic Structure

Expand

Regional

Self-contained divisions

Multi-domestic

strategy

Market Structure

Each kind customer

Self-contained

division

Matrix Structure

Learning

Work together

Product Teams

Develop specific product

Complex network reporting

relationships

Flexible

2 bosses

A. Functional boss –

performance functional perspective

B. Product Team Boss:

Performance Team

High Tech companies

Innovative

culture

Product Team Structure

Do away duel reporting

relationships

Permanently assigned

cross-functional teams – report only product team manager

Cross

Functional Teams: Group Managers different departments – together-

perform tasks

Hybrid Structure

Many different

Large

Many divisions

simultaniously

Coordinating Functions

Linking & coordinating

Different

views

Allocating Authority

Hierarchy of

Authority

Chain of command – specify

relative authority each manager

Span of control

Number subordinates report

directly manager

Eliminating

one level & giving responsibility of managers at that level to

managers above and empowering employees below – low cost foreign

competitors – reduce costs.

Strategic Alliance B2B

Agreement

managers share organization, resources, knowledge, foreign company, share

rewards & risks, new venture

https://www.youtube.com/watch?v=NxJvS92uCus