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Weaknesses: i.e. Rising Manufacturing costs, outdated technology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

	Created by Miriam Perkins almost 10 years ago

University First Year BUS176 Management & Governance Note on Chapter 3: Managing Strategy and Structure: Planning, created by Miriam Perkins on 11/03/2015.