STRATEGY FORMULATION

AND IMPLEMENTATION
STRATEGIC MANAGEMENT
 S.M is art and science of formulating,
implementing and evaluating cross-
functional decisions that enable an
organization to achieve its objectives.
 Stages of S.M
• STRATEGY FORMULATION:
• Developing mission
• SWOT analysis
• Establish long term objectives
• Choosing particular strategy to peruse
 STRATEGY
IMPLEMENTATION
 Action stage (put formulate strategy into
action)
 Establish annual objectives
 Devise policies
 Motivate employees
 Redirecting marketing efforts
 Prepare budgets
 STRATEGY EVALUATION
 Finalstage
 Measuring performance
 Taking corrective action
 Providing feed back
Strategy:plan of action dealing with
allocating resources and other activities to
attain organization goals.
Grand strategy:general plan of major
action by which organization intend to
achieve its long term goals.
Grand strategy divide into three categories:
 growth strategies
 Stability strategies
 Consolidation strategies
 GROWTH STRATEGY
 FOR CURRENT MARKET:
 PRODUCT DEVELOPMENT:
 Increase sales by improving or modifying
present product or service.
 Meet changing customer needs and wants
 Advantages of new technology
 Replacing or reformulating existing product.
MARKET PENETRATION
 Increase market share for present product or
services through greater marketing efforts.

 VERTICAL INTEGRATION
• FORWARD INTEGRATION
• BACK WARD INTEGRATION
FORWARD NTEGRATION:
Gaining ownership or increased control over distributors
or retailers.
BACKWARD INTEGRATION
Seeking ownership or increase control of firms suppliers.
 For new markets
 MARKET DEVELOPMENT:
 Bring current product to new market.
 HORIZONTAL INTEGRATION:
 Seeking ownership and increase control over firms
competitors.
 Take over (polka, walls)
 Merges (pizza hut , coke)
 Acquisition (nestle, Ava)
 DIVERSIFICATION
STRATEGIES
 CONCENTRIC DIVERSIFICATION:
Adding new but related product t. (tooth
paste+ brush)
CONGLOMERATE DIVERSIFICATIO.
Adding new but unrelated product. (Mercedes
+vacuum cleaner)
HORIZONTAL DIVERSIFICATION:
Adding new but unrelated product. Pepsi,
water, beer)
 Stability Strategy

– A strategy that seeks to maintain the status quo

to deal with the uncertainty of a dynamic
environment, when the industry is experiencing
slow- or no-growth conditions, or if the owners
of the firm elect not to grow for personal
reasons.
 DEFENSIVE OR
CONSOLIDATION STRATEGIES

– Developing strategies to counter organization

weaknesses that are leading to performance declines.
 RETRENCHMENT:
 Reducing existing product by withdrawing from
weaker market. due to decline of sale and profit.
 PRUNING:
Reduce weak product from market.
 DIVESTITURE OR DIVESTMENT
 Sell a part of business. (distributor)
 LIQUIDATION:

selling all company assets.

JOIN VENTURE:
2 or more companies from temporary
partnership.
 GLOBAL STRATEGY
 GLOBALIZATION
 The standardization of product design and
advertising strategies throughout the world.
 MULTIDOMESTIC STRATEGY:
 The modification of product design and advertising
strategies to suit the specific needs of individual
countries.
 TRANSNATIONAL STRATEGY:
 A strategy that combines global coordination to
attain efficiency with flexibility to meet specific
needs in various country.
Levels of strategy

Corporate-level
strategy

Business- level
strategy

Function- level
strategy
 CORPORATE –LEVEL
STRATEGY
A level of strategy concerned with the
question “what business are we
in?”pertains to the organization as a whole
and the combination of business units and
products lines that makes it up.
 Acquisition of new business
 Addition or divestment of business unit
 Joint venture with other corporations
 Business level strategy
 The level of strategy concerned with he question
“how do we compete?” pertain to each business
unit or product line within the organization.
 Advertising
 Research and development
 New product development
 Expansion or contract product line
 Reduction of cost
 Function- level strategy
A level of strategy concerned with the
question “how do we support the business
level strategy?” pertain to all
organization’s major department.
 All major department
 Finance. Marketing, HR
 SWOT ANALYSIS
SWOT analysis is a tool for auditing an
organization and its environment.
It is the first stage of planning and helps
marketers to focus on key issues.
SWOT stands for strengths, weaknesses,
opportunities, and threats.
Strengths and weaknesses are internal
factors. Opportunities and threats are
external factors.
 EXTERNAL FACTORS
 InSWOT, opportunities and threats are
external factors. : An opportunity is an
area of buyer need in which a company can
perform profitability.example:

A developing market such as the Internet.

 mergers, joint ventures or strategic alliances
 moving into new market segments that offer
improved profits
 a new international market
 a market vacated by an ineffective competitor
 Environmental threat is a challenge posed by an
unfavorable trend or development that would lead in the
absence of defensive marketing action to deterioration in
sales/profits

A threat could be:

 a new competitor in your home market
 price wars with competitors
 a competitor has a new, innovative product or service
 competitors have superior access to channels of
distribution
 taxation is introduced on your product or service
 Internal Environment Analysis
-Strengths /Weaknesses
 In SWOT, strengths and weaknesses are
internal factors. For example:A strength
could be:
 your specialist marketing expertise.
 a new, innovative product or service
 location of your business
 quality processes and procedures
 any other aspect of your business that adds
value to your product or service.
weakness could be:
 lack of marketing expertise
 undifferentiated products or services
(i.e. in relation to your competitors)
 location of your business
 poor quality goods or services
 damaged reputation
 PORTFOLIO STRATEGY
A type of corporate – level strategy that
pertains to the organization’s mix of SBU
and product lines that fit together in such
way as to provide the corporation with
synergy and competitive advantage.
 STRATEGIC BUSINESS UNIT:
 A division of the organization that’s has a
unique business mission, product line,
competitors and markets elative to other
SBU in the same corporation.
 Synergy: the condition that exist when the
organization’s parts interact to produce a
joint effect that is greater than the sum of
the parts acting alone.
The BCG GROWTH MATRIX
A concept developed by the Boston
Consulting Group that evaluates SBU’s
with respect to the dimension of business
growth rate and market share
 BCG Growth-Share Matrix
Market
Share

Cash Cow Star

High

Dog Problem Child

Low
Low High Market
Growth
 The Boston Consulting Group’s
Growth-Share Matrix
20%- Stars Question marks
Market Growth Rate

18%- 4 3
?2 ? 1
16%-
14%-
5 ?

?
12%-
10%- Cash cow Dogs
8%-
6%- 8
4%- 6 7
2%-
0
10x 4x 2x 1.5x 1x .5x .4x .3x .2x .1x
Relative Market Share
 star
 High growth and high market share
 Large market share in rapidly growing
market.
 Business is likely to generate enough cash
to be self sustaining. Recommended
tactics:
 promote aggressively
 expand your product or service
 invest in R & D
 Cash cow
 Compete in a slow growth industry
and have high market share

 Business can be used to support other

business units.
 Generate more cash than consume
 Question mark
 Business requires a lot of cash to
maintain market share.
 invest more cash
 or, divest
 Has potential to gain market share
and become star and fail as well.
 Dogs/ problem child
 Poor performer
 Small share in low growth industry
 Business is a cash trap.
 focus on short term
 avoid risky project
 limited future
 Porter’s competitive forces
Potential new
entrant Power of buyers

Power of suppliers

Threat of Rivalry among

substitute product competitors
 Exhibit 8–6 Forces in the Industry Analysis

Source: Based on M.E. Porter, Competitive Strategy: Techniques for

Analyzing Industries and Competitors (New York: The Free Press, 1980).
 Potential new
entrant

 Many problem face by new entrant

 Economies of scale
 Lack of capital
 Access to distribution
 Government policies
 Access to inputs
 Power of buyer
 Single buyer may influence on price and
other conditions
 Monopsony: many seller but one buyer
 Supplier power
 One supplier –many buyers
 Influences on price
 Threat of substitute
 Any product available in the market may
force customer to brand switching.
 Rivalry among competitors
 Intense competition between two
companies.
 Same customer same product
 Pepsi and coke
 Fight to increase market share
 Competitive strategies
 Generic strategies were used initially in the
early 1980s, and seem to be even more
popular today. They outline the three main
strategic options open to organization that
wish to achieve a sustainable competitive
advantage.
 Cost Leadership
 Differentiation
 Focus or Niche strategy
 Cost Leadership
A type of competitive strategy with which the
organization aggressively seeks, efficient
facilities, cut cost, and employs tight cost
control to be more Efficient than
competitors.
 The low cost leader in any market gains
competitive advantage from being able to many
to produce at the lowest cost.
 Low cost mean company can undercut
competitors.
 differentiation
A type of competitive strategy with which the
organization seek to distinguish its product or
services from competitors.
 The organization may use advertising, distinctive
product features exceptional service or new
technology to achieve a product perceived as unique.
 This strategy may be profitable because customer
will pay high price for the product.
 FOCUS
 The type of competitive strategy that emphasizes
concentration on a specific regional market or
buyer group.
 The premises is that the need of a group can be
better serviced by focusing entirely on it.
 PRODUCT LIFE CYCLE
 The Product Life Cycle (PLC) is based upon
the biological life cycle. For example, a seed is
planted (introduction); it begins to sprout
(growth); it shoots out leaves and puts down
roots as it becomes an adult (maturity); after a
long period as an adult the plant begins to
shrink and die out (decline).
PRODUCT LIFE CYCLE
 INTRODUCTION STAGE
 InIntroduction stage, sales are low as a new idea
is first introduced to a market.
 Customers aren't looking for the product, and
may not be aware of its benefits or advantages
over current offerings.
 In fact, they may not even know about it.
 Informative promotion is needed to tell potential
customers about the new product concept. Even
though a firm promotes its new product, it takes
time for customers to learn that the product is
available. Money is invested in developing the
market in anticipation of future profits.
 GROWTH STAGE
 The Growth stage, industry sales grow quickly -
but industry profits rise and then start falling.
 The innovator begins to make big profits as
more and more customers buy.
 But competitors see the opportunity and enter
the market.
 Some just copy the most successful product, or
try to improve it to compete better. Others try to
refine their offerings to do a better job of
appealing to some target markets. The new
entries result in much product variety.
 MATURITY STAGE
 Maturity occurs when industry sales level off.
 Competition gets tougher as aggressive
competitors have entered the race for profits.
 Industry profits continue to go down during
maturity because promotion costs rise and
competitors continue to cut prices to attract more
business. New firms may still enter the market
during this stage. These late entries skip the early
life cycle stages, including the profitable growth
stage. They must try to take market share from
established firms, which is difficult and expensive
in a saturated, flat market. Customers who are
satisfied with their current relationship won't be
interested in switching to an unknown brand.
 DECLINE STAGE
 During the Sales Decline stage, new
products replace the old.
 Price competition from dying products
becomes more vigorous, but firms with
strong brands may make profits until the
end because they successfully
differentiated their products. They may also
keep some sales by appealing to the most
loyal customers or those who are slow to
try new ideas. These buyers might switch
later, smoothing the sales decline.