Strategy Formulation power point presentation
- 1. Strategy Formulation Prepared by: Carla Joy T. Palaris
- 2. Strategic Formulation Strategy Formulation is an analytical process of selection of the best suitable course of action to meet the organizational objectives and vision. It is one of the steps of the strategic management process. The strategic plan allows an organization to examine its resources, provides a financial plan and establishes the most appropriate action plan for increasing profits.
- 3. Strategy Formulation is examined through SWOT analysis Strength Weakness Threat Opportunity The strategic plan should be informed to all the employees so that they know the company’s objectives, mission and vision. It provides direction and focus to the employees.
- 7. Analysis of Organizational Environment Forming Quantitative Goals Objectives in Context with the Divisional Plans Performance Analysis Selection of Strategy
- 8. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape Strengths and weaknesses are internal factors which the company has control over. Opportunities and threats, on the other hand, are external factors over which the company has no control. A successful organization builds on its strengths, overcomes its weakness, identifies new opportunities and protects against external threats.
- 9. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape Strategy formulation process is an integral part of strategic management, as it helps in framing effective strategies for the organization, to survive and grow in the dynamic business environment.
- 10. Levels of Strategy Formulation
- 11. Hence, all organizations have competitors, and it is the strategy that enables one business to become more successful and established than the other.
- 12. Strategy refers to a comprehensive plan or set of actions designed to achieve an organization’s long-term goals and objectives. It involves determining the best path to navigate the competitive landscape, allocate resources effectively, and maximize the organization’s strengths while minimizing its weaknesses. Types of Strategies 1. Corporate Strategy 2. Business Strategy 3. Functional Strategy 4. Pricing Strategy 5. Operational Strategy
- 13. 1. Corporate Strategy Corporate Strategy is a high-level plan formulated by a company’s top management to direct and guide the organization’s overall direction. It encompasses decisions related to the overall scope and direction of the company, including which markets to enter or exit, resource allocation, and the pursuit of growth through various means such as mergers, acquisitions, or partnerships. The goal of corporate strategy is to achieve sustainable competitive advantage and long-term profitability.
- 14. Corporate Strategy | Features • Broad Scope: Corporate Strategy encompasses the entire organization, including all its business units and functions. It addresses high-level decisions that impact the overall direction and long-term success of the company. • Resource Allocation: It involves strategic decisions about how to distribute resources (such as capital, personnel, and technology) across various parts of the organization to maximize efficiency and effectiveness. • Synergy Creation: Corporate Strategy aims to create synergies by leveraging the strengths and capabilities of different business units, leading to greater overall value than if the units operated independently.
- 15. Corporate Strategy | Advantages • Clear Direction: A well-defined corporate strategy provides a clear direction for the entire organization, aligning all business units and employees with the same long-term goals and objectives. • Competitive Advantage: By carefully analyzing the competitive environment and making strategic decisions, an organization can achieve and sustain a competitive advantage in its markets. • Optimal Resource Use: Effective corporate strategy ensures that resources are allocated efficiently, reducing waste and improving the overall performance and profitability of the organization.
- 16. Corporate Strategy | Disadvantages • Complexity: Developing and implementing a corporate strategy can be highly complex, requiring extensive analysis and coordination across multiple business units and functions. • Risk of Misalignment: If not communicated and executed properly, there is a risk that the corporate strategy may not be aligned with the day-to-day operations and goals of individual business units, leading to inefficiencies and conflicts. • Inflexibility: A rigid corporate strategy may limit an organization’s ability to respond quickly to changes in the market or competitive landscape, potentially leading to missed opportunities or threats.
- 17. Corporate Strategy | Example The Walt Disney Company is a prime example of successful corporate strategy. Disney’s corporate strategy involves diversification across various entertainment sectors, including theme parks, movies, television networks, and streaming services. By leveraging its strong brand and creating synergies across its different business units, Disney has been able to maintain a competitive advantage and achieve sustained growth. For instance, characters and stories from Disney movies are integrated into its theme parks and merchandise, creating a cohesive and powerful brand presence across multiple platforms.
- 18. 2. Business Strategy Business Strategy refers to a company’s plan for achieving its long- term goals and sustaining competitive advantage. It encompasses the decisions and actions that guide the overall direction of the business, including how it will compete in the market, satisfy customer needs, and achieve financial and operational objectives.
- 19. 2. Business Strategy | Features • Long-Term Focus: Business Strategy is oriented towards achieving goals over an extended period, typically spanning several years, rather than focusing solely on short-term gains. • Alignment with Goals: It involves aligning every aspect of the business, including operations, marketing, and finance, with the overarching goals and objectives of the company. • Adaptability: A good business strategy is flexible and adaptable, allowing for adjustments in response to changes in the market, technology, or other external factors.
- 20. 2. Business Strategy | Advantages • Competitive Advantage: A well-defined business strategy can help a company gain a competitive edge by leveraging its strengths and exploiting opportunities in the market. • Resource Optimization: By prioritizing initiatives and allocating resources effectively, a business strategy enables companies to maximize their return on investment and minimize waste. • Risk Management: Business Strategy involves careful analysis of risks and uncertainties, allowing companies to anticipate potential challenges and develop contingency plans to mitigate them.
- 21. 2. Business Strategy | Disadvantages • Complexity: Developing and implementing a comprehensive business strategy can be complex and time-consuming, requiring input from various stakeholders and extensive planning. • Uncertainty: Despite careful planning, business strategies are subject to uncertainties in the market, technology, and regulatory environment, which can impact their effectiveness. • Resistance to Change: Employees and stakeholders may resist changes associated with a new business strategy, leading to implementation challenges and delays.
- 22. 2. Business Strategy | Example Apple’s strategy includes a focus on innovation, premium pricing, and a seamless ecosystem of products and services. This strategy has helped Apple establish itself as a leader in the consumer electronics industry, with a loyal customer base and strong financial performance.
- 23. 3. Functional Strategy A functional strategy refers to the detailed, action-oriented plans developed by various functional areas within an organization, such as marketing, finance, human resources, and operations. These strategies are designed to support and achieve the overall business strategy and corporate objectives.
- 24. 3. Functional Strategy | Features • Alignment with Business Goals: Functional Strategies are designed to support and contribute to the achievement of the organization’s broader objectives. • Specialization: Each functional area develops its own strategies tailored to its unique requirements and challenges. • Coordination: Functional Strategies must be coordinated across different departments to ensure coherence and synergy in overall organizational performance.
- 25. 3. Functional Strategy | Advantages • Efficiency: By focusing on specific areas, functional strategies enable organizations to allocate resources effectively and streamline operations for better efficiency. • Expertise Utilization: Functional Strategies allow organizations to leverage the specialized knowledge and skills of employees within each department, leading to optimized performance. • Flexibility: With separate strategies for different functions, organizations can adapt more easily to changes in the business environment or market conditions.
- 26. 3. Functional Strategy | Disadvantages • Silos and Tunnel Vision: Functional Strategies may lead to siloed thinking, where departments prioritize their own goals over the organization’s broader objectives, hindering collaboration and innovation. • Coordination Challenges: Ensuring alignment and coordination among different functional strategies can be complex and may result in conflicts or inefficiencies. • Lack of Holistic View: Functional Strategies may overlook the interconnectedness of different business functions, potentially leading to suboptimal decision-making and missed opportunities.
- 27. 3. Functional Strategy | Example Apple Inc. exemplifies functional strategy through its well-known focus on innovation, marketing, and design. The company’s marketing strategy, for instance, emphasizes product differentiation and customer experience, aligning with its broader goal of maintaining a premium brand image. This approach is supported by specialized functional teams dedicated to research and development, marketing, and design, which work collaboratively to create and promote innovative products like the iPhone and MacBook. However, this functional strategy has also faced criticism for occasionally leading to product feature prioritization over addressing broader market trends or consumer needs.
- 28. 4. Pricing Strategy A pricing strategy is a method used by a company to set the prices for its products or services. It aims to maximize profits, attract customers, and maintain a competitive edge in the market. Pricing Strategies take into account various factors such as production costs, market demand, competitor pricing, and perceived value.
- 29. 4. Pricing Strategy | Features • Market-Based Pricing: This feature involves setting prices based on the prevailing market conditions and competitor prices. It ensures the company remains competitive while appealing to the target market. • Value Perception: This involves setting prices based on the perceived value of the product or service to the customer rather than just the cost of production. It aims to align the price with the customer’s willingness to pay. • Dynamic Pricing: This feature allows for flexible pricing that can change in response to market demand, inventory levels, and other factors. It helps maximize revenue by adjusting prices in real-time or periodically.
- 30. 4. Pricing Strategy | Advantages • Maximizes Profits: An effective pricing strategy can help a company maximize its profits by setting optimal prices that attract customers while covering costs and generating a healthy margin. • Competitive Advantage: By carefully setting prices, a company can gain a competitive edge over its rivals, attracting more customers and increasing market share. • Customer Satisfaction: A well-designed pricing strategy can enhance customer satisfaction by offering perceived value for money, which can lead to increased loyalty and repeat business.
- 31. 4. Pricing Strategy | Disadvantages • Complexity: Developing and maintaining an effective pricing strategy can be complex and time-consuming, requiring constant analysis and adjustments based on market changes. • Risk of Price Wars: Aggressive pricing strategies may lead to price wars with competitors, which can erode profit margins and harm the overall market. • Customer Perception: Incorrect pricing can negatively impact customer perception, with prices that are too high deterring potential buyers and prices that are too low suggesting inferior quality.
- 32. 4. Pricing Strategy | Example Apple Inc. employs a premium pricing strategy, which sets its products at a higher price point compared to competitors. This strategy is based on the high perceived value of Apple’s brand, innovative technology, and quality design. By maintaining premium prices, Apple reinforces its brand image as a leader in the tech industry and attracts customers willing to pay more for superior products and unique experiences.
- 33. 5. Operational Strategy Operational Strategy refers to the plan and actions a company uses to achieve its business goals and objectives through the efficient use of resources and processes. It involves designing, controlling, and improving the production and delivery of the company’s products or services.
- 34. 5. Operational Strategy | Features • Resource Allocation: Operational Strategy involves allocating resources such as labor, technology, and capital to different departments or projects to maximize efficiency and productivity. • Process Optimization: It focuses on optimizing processes to reduce waste, improve quality, and speed up production. This can include adopting new technologies or refining existing workflows. • Performance Measurement: It includes setting Key Performance Indicators (KPIs) and regularly measuring performance against these metrics to ensure the company is on track to meet its operational goals.
- 35. 5. Operational Strategy | Advantages • Increased Efficiency: An effective operational strategy can streamline processes, reduce waste, and lower costs, leading to higher productivity and profitability. • Improved Quality: By focusing on process optimization and performance measurement, companies can enhance the quality of their products or services, leading to greater customer satisfaction. • Better Resource Utilization: Efficient resource allocation ensures that all resources are used optimally, which can reduce unnecessary expenses and improve overall operational effectiveness.
- 36. 5. Operational Strategy | Disadvantages • High Implementation Costs: Developing and implementing a comprehensive operational strategy can require significant investment in technology, training, and process changes. • Resistance to Change: Employees may resist changes in processes or technology, leading to potential disruptions and a decline in morale. • Complexity: Managing and coordinating various aspects of operational strategy can be complex and time-consuming, potentially diverting attention from other important business activities.
- 37. 5. Operational Strategy | Example Toyota is a prime example of a company with a strong operational strategy. Toyota’s operational strategy, often referred to as the Toyota Production System (TPS), focuses on continuous improvement (Kaizen), just- in-time production, and respect for people. This strategy has allowed Toyota to maintain high efficiency, reduce waste, and produce high- quality vehicles, establishing it as a leader in the automotive industry.
- 38. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape 1. Establishing Organizational Objectives: This involves establishing long-term goals of an organization. Strategic decisions can be taken once the organizational objectives are determined.
- 39. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape 2. Analysis of Organizational Environment: This involves SWOT analysis, meaning identifying the company’s strengths and weaknesses and keeping vigilance over competitors’ actions to understand opportunities and threats.
- 40. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape 3. Forming quantitative goals: Defining targets so as to meet the company’s short-term and long-term objectives. Example, 30% increase in revenue this year of a company.
- 41. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape 4. Objectives in context with divisional plans: This involves setting up targets for every department so that they work in coherence with the organization as a whole.
- 42. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape 5. Performance Analysis: This is done to estimate the degree of variation between the actual and the standard performance of an organization.
- 43. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed d incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in elit, sed d eiusmod tempor incididunt ut labore et dolore aliqua. Competitive Landscape 6. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of the alternatives and selection of the best strategy amongst them to be the strategy of the organization.
- 44. • Corporate level strategy: This level outlines what you want to achieve: growth, stability, acquisition or retrenchment. It focuses on what business you are going to enter the market.
- 45. • Business level strategy: This level answers the question of how you are going to compete. It plays a role in those organization which have smaller units of business and each is considered as the strategic business unit (SBU).
- 46. • Functional level strategy: This level concentrates on how an organization is going to grow. It defines daily actions including allocation of resources to deliver corporate and business level strategies.
- 47. Thank You