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Higher Technological Institute (HTI), 10th of

Ramadan City.

Principles of Management

Chapter 8
Strategy Formulation and Execution

Dr. Mansour Abou Gamila 2022/2023

Learning Outcomes
After studying this chapter, students should be able to:
• Define the components of strategic management and discuss
the levels of strategy.
• Describe the strategic management process and SWOT
analysis.
• Define corporate-level strategies and explain the BCG
matrix, portfolio and diversification approaches.
• Describe Porter’s competitive forces and strategies.
• Discuss new trends in strategy, including innovation from
within and strategic partnerships.
• Discuss the organizational dimensions managers use to
execute strategy.
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Strategy

• Every company is concerned with strategy

– It determines which organizations succeed and
which ones struggle
– Strategic blunders can hurt a company

• Strategic management is a specific type of

planning

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Thinking Strategically
• Strategic planning in for-profit organizations pertains to
competitive actions in the marketplace. In nonprofit
organizations, strategic planning pertains to events in the
external environment.

• Strategic thinking means to take the long-term view and to see

the big picture of the organization and its environment to
achieve organizational goals

• Thinking strategically impacts performance and financial

success

• Today’s environment requires everyone to think strategically

(not just top manager)
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Strategic Management
• The set of decisions and actions used to formulate and execute
strategies that will provide competitively superior fit
(competitive advantage) between the organization and its
environment to achieve organizational goals
• It helps managers answer questions such as:
• What changes and trends are occurring in the competitive
environment?
• What products or services should we offer?
• How can we offer those products and services most
efficiently

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Purpose of Strategy
• Strategy is the plan of action that describes resource
allocation and activities for dealing with the environment,
achieving a competitive advantage, and attaining the
organization’s goals.

• Competitive advantage refers to what sets the organization

apart from others and provides it with a distinctive edge in
the marketplace. The essence of formulating strategy is
choosing how the organization will be different. To remain
competitive, companies develop strategies that focus on core
competencies, develop synergy, and create value for
customers.

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Purpose of Strategy
Strategies should
• Exploit Core Competence. A company’s core competence is
something the organization does especially well in comparison to
its competitors. A core competence represents a competitive
advantage because the company acquires expertise that competitors
do not have. A core competence may be in the area of superior
research and development, expert technological know-how, process
efficiency, or exceptional customer service.
• Build Synergy. Synergy occurs when organizational parts interact
to produce a joint effect that is greater than the sum of its parts
acting alone. The organization may attain a special advantage with
respect to cost, market power, technology, or management skill.
When properly managed, synergy can create additional value with
existing resources, providing a big boost to the bottom line. 7
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Purpose of Strategy

• Deliver Value. Delivering value to customers should be

the heart of strategy. Value can be defined as the
combination of benefits received and costs paid.
Managers help their companies create value by devising
strategies that exploit core competencies and attain
synergy.

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Levels of Strategy

Levels of Strategy
• What business are we in? Corporate-level strategy pertains to the
organization as a whole and the combination of business units and product
lines that make up the corporate identity. Strategic actions at this level
usually relate to acquisition of new businesses, additions or divestment of
business units, plants, or product lines, and joint ventures with other
corporations in new areas.
• How do we compete? Business-level strategy pertains to each business
unit or product line within the organization. Strategic decisions focus on
advertising, direction and extent of R&D, product changes and
development, equipment and facilities, and expansion or contraction of
product and service lines.
• How do we support the business-level competitive strategy?
Functional-level strategy pertains to the major functional departments
within the business unit. Functional strategies involve all of the major
functions, including finance, research and development, marketing, and
manufacturing.

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The Strategic Management Process

The Strategic Management Process

The strategic management process begins when executives

evaluate their current position with respect to mission, goals,
and strategies.
Then they scan the organization’s internal and external
environments and identify strategic factors that might
require change.
Events might indicate a need to redefine the mission or goals
or to formulate a new strategy at either the corporate,
business, or function level.

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Strategy Formulation
versus Execution

Formulation: Execution:
Assessing the external the use of managerial
environment and and organizational
internal problems to tools to direct
create goals and resources toward
strategy accomplishing
strategic results

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SWOT Analysis

• Formulating strategy often begins with an audit

of internal and external factors
– Internal Strengths and Weaknesses
– External Opportunities and Threats

• External information about opportunities is obtained from

customers, government reports, professional journals, suppliers,
bankers, friends, and consultants. Internal information comes
from reports, budgets, financial ratios, surveys of employee
attitudes, and meetings.
•
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SWOT Analysis
Internal Strengths and Weaknesses
• Strengths are positive internal characteristics organizations can exploit to
achieve strategic performance goals.
• Weaknesses are internal characteristics that may inhibit or restrict the
organization’s performance. The information sought pertains to specific
functions such as marketing, finance, production, or R&D.

External Opportunities and Threats

• Opportunities are characteristics of the external environment that have the
potential to help the organization achieve or exceed its strategic goals.
• Threats are characteristics of the external environment that may prevent the
organization from achieving its strategic goals. The task environment sectors
are the most relevant to strategic behavior and include the behavior of
customers, competitors, suppliers, and the labor supply. The general
environment includes technological developments, the economy, legal-
political and international events, and sociocultural changes.
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SWOT: Audit Checklist

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SWOT Analysis

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COCACOLA- SWOT Analysis

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Cake SWOT Analysis

Strengths Weaknesses
 Baking only with seasonal ingredients, local  Lack of ingredients from local sources
spices and herbs.  Seasonal shortage of production-related to
 Partnering only with local farms local farms
 Environmentally friendly - Producing our  No online or mobile payment system
own electricity and hot water with solar  Small number of staff for the preparation of
panels, Gas and Water are sourced with big events
green energy companies
 Reducing cost and carbon footprint by
avoiding overseas shipping
 Offering made-to-order cakes
 Large-scale production for events, hosting
up to 2000 guests
Opportunities Threats
 Website development to reach more  Local well-known baker in Los Angeles
customers easily- Online ordering County; "Banana Bread Bakery"
 Partnerships with local restaurants and  Location of the bakery (it is far from local
coffee shops farms)
 Catering for local events  Lack of computer skills
Copyright
Farm project to grow our own herbs and  Need of a delivery truck
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local species

Blended learning SWOT Analysis

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Formulating Corporate-Level Strategy:

Portfolio Strategy

Strategic Business Units (SBUs) have a

unique mission, products, and
competitors

Companies manage the mix of SBUs for

synergy and competitive advantage

Organizations should not become too

dependent on one business – Related to
the diversification strategy (Diversification
lowers business risk) 21

Porter’s Five Forces

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Porter’s Competitive Strategies

Formulating Functional-Level
Strategy

 Action plans used by major departments

(Marketing, Production, Finance, HR, R&D)
 To support the execution of biz-level strategy
 To coordinate with biz-level strategy to achieve
the organization’s strategic goals

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Six Silent Killers of Strategy

Tools for Putting Strategy into Action

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