The Strategic Management Process: Steps 2 and 3

Step 2: Assessing the Current Reality

  • look at where the organization stands internally and externally, to determine what’s working and what’s not
  • see what can be changed so as to increase efficiency and effectiveness in achieving the organization’s vision
  • tools include: competitive intelligence, SWOT analysis, VRIO analysis, forecasting, benchmarking, Porter’s model for industry analysis

Step 3: Formulate Corporate, Business, and Functional Strategies

  • grand strategy:
    • comes after assessing the current reality
    • strategyformulation:strategy formulation: process of choosing among different strategies and altering them to best fit the organization’s needs
    • translates the broad mission and vision statements into a corporate strategy which explains how the organization’s mission it to be accomplished

3 Types of Corporate Strategies

  • growth strategy: involves expansion, as in sales revenue, market share, number of employees, or number of customers
  • stability: involves little or no significant change
  • defensive: involves reduction in organization’s efforts
    • retrenchement
    • ex: record industry
  • corporate strategy may also be called “grand strategy”

The Diversification Strategy

  • diversification: operating several businesses in order to spread the risk
    • products may be related or unrelated
    • ex: gas station stores
  • vertical integration: firm expands into businesses that provide the supplies it needs to make its products or that distribute and sell its products (the company owns the suppliers and distributors of its products)
    • specific type of diversification strategy
    • ex: Starbucks buys and roasts its own coffee, then sells it through its own stores

The BCG Matrix

  • stars: have high growth, high market share (definite keepers)
  • cash cows: have slow growth, high market share (income finances stars and question marks)
  • question marks: risky new ventures (some will become stars, some will become dogs)
  • dogs: have low growth, low market share (should be gotten rid of)