Unit 3: Managerial Strategy Formation
This unit will address the various ways to formulate a strategy. One of the most popular ways is to use Porter's Generic Strategies as a starting point. This strategy development method looks at whether a company will focus on the differentiation of its product or service or attempt to be a cost leader. Do you know the types of organizational structures that best support various strategies? In this unit, we will also address organizational structures and how they can help support business strategy. No business strategy is complete without considering ethics. This unit will also talk about the different methods companies can use to ensure a successful strategy and an ethical organization.
Completing this unit should take you approximately 8 hours.
Upon successful completion of this unit, you will be able to:
- use Porter's Generic Strategies to determine the appropriate business strategy for a given scenario;
- explain the various tools, such as the BCG and SPACE Matrix, that are used to create business strategy;
- identify the common organizational structures used to craft business strategy, such as the matrix and functional structures; and
- describe how ethical behavior can be integrated into business strategy.
3.1: Porter's Generic Strategies
Now that you have an overview of ethics and strategy and identified the various forces that will affect your strategy, it is time to select a strategy to move forward with. This section will address one model for strategy selection: Porter's Generic Strategies. As you review this content, consider the best generic strategy for your organization.
Porter's Generic strategies can help your company focus on the strategy you want to pursue. Don't forget that you'll also want to consider the internal and external environment, as we addressed in Unit 2, to ensure the success of your strategy. As you read this article, consider the type of generic strategy used by a company you like to do business with.
After watching this video, you will be able to give examples of Porter's Generic Strategies and discuss the advantages and disadvantages of pursuing each strategy.
3.2: Business Strategy Tools
Many excellent tools can help you narrow and define your strategy beyond Porter's Generic Strategies. Before specifically discussing the tools to determine strategy, reading a case study about Target and Walmart will be beneficial. As you read, consider which of Porter's Generic Strategies was used in both companies.
After companies select the general strategy, they must choose a specific business-level strategy. This resource gives examples of retailers and their business-level strategies.
The BCG matrix is one tool that you can choose to determine strategy. You may remember this matrix from a marketing class. The matrix allows you to see what products or services are doing well and not doing well in your industry. As you read this resource on the BCG Matrix, consider what products or companies you consider to be "dogs". What makes them appear this way to you, and why? Do you think companies can easily identify their "dogs", or is it possible to be "too close" to a product to identify this?
The balanced scorecard and strategy map approach can be useful tools for determining business strategy. As you read, consider the strategy map used for Mayberry Utilities Company. Do you think this strategy map is missing any potential perspectives? As you read this resource, pay special attention to the corporate strategy map provided in This text. Do you see how you might be able to use a mind map to determine your strategy? This corporate strategy mind map also addresses the internal and external perspectives you learned about in Unit 2.
You can use the balanced scorecard to make big-picture strategic decisions. After you read this article, you should be able to create a balanced scorecard for your organization.
The SPACE matrix determines whether you should use an aggressive, conservative, defensive, or competitive approach for your business strategy. As you learned about in Unit 2, internal and external organizational analysis is necessary to use this tool. As you read through this section, think about the advantages and disadvantages of each. The SPACE matrix is yet another tool to help you determine your potential strategy. After you read this content, you will be able to identify the internal and external strategic positions to consider when using this tool.
This section will address diversification and differentiation of products and services as a potential strategy. As you read, consider the downsides of diversification of products. Do you purchase from companies that offer many product lines? No strategy development would be complete without looking at marketing strategy and how the marketing strategy can work within the overall business strategy. This text will help you compare marketing strategy with business strategy. After you read, you should be able to effectively describe the difference between diversification and differentiation in marketing and strategic planning terms.
Determining whether or not to diversify offerings can be a challenge. After you read, you will be able to identify the tests used to determine if you should use a proposed diversification strategy.
3.3: Selecting Organizational Structure
Some organizational structures are better than others for specific kinds of strategies. This section will focus on what organizational structures work best for different business strategies. Can you identify your current or past organization's structure as you read? Do you think it was a good fit for your particular organization's strategy?
An organizational design is needed to support the chosen strategy. As you read, consider your potential strategy and which structures might work best.
It is well known that you can execute strategy more easily with the right organizational design. This text will focus on organizational designs and control systems to implement a strategic plan.
One of the most popular organizational structures is the matrix structure. As you watch the video, consider how the functional structure and divisional are combined to create this useful structure to help support organizational strategy.
3.4: Ethics in Strategic Planning
How do companies ensure ethical standards are met? Who do you think organizations should be the most accountable to? Shareholders? Employees? Customers? This section will address the importance of building ethics in business strategy formulation.
- Part of the strategic planning process is building ethics into the organizational structure and strategy. As you read this article, look for the four elements of ethical alignment.
Companies have several methods to help implement ethics within their organization. In this section, we will talk about a few of those methods. As you read, consider which methods you think to be the most and least effective. Why do you believe this? How can organizations influence ethical conduct? As you read, consider the different steps that you can use to help build ethical conduct into a business strategy.
Codes of ethics are used to ensure ethical conduct occurs within the overall company strategy. After you read, you should be able to draft a code of ethics.
This video further addresses codes of ethics. Do you think a code of ethics is enough for an employee to behave ethically, or do you think companies should do more to ensure employees act ethically?
As you read this case study about flooding in Houston, consider how all stakeholders should be involved in social responsibility decision-making to obtain buy-in. Review the critical thinking questions at the end of the case.
Study Guide: Unit 3
We recommend reviewing this Study Guide before taking the Unit 3 Assessment.
Unit 3 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.