19–1

Levels of Organizational Strategy

19–2

• Types of Strategic Alternatives

• 1. Corporate-Level StrategyThe set of strategic alternatives that an organization chooses from as it manages its operations simulations across several industries and several markets.

Type of strategy addressing what businesses the organization will operate, how strategies of those businesses will be coordinated to strengthen the organization’s competitive position, and how resources will be allocated among businesses.

19–3

• Types of Strategic Alternatives

• 2. Business-Level StrategyHow the organization conducts business in a particular industry.

Or

A strategy that seeks to determine how an organization should compete in each of its SBU (strategic business units).(Price, Quality and Speed are main challenges for an org. in 21st century)

Type of strategy concentrating on the best means of competing within a particular business while also supporting corporate level strategy.

19–4

• Types of Strategic Alternatives

• 3. Functional-Level StrategyStrategy developed for a specific functional areas such as marketing, finance etc.

Type of strategy focusing on action plans for managing a particular functional area with in a business in a way that supports business level strategy.

19–5

• Formulating Corporate Level Strategy

• Corporate level strategy is the overall strategy an organization follows.

• Its development involves selecting a Grand Strategy and using a Portfolio Strategy approaches to determine the various businesses making up the organization.

19–6

Corporate Level Startegy

PortfolioStrategy

GrandStrategy

CorporateLevel

Strategy

The overall organization strategy that addresses the question “What

business (es) are we in or should we be in?”

19–7

• Formulating Corporate Level Strategy

• Portfolio Strategies:

• Method of analyzing an organization’s mix of businesses in term of both individual and collective contributions to strategic goals.

• (UMT, SST, SBE, SSSH, Commerce College)

19–8

Formulating Corporate Level Strategy

• 1. BCG Growth-Share Matrix

• Developed by the Boston Consulting Group (BCG)

• Compare business in an organization’s portfolio on the basis of relative market share and market growth rate.

Classifies firms as:

Cash cows: low growth rate, high market share

Stars: high growth rate, high market share

Question marks: high growth rate, low market share

Dogs: low growth rate, low market share

19–9

The BCG Matrix

19–10

Formulating Corporate Level Strategy

• 2. Product-Market Evaluation Matrix

• Compare businesses’ strength against product/market life-cycle.

19–11

Formulating Corporate Level Strategy

• Grand Strategies

1. Growth

2. Stability

19–12

Grand Strategies

• 1.Growth Strategy

Seeking to increase the organization’s business by expansion into new products and markets.

• Types of Growth Strategies

i. Concentration

ii. Vertical integration

iii. Horizontal integration

iv. Diversification

19–13

Growth Strategy

• i. Concentration Focusing on a primary line of business and increasing the number of

products offered or markets served.

• ii. Vertical Integration Backward vertical integration: attempting to gain control of inputs

(become a self-supplier).

Forward vertical integration: attempting to gain control of output through control of the distribution channel and/or provide customer service activities (eliminating intermediaries).

(KDC,Jehlum or K&N Chickens)

iii. Horizontal Integration Combining operations with another competitor in the same industry to

increase competitive strengths and lower competition among industry rivals. (Walls & Polka)

19–14

Growth Strategies

• iv. Diversification/Expansion

• a. Related Diversification Expanding by merging with or acquiring firms in different, but related

industries that are “strategic fits”.

(Paktel & Insta Phones, Banks)

• b. Unrelated Diversification Growing by merging with or acquiring firms in unrelated industries

where higher financial returns are possible.

(Super Asia Fans & Motor Cycle)

19–15

Growth Strategies

2. Stability Strategy

A strategy that seeks to maintain the status 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.

19–16

Formulating Business Level Strategy

• 1. Business level strategy is concerned with how a particular business competes.

• 2. The best known approach for strategy development is based on Porter’s research.

• Generic Business Strategies: Porter outlined three generic business level strategies to gain competitive advantage over other firms operating in the same industry.

• i. Cost Leadership Strategy: Emphasizes operational efficiency i.e overall costs are lower than competitors.

• ii. Differentiation Strategy: Attempting to create a unique and distinctive product or service for which customers will pay a premium.

• Iii. Focus Strategy: Concentration on a segment, portion of a market. Using a cost or differentiation advantage to exploit a particular market segment rather a larger market.

19–17

Formulating Functional Level Strategy

• Functional level strategies spell out specific ways that functional areas can strengthen business level strategies.

• For Example:

• Under product differentiations strategy, the R&D Dept. may accelerate the innovation process to provide new products in advance of competitors.

19–18

Customer Service Strategies

• Giving the customers what they want.• Communicating effectively with them.• Providing employees with customer service

training.

19–19

• Strategy Implementation

• Strategy implementation involves management activities needed to put the strategy in motion, institute the strategic controls for monitoring progress, and ultimately achieve organization goals.

19–20

First-Mover Advantages–Disadvantages

• Advantages Reputation for being

innovative and industry leader

Cost and learning benefits

Control over scarce resources and keeping competitors from having access to them

Opportunity to begin building customer relationships and customer loyalty

•Disadvantages Uncertainty over exact

direction technology and market will go

Risk of competitors imitating innovations

Financial and strategic risks

High development costs