levels of strategy management

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Corporate Level Strategy


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Corporate level strategy : 

Corporate level strategy Corporate strategy is basically concerned with the choice of business,products and markets It tries to answer key questions like what business the firm should be in in terms of range of products it supplies ? What should be the optional geographic spread of activities for the firm? What range of vertically linked activities should the firm encompass? How the corporate office should manage its group of business?

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Advantages of corporate strategy Bridge the gaps- Corporate strategy helps a firm identify the strategic planning gaps and bridge them through appropriate strategies Exploit the opportunities- the firm can identify the areas where it can profitably operate keeping its own capabilities in mind Develop core competencies- by focussing on its strengths,the firm can build core competencies in certain fields and serve customers better

The balanced score card-a balanced apparoach : 

The balanced score card-a balanced apparoach RS Kaplan and DP norton came out with this popular approach in early 90s Here corporate goals are linked with strategic actions undertaken at the business unit, departmental and individual level The score card allows managers to evaluate a firm from different complementary perspectives

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These are the arguments related 1.A firm can offer superior returns to its stake holders if it has competitive advantage in its product or service offerings in comparison 2.In order to sustain competitive advantage a firm must offer superior value to its customers 3.This in turn requires development of operations with necessary capabilities

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4.In order to develop the needed operational capabilities, a firm requires the services of employees having requisite skillsand creativity Thus performance in one perspective supports performance in other areas The financial perspective- Does the firm offer returns in excess of the total cost of capital as suggested by the EVA (economic valueadded)model

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EVA is what left over after a firm has covered all factors of production(operating expenses, interest,taxes&fair return to share holders) The customers perspective- does the firm provide superior value in terms of product differentiation,low cost and quick response The operations perspective- how efficiently and effectively the core processes that produce customer value perform ?

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The organisational perspective- Can this firm adapt to changes in environment,is its workforce committed to shared goals ? And does the organisation learn from past mistakes and whether it work on the root causes or handle it superficially A firms long term strategy takes all the above perspectives in to account in deciding the matching the resources and capabilities

Grand strategies : 

Grand strategies Grand strategy is the general plan of major action by which a firm intends to achieve its long term goals Most firms begin their operations as single business units Some firms continue to thrive due to their specialized operations and focus on a limited business arena Eg: Mcdonalds had steady growth and improved product line in fast food business

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Infosys had exploited the low cost advantage of software services in India and after consolidating its position is diversifying Walmart too has primarily benefitted from the retailing industry However operating in one industry may make the firm vulnerable to business cycles

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The industry attractiveness decline through permanent decrease in consumer demand or new competitors,the company is likelyto suffer Eg: is the software and telecom in the late 90s These limitations can be overcome by operating in different fields through diversification The firm could diversify in to related exploit core strengths) or unrelated business(untapped areas) Grand strategies fall into 4 categories: growth,stability,retrenchment &combination

Growth/expansion strategy : 

Growth/expansion strategy Organisation generally seek growth in sales,market share or some other measure as a primary objective When growth becomes a passion and organisation try to seek sizeable growth it takes the shape of an expansion strategy The firm tries to redefine the business,enter new businesses that are related or non related

When to adopt a growth strategy : 

When to adopt a growth strategy Growth must be manageable- it should enable the organisation to stabilise its operations over a period and ensure profitability Growth must take in to account environmental demands An organisation can grow only to the extent permitted by the environment

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Growth should be the natural choice where the environment presents several opportunities and concessions For eg: the government offers special benefits to small scale sector in the backward areas Whenever such opportunities exist in the environment,organisations can pursue growth strategies diligently

Why to pursue growth strategy : 

Why to pursue growth strategy To ensure survival- in the long run growth is necessary for the very survival of the organisation This is more important in turbulent and highly competitive environment If the organisation does not grow it may be pushed out by new entrants eg:ambassador, ideal jawa

Diversification strategy : 

Diversification strategy Diversification is to divert in to new lines,markets than harping on the existing lines and markets Reasons for diversification 1,It bring synergistic benefits-related or unrelated diversification,coming together of firm will create synergy in distribution,advt etc 2,spreads the risks- it’s a wiser policy to invest in different lines even if one fails, the other will be able to take the business forward

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3,better utilisation of resources- A marginal additional investment for diversification and exploiting the common capabilities 4,Developing competitive edge- could be technological superiority or innovative approach,a timely diversification keeps competition off 5,Makes firm dominant in markets- the image of the firm increases in each depts as well as in the general market

Retrenchment strategy : 

Retrenchment strategy It’s a strategic option which entrails reduction of any existing product or service line set below the past achievement. It includes a,focussing on functional improvement and reducing costs b,reducing the no. of function it performs c, reducing the number of products and markets it serves

Why retrenchment : 

Why retrenchment Poor performance Threat to survival Deployment of resources Insufficiency of resources Getting improved managerial efficiency the sub-strategies of retrenchment can be 4 types namely turnaround,divestment,harvest and liqudation strategy

Stability strategy : 

Stability strategy A stability or neutral strategy or stable growth policy is one which aims at the maintaining the existing business course,no additions In an effective stability strategy companies will concentrate on their resources where the company has or can develop competitive advantage A firm pursue a stability strategy when i,it serves the customers in the same products&markets ii, focus on incremental improvement of functions

Features of stability strategy : 

Features of stability strategy Status quo orientation- stabilty strategy is fundamentally safety oriented, status quo strategy Incremental improvements- its an attempt to enhance functional efficiency through better deployment and utilisation of resources No redefinition of business- The strategy does not permit the renewal process of bringing in fresh investment and new products and markets Modest strategy- stability does not mean lack of concern for business and profits,does modestly

Why to follow stability strategy : 

Why to follow stability strategy Level of managerial satisfaction- when the managers are happy with the present performance,there is a tendency to continue same Managerial reading of future- Stability strategy is less risky in that it offers the safe business to the co. unless there is major environmental change Retention of core competence- a firm wants to capitalise on past experience that has that has given strategic advantage or core competence

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The degree of resistance to change- the organisation does not like to bear the risk of changing the product line or incurring heavy expenses to explore new markets Fear of loss of control- mainly in the cases of family owned business concerns, who fear that an equity issue may lose their control

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Lack of resources- the term includes physical and human resources which automatically includes business capabilities Threats by external environment- the external environment forces happen immediately and powerfully it creates an imbalance for the organisation,as it is a part of it

Combination strategies : 

Combination strategies Large diversified organisations generally use a mixture of stability,expansion or retrenchment strategies either simultaneously orsequentially Growth could be achieved by an organisation through acquisition of new business or divesting itself of unprofitable ventures Depending on situational demands,therefore an organisation can employ various strategies to survive grow and remain profitable

Combination strategies of asian paints : 

Combination strategies of asian paints Asian paints offers nearly 50 decorative paints with as 150 plus shades in multiple packing For over 25 yrs the company is the market leader with 50 % of market share Powerful brands covering all segments and filling all gaps it has consolidated its position in the market place(stability) It comes with new product launches at regular intervals in order to stay on course(growth)

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Over 15,000 dealers,2600 colour world outlets the company is in the top 15 global decorative paint companies It has recently acquired two companies-one in egypt and other in singapore The company has a significant presence in industrial coatings segments too Its trying to expand its share in this business through joint ventures and acquisitions

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Joint ventures- when two firms pool resources to accomplish a task that the firm could not accomplish alone the result is joint venture Joint venture is not a strategy but a way of implementing a strategy It helps a firm to undertake giant projects by spreading risks more efficiently

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Strategic alliances- in a joint venture,the companies involved take an equity stake in one another In strategic alliances however the partners contribute their skills and expertise to a cooperatively conceived project Alliances would take the shape of a licensing agreement where licensor would transfer his property right over patents

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Consortia- are interlocking relationships between businesses of an industry Here different firms are joined around a large trading company or bank These are coordinated through interlocking directories&stockexchanges

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