Levels of Strategy

Terms Arrange the following terms in a logical hierarchy: Arrange the following terms in a logical hierarchy: Company Company Division Division Strategic Business Unit (SBU) Strategic Business Unit (SBU) Corporation Corporation Industry Industry Value Chain Value Chain Person Person Department Department Market Market

Terms Industry Industry Value Chain Value Chain Company Company Department Department Person Person A market refers to the place where goods and services are exchanged. Arrange the following terms in a logical hierarchy: Arrange the following terms in a logical hierarchy: Corporation Corporation Division / SBU Division / SBU Company Company

Rumelt's Typology of Diversification 1. Single Product: 95% of revenues from a single product line 2. Dominant Product: 70-94% of revenue from a single product line 3. Related Product: Less than 70% of revenue from a single product line and and the remainder of revenues from a related product domain 4. Unrelated Product: Less than 70% of revenue from a single product and remainder of revenues from an unrelated product domain

Some Levels of Strategy The Impact of IT on strategy is dramatically different depending on the level of strategy. On what level is your paper? Corporate Corporate Business Business Functional Functional Operational Operational

Corporate Level Strategy What businesses are we in? What businesses should we be in? What businesses are we in? What businesses should we be in? Four areas of focus Four areas of focus Diversification management (acquisitions and divestitures) Diversification management (acquisitions and divestitures) Synergy between units Synergy between units Investment priorities Investment priorities Business level strategy approval (but not crafting) Business level strategy approval (but not crafting)

Corporate-Level Strategies Firm Status Valuable strengths Critical weaknesses Environmental Status Abundant environmental opportunities Critical environmental threats Corporate growth strategies Concentric Diversification (Economies of Scope) Conglomerate Diversification (Risk Mgt.) Corporate retrenchment strategies Can still go for business-level growth (economies of scale) Corporate stability strategies

The BCG “Portfolio” Matrix High Low HighLow Market Share Anticipated Growth Rate Stars ? ? ? ? ? ? ? ? Question Marks Cash CowsDogs

Business Level Strategy How do we support the corporate strategy? How do we support the corporate strategy? How do we compete in a specific business arena? How do we compete in a specific business arena? Three types of business level strategies: Three types of business level strategies: Low cost producer Low cost producer Differentiator Differentiator Focus Focus Four areas of focus Four areas of focus Generate sustainable competitive advantages Generate sustainable competitive advantages Develop and nurture (potentially) valuable capabilities Develop and nurture (potentially) valuable capabilities Respond to environmental changes Respond to environmental changes Approval of functional level strategies Approval of functional level strategies

Functional / Operational Level Strategy Functional: How do we support the business level strategy? Functional: How do we support the business level strategy? Operational: How do we support the functional level strategy? Operational: How do we support the functional level strategy? An example. Business L.S.: Become the low cost producer of widgets Functional L.S. (Mfg.): Reduce manufacturing costs by 10% Operational (Plant #1): Increase worker productivity by 15%

A Simple Organization Chart (Single Product Business) Business Research and Development ManufacturingMarketing Human Resources Finance Functional Level Strategy Business Level Strategy

A Simple Organization Chart (Dominant or Related Product Business) Multibusiness Corporation Corporate Level Business 1 (Related) Business 2 (Related) Business 3 (Related) Business Level Research and Development ManufacturingMarketing Human Resources Finance Functional Level

An example of an Unrelated Product Business (Note: By itself, an SBU can be considered a related product business) A (Multi-business) Corporation Ex.: G.E. (General Electric Corp.) Strategic Business Unit 1 S.B.U. 2 Company 1 Co. 2Co. 3Division 1Div. 2Div. 3 SBU: a single business or collection of related businesses that is independent and formulates its own strategy