Strategies Used by Organizations

Corporation Strategic Business Unit A Finance Corporate Strategy Business Strategy Corporate Strategy

Corporate Strategy – Long term direction. It asks “What industries and markets should we compete in?” What kinds of things could companies include in this level of strategy?

Business Strategy Business Strategy is more focused. It identifies how a division within a company (Strategic Business Unit) will compete in its product or service domain. It asks “How are we going to compete for customers in this industry and market?” What products should we offer, where should we build facilities, etc. Not EVERY company has corporate and business strategies. In single business companies, they are the same.

General Electric

Functional Strategy Functional Strategy guides activities within one specific area of operations. Marketing, Manufacturing, Finance, Human Resources It asks “how can we best utilize resources to implement our business strategy?”

Lets Look at… Growth

Growth Strategies Growth Strategies look to expand the operations of an organization. Why do companies want to grow? There are different ways that companies can grow…

Concentration What do you think this means?

Diversification Any idea what this means?

Diversification Diversification means that expansion is happening by acquiring or investing in new business areas. Acquiring means that a company buys another. Related Diversification means that the new businesses or business areas are in related industries. Unrelated Diversification means it is not related. Like Apple making cars!

Vertical Integration Vertical Integration means that a business buys suppliers or distributors. Backward vertical integration sees the purchase of suppliers. Forward vertical integration sees the purchase of distributors. This is common with auto companies. Why do you think this is? Why would ANY company want to do this?

Something to think about… We know that growth is good…but is all growth, ALWAYS good?

Restructuring Sometimes mistakes are made and they need to be fixed. These strategies are called retrenchment strategies. These change operations to correct weaknesses. Liquidation – selling assets to pay creditors. Restructuring – Making efficiencies in business. Reduces scale, or mix of operations. Downsizing – Making operations smaller. Usually leads to layoffs.

Divestiture Complicated word…it means SELLING PARTS OF THEIR BUSINESS. It is not liquidation…that is assets. Divestiture means selling branches of the business. If a company does this, it is probably because diversification did not work so well.

Global Strategies Some of this is review. A globalization strategy tries to standardize products and advertising. Some things are sold the same way everywhere. Like iPhone. Companies doing this are a little bit ethnocentric because of this. -It is assumed that everyone everywhere wants the same thing.

Global Strategies Multidomestic Strategies treat local markets differently and try to offer products/advertising that appeal to that market. This is polycentric because it shows some respect for cultural differences.

Global Strategies Transnational Strategies ignore national identities and try to balance efficiency with local markets. Products, materials, labour, and ideas come from all around the world and wherever is lower cost. Only the largest companies can work like this. Ford Motor Company does. So do others.

Co-operative Strategies Strategic Alliances are when organizations join together in partnership to pursue an area of mutual interest. Outsourcing Alliances Supplier Alliances Distributor Alliances

E-Business Strategies This is a strategy that uses the internet to gain competitive advantage. Target’s failure in this section.section

E-Business Strategies These strategies are referred to as B2B and B2C Strategies. Nowadays, customers want things: 1. Cheap 2. Fast 3. Exactly as they want.

Some other E-Business Strategies Brokerage – Brings buyers and sellers together Advertising – Have a website, get money from advertising. Merchant model – Selling things online. Subscription model – Selling access to a website. Infomediary model – Collecting information on users and selling it to other businesses.

B2C Strategies Part of the reason Dell is so strong in the computer market is their website, manufacturing, and customer service models.website

Back to Strategy Formulation We have to decide: 1. Are we focusing on cost and quality? 2. Are we focusing on innovation and speed of delivery to market? 3. Are we focusing on making it difficult for competitors to enter the market? 4. Are we focusing on financial security with investments and loss sustainment? Remember, things move fast now. Advantages gained may not last.

Porter’s Generic Strategies Think to the 5 forces model. It helps us answer the question: “Is this an attractive industry for us to compete in?” Once we are in an industry, however, we have to figure out how to deal with our competitors. Michael Porter says there are two factors we have to think about for business-level strategic decisions. 1) “How broad or narrow is our market/target market?” and 2) “Will we compete for competitive advantage by lower price or uniqueness?”

Differentiation Strategy We are looking to create goods or services that are unique, or at least, different from our competitors. One of the most successful products on Dragon’s Den. One of the most successful products on Dragon’s Den.

Cost Leadership Strategy This means the company tries to have lower costs and be efficient (usually to try to make more profit than competitors). It also means that your products are more attractive to consumers. Wal-Mart does this. It’s costs are very low (wages and distribution) so it can sell a lot of stuff, for a low price, and still make money.

Focus Strategies Focused Differentiation – offers unique products to a special market segment. Focused Cost leadership – Seeks the lowest costs of operation within a special market segment.

Portfolio Planning When companies are part of many industries, with many products or services, it is a complex thing to plan strategy. Think of someone who wants to invest in stocks. They have to choose what kind of investments to make in a portfolio.

BCG Matrix This is a comparison to analyze business opportunites according to market growth rate and market share.

Adaptive Strategies Prospector Strategy – Pursue innovation and opportunities. High risk, but high-growth opportunity. Defender Strategy – Protects market share by focusing on existing products. Not looking for growth. Analyzer Strategy – Maintains stability in business but looks for small opportunities for innovation and change Reactor Strategy – No real strategy. They wait to see what’s going on and reacts to it. NOT DESIRABLE

Incrementalism and Emergent Strategies Incrementalism is when a strategy is not made intentionally and with any thought. Changes happen bit by bit. Emergent Strategies develop over time due to managers’ experiences and responses.

Organizational Culture Apple’s Organizational Culture Zappo’s Organizational Culture Another look at Zappo’s

Organizational Culture Organizational Culture is the system of shared beliefs and values that develops within an organization. They guide the behaviour of the members. Can also be called “Corporate Culture.” “The way we do things here.”

Organizational Culture Strong cultures are clear, defined, and shared among members. They discourage bad work behaviours and encourage good behaviours. Members are encouraged to things for and with each other that are in the best interests of the organization. The BEST organizations are likely: performance oriented, emphasize teamwork, allow risk-taking, encourage innovation, and make the well-being of people a top priority.

Levels of Organizational Culture Two levels: 1. Observable culture and “Core” Culture.

Observable Culture What you see and hear when walking around an organization. How do people dress? How are offices arranged? How are people speaking/behaving with each other? What are they talking about?

Observable Culture Core Culture Core Values -Beliefs about the right ways to behave. -Shared by members of the organization Rites and Rituals -Celebration of heroes and events displaying core values Symbols -Language and other symbols conveying core values Stories -Tales about events conveying core values Heroes -People (past and present) who display core values

Value-Based Management Just like strategies, it is not enough to simply come up with values…you have to actually follow them. They have to be real. Value-based management describes managers who help come up with these values and make sure that their employees follow them. BUT, these values also have to consider: Relevance, Integrity, Pervasiveness, Strength.