Strategic Management Unit iv & v

CORPORATE LEVEL STRATEGIES

Types of CLS

Growth/expansion

Stability

Retrenchment

combination

Growth/Expansion

A) INTENSIFICATION Market penetration

Market development

Product development

Innovation

B) DIVERSIFICATION Concentric

Conglomerate

Forward

Backward

Concentric Diversification(RELATED)

When an org diversifies into a related but

distinct business. With concentric

diversification, new businesses can be related

to existing businesses through products,

markets or technology. Example: Philips into

Cellular phones,etc

CONGLOMERATE(UNRELATED)

An org diversifies into an area that are

unrelated to its business. The decision is taken

due to technological change.

STABILITY STRATEGY

When firms are satisfied with their current rate of growth and profits, they may decide to use a stability strategy. This strategy is essentially a continuation of existing strategies. Such strategies are typically found in industries having relatively stable environments. The firm is often making a comfortable income operating a business that they know, and see no need to make the psychological and financial investment that would be required to undertake a growth strategy.

RETRENCHMENT STRATEGIES

Retrenchment strategies involve a reduction in

the scope of a corporation's activities, which

also generally necessitates a reduction in

number of employees, sale of assets

associated with discontinued product or

service lines, possible restructuring of debt

through bankruptcy proceedings, and in the

most extreme cases, liquidation of the firm.

DIVESTMENT STRATEGY

A divestment decision occurs when a firm elects to sell one or more of the businesses in its corporate portfolio. Typically, a poorly performing unit is sold to another company and the money is reinvested in another business within the portfolio that has greater potential.

BUSINESS-LEVEL STRATEGIES

Business-level strategies are similar to corporate-strategies in that they focus on overall performance. In contrast to corporate-level strategy, however, they focus on only one rather than a portfolio of businesses. Business units represent individual entities oriented toward a particular industry, product, or market

A common focus of business-level strategies are sometimes on a particular product or service line and business-level strategies commonly involve decisions regarding individual products within this product or service line. There are also strategies regarding relationships between products.

ANALYSIS OF BUSINESS-LEVEL

STRATEGIES

PORTER'S GENERIC STRATEGIES.:

Cost leadership Strategy

Differentiation Strategy

Focus Strategy

COST LEADERSHIP

Cost-leadership strategies require firms to develop policies aimed at becoming and remaining the lowest cost producer and/or distributor in the industry.

Note here that the focus is on cost leadership, not price leadership.

This may at first appear to be only a semantic difference, but consider how this fine-grained definition places emphases on controlling costs while giving firms alternatives when it comes to pricing (thus ultimately influencing total revenues).

DIFFERENTIATION STRATEGY

Differentiation strategies require a firm to create something about its

product that is perceived as unique within its market.

Whether the features are real, or just in the mind of the customer, customers

must perceive the product as having desirable features not commonly found

in competing products.

The customers also must be relatively price-insensitive. Adding product

features means that the production or distribution costs of a differentiated

product will be somewhat higher than the price of a generic, non-

differentiated product.

Customers must be willing to pay more than the marginal cost of adding the

differentiating feature if a differentiation strategy is to succeed.

FOCUS STRATEGY

Focus, the third generic strategy, involves concentrating on aparticular customer, product line, geographical area, channelof distribution, stage in the production process, or marketniche.

The underlying premise of the focus strategy is that the firm isbetter able to serve its limited segment than competitorsserving a broader range of customers.

Firms using a focus strategy simply apply a cost-leader ordifferentiation strategy to a segment of the larger market.

Firms may thus be able to differentiate themselves based onmeeting customer needs through differentiation or throughlow costs and competitive pricing for specialty goods.

COMPETITIVE ADVANTAGE

Competitive advantage occurs when a organization acquires or develops an attribute or combination of attributes that allows it to outperform its competitors.

These attributes can include access to natural resources, such as high grade ores or inexpensive power, or access to highly trained and skilled personnel human resources.

New technologies such as robotics and information technology either to be included as a part of the product, or to assist making it.

The term competitive advantage is the ability gained through attributes and resources to perform at a higher level than others in the same industry or market

How to build/acquire CA?

Innovation

Integration

Alliances/mergers/acquisitions

R&D

Entry Barriers

Benchmarking

Value chain approach

How to build/acquire CORE

COMPETENCE?

Focus on two or more skills

Low cost strategies

Benefits of cost leadership

STRATEGIC

IMPLEMENTATION

“Implementation of strategies is concerned

with the design and management of systems

to achieve the best integration of

people,structures,processes and resources in

reaching organizational purpose”.

RESOURCE ALLOCATION

While implementing strategies, the scarce resources (financial,physical,human,etc) resources need to be allocated carefully. In this regard, one can follow, top-down and bottom-up approach.

In top -down approach resources are allocated through a process of segregation down to operating levels.

In the bottom-up approach resources are distributed after a process of aggregation from the operating level

.

Means of resource allocation

Strategic Budget

Capital budget

Performance budget

Decision package

Ranking

Resource allocation

Structural Issues

FUNCTIONAL STRUCTURE:A company organized with a functional structure groups people together into functional departments such as purchasing, accounts, production, sales, marketing. These departments would normally have functional heads who may be called managers or directors depending on whether the function is represented at board level.

Advantages

Clarity

Economies of scale

Specialization

Coordination

In-depth skill development

Suitability

Limitations

Effort Focus

Poor decision-making

Sub-unit conflicts

Managerial vacuum

PRODUCT DEPARTMENTATION

The purpose of product departmentation is that every product is handled by separate management team and the problems faced in the development of a product are carried out by single group of employees working in that unit.

The disadvantage is that the product managers need to coordinate each other for the resource sharing which becomes a difficult process because of lesser communication between the product divisions.

Sometimes, products of the same company start competing with each other which results in snatching one's division profit from other division leaving behind net profit for the company zero. However this kind of structure works best in the big organizations which have lots of products in their product portfolio.

PRODUCT DEPARTMENTATION

Advantage: The manager can aware about

their particular activity in the firm about the

activities which are related to the manufacturing

a product.

Disadvantage: Sometimes the managers and

employees do not meet the requirement of other

department which is somewhere related to their

particular department because they are working

in their department and there is no more

communication between the other departments

GEOGRAPHIC DEPARTMENTATION

MATRIX ORGNAISATION

STRUCTURE

A Matrix structure organisation contains teams of people created from various sections of the business. These teams will be created for the purposes of variety of projects rather than a specific project and will be led by a project manager. Often the team will only exist for the duration of the projects and matrix structures are usually deployed to develop new products and services .

The advantages of a matrix include

Individuals can be chosen according to the needs of the project.

The use of a project team which is dynamic and able to view problems in a different way as specialists have been brought together in a new environment.

Project managers are directly responsible for completing the project within a specific deadline and budget.

the disadvantages include

A conflict of loyalty between line managers

and project managers over the allocation of

resources.

If teams have a lot of independence can be

difficult to monitor.

Costs can be increased if more managers (ie

project managers) are created through the use

of project teams

Factors affecting Organizational

structure

Size

Technology

Environment

People

PROJECT MANAGEMENT

Project management is a carefully planned and organized effort to accomplish a specific (and usually) one-time objective.

for example, construct a building or implement a major new computer system.

Project management includes developing a project plan, which includes defining and confirming the project goals and objectives, identifying tasks and how goals will be achieved, quantifying the resources needed, and determining budgets and timelines for completion..

It also includes managing the implementation of

the project plan, along with operating regular

'controls' to ensure that there is accurate and

objective information on 'performance' relative to

the plan, and the mechanisms to implement

recovery actions where necessary. Projects

usually follow major phases or stages (with

various titles for these), including feasibility,

definition, project planning, implementation,

evaluation and support/maintenance.

Benefits of Project Mgt.

Better efficiency in delivering services

Improved/increased/enhanced customer satisfaction

Enhanced effectiveness in delivering services

Improved growth and development within your team

Greater standing and competitive edge

Opportunities to expand your services:.

Better Flexibility:

Increased risk assessment:.

Increase in Quality: