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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: