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Strategic Management: Chapter 5 Strategic in Action

Strategy in action-

Corporate StrategyBusiness Strategy Functional Strategy

Chapter 5


Chapter objectives

After finish this chapter student will understanding what is: Corporate level strategy Business level strategy Functional level strategy Tools to develop strategy


Level of strategic plan

Most of company develop strategy into 3 different level: Corporate level strategy Business level strategy Functional level strategy


CorporateStrategies

Business Strategies

Functional Strategies(R&D, Manufacturing, marketing, finance,

human resource, …etc

Responsibility of corporate

level

Responsibility of business

level

Responsibility of head of

functional department

within business unit

Level of Strategic plan


Corporate level strategy Sometime called grand strategy or

master strategy. Address overall of the organization

strategic direction. For the organization which has a

various strategic business unit, it may set the direction to each business unit differently (SBU-strategic business unit)


Type of corporate level strategies Growth strategy

Concentration Market Penetration Market Development Product Development

Diversification Concentric diversification Conglomerate diversification

Integration Horizontal Integration Vertical Integration

Stability strategy Retrenchment strategy

Harvest Turnaround Divestiture Bankruptcy Liquidation


Growth strategy

Involves organizational expansion in sales, earnings, and other criteria such as business units, product variety, customers, and geographic location. There are 3 type:

Concentration Diversification Integration


Concentration strategy or intensive strategy, focus on effecting the

growth of a single product or service or small number of closely related products or services.

Market Penetration

Product Development

Market development (Diversification)

Current Products

New Products

Current Markets

New Markets


Diversification strategy entails effecting growth through the

development of new areas that are clearly distinct from current business.

Concentric diversification- firm seek new products that have technological or market synergies with existing product line.

Conglomerate diversification-firm seek new businesses that have no relationship to its current technology, products, or markets.


Integration strategy

involves expanding its operations line to related activities or the similar activities but to acquire more markets or products.


Horizontal and Vertical strategy

Organizations

Competitors Competitors

Buyers

Suppliers

Horizontal Integration

Background Integration

Forward Integration


Stability strategy

engages maintaining the statue in competition because of several reasons: If company doing well –not take risk from

growing Difficult to growth according to resources

stretched –no need to growth Market growth is slow– stay in the

current market share.


Retrenchment Strategy or defensive strategy focus on the

desire or need to reduce organizational operation, usually through cost reduction or asset reductions. There are five sub strategy.

Harvest Turnaround Divestiture Bankruptcy Liquidation


Tools for developing corporate strategy

1- BCG Growth Matrix

2- GE 9 Cell


1- BCG Growth Matrix


2- GE 9 Cell


Business level strategy

involves a distinctive positioning that firm established to competes successfully in a particular market.


Porter’s generic strategies


cost advantage strategy a firm tries to become the lower cost producer in the industry. However, its product must be seen as comparable to products of the quality and other expectations of the buyers.

In differentiation strategy, a firm tries to produce something that is unique with respect to certain dimensions that are widely valued by buyers. The firm may position itself to cater to some or all of those dimensions. For providing these valued attributes the firm will charge a premium.


segmentation strategy or called focus strategy concentrates on a

narrow segment and within that segment attempts to achieve either cost leadership or differentiate.

Focus strategy are most effective when consumers have distinctive preferences or requirements and when rival firms are not attempting to specialize in the same target segment.


Functional Level strategy

Involves business function operations to support business and corporate strategy. It focus on operation plan within marketing, productions, finance, human resource and...division.


Means for achieving strategy

Joint Venture/PartneringJoint Venture is a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity. Cooperative arrangements include R&D partnerships, cross-distribution arrangement, cross-licensing arrangement, cross-manufacturing agreement, and joint-bidding consortia.


Merger/Acquisition This is two commonly used ways to pursue strategies. Merger occur when two organizations of about equal size unite to form one enterprise.

An acquisition occur when a large organization purchases (acquires) a smaller firm, or vice versa.


Review and discussion

1. Describe briefly type of strategy that you just already learned.

2. Group Discussion-break a class into group (3-5)

Topics: Suppose you are a manager of tourism company. -If your company is a global firm (big) what type

of business strategy you will use to compete in the market? why? how to do it?

-If your company is a local firm (small) what type of business strategy you will use to compete in the market? why? how to do it?

strategic management: chapter 5 strategic in action page 1 strategy in action- corporate strategy...

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