Академический Документы
Профессиональный Документы
Культура Документы
Lecture: 2
Establishing Company Direction - An overview
Vitually startegic intent can be thought as a “Big Hairy Audacious Goal” or BHAG that usually
takes a long time to achieve, may be as long as 20-30 years.
Ex:
• A small company want to dominate the niche.
• An up-and-coming enterprise may try to overtake market leaders.
• Technologically advanced company may discover a whole new array of products.
(Ex: Komatsu an Earth Moving Equipment Company (See the Text Book, page: 45)
2. Business strategy : Strategy for the each business the company has diversified into.
3. Functional Strategy : Strategy for each specific functional unit within a business structure.
Each business usually has a production strategy, a marketing
strategy, finance strategy and so on.
4. Operating strategy : Strategies for basic operating unit like plants, sales districts regions
and departments within functional areas.
Corporate strategy:
Corporate strategy is the overall managerial game plan for a diversified company. It concerns how a
diversified company intends to establish business positions in different industries and the actions and
approaches employed to improve the performance of the group of businesses the company has
4
diversified into. Crafting corporate strategy for a diversified company involves four kinds of
initiatives:
1. Making the memo to establish positions in different business and achieve diversification
2. Initiating actions to boost the combined performance of the business the firm has diversified.
3. Pursuing ways to capture the synergy among related business unit and turn in into
competitive advantage.
4. Establishing investment priorities and steering corporate resourses into the most attractive
business units.
Business strategy:
The term business strategy refers to the managerial game plan for a single business. It is mirrored in
the pattern of approaches and moves crafted by management to produce successful performance in
one specific line of business.
The central thrust of business strategy is how to build and strengthen the company’s long – term
competitive position in the market place. Towards the end, business strategy is concerned principally
with:
1. Forming responses to changes under way in the industry, the economy at large, the
regulatory and political area and other relevant areas.
2. Crafting competitively moves and market approaches that can lead to sustainable
competitive advantage.
3. Building competitively valuable competencies and capabilities.
4. Uniting the strategic initiatives of functional departments.
5. Addressing specific strategic issue facing the company’s business.
It is clear that business strategy encompasses whatever moves and new approaches manager deem
prudent in light of market forces, economic trends and developments, buyers’ need and
demographics, new legislation and regulatory requirements and other such broad external factors. A
good strategy is well matched to the external situation.
Functional strategy:
The term functional strategy refers to the managerial game plan for running the major functional
activity or process within a business like R & D, Production, Marketing, Customer Service,
Distribution, Finance, Human resources and so on. A business needs as many functional strategy as
it has critical activities.
5
The primary role of functional strategy is to support the company’s overall business strategy and
competitive approach. Well executed functional strategies give the enterprise competitively valuable
competencies, capabilities and resource strengths.
Compatible, collaborative, mutually reinforcing strategies are essential for the overall business
strategy to have maximum impact.
Operating strategy:
Operating strategy concerns how to manage front line organizational units within its’ business
(plants, sales districts, distribution centers) and how to perform strategically significant operating
tasks (materials, purchasing, shipping, inventory control, maintenance, advertising campaigns). Lead
responsibility for operating strategies is usually delegated to front line managers subject to review
and approval by higher ranking mangers. Frontline managers are part of an organization’s strategy
making term because many operating units have strategy critical performance targets and need to
have strategic action plans in place to achieve them.
A regional manger needs a strategy customized to the region’s particular situation and objectives.
The Goodness of Fit Test: A good strategy is well matched to the company’ situation – both
internal and external factors, its own capabilities and aspirations. Unless a strategy exhibits
tight fit with factors shaping the strategy, it is less likey to be succesful.
The performance Test: A good strategy boosts company performance. Two kinds of
performance improvements are the most telling; gains in profitability and gains in the
company’s long-term business strengths and competitive position.
Questions:
• Sketch the ‘Strategy Making Pyramid’ ? Describe the test of a “Winning Strategy”?
• Describe the Corporate & Business strategy. What are the factors that shape the companys’strategy?