Strategic Control,levels Of Strategy

Question 1 Each level of strategy involves different strategic decisions. Discuss taking into consideration the different levels of strategy. Illustrate your answer with the help of examples

Introduction: The term ‘strategy’ is derived from the Greek word “STRATEGOS”, which means Generalship. The word ‘strategy’, means “THE ART OF GENERAL”. For a company strategy is one of the most significant concepts to emerge in the field of management, and also one of the most vital for survival and success.

Definitions: “Strategy is the determination of basic long-term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources for carrying out these goals” Alfred chandler “A unified, comprehension and integrated plan designed to assure that the basic objectives of the enterprises are achieved” William Glueck

Strategic management is “that set of managerial decisions & actions that determines the long run performance of a corporation” (Thomas L.WWhelen)

Strategy is long term & growth is achieved by deepening strategy. It is➢ The future plan of action, which relates to the company’s activities and depends on its mission/vision ➢ It is concerned with the resource available today and those that will be required for the future plan of action.

1|Page

➢ It is about the trade off between its different activities and creating a fit among these activities. A company needs strategy at various levels, as there is a different need at each level. Hierarchical Levels of Strategy

Strategy can be formulated on three different levels: •

Corporate level

•

Business unit level

•

Functional or departmental level

CORPORATE LEVEL STRATEGIES Corporate-level strategies address the entire strategic scope of the enterprise. It is the "big picture" view of the organization and includes deciding in which product or service markets to compete and in which geographic regions to operate. For multibusiness firms, the resource allocation process like cash, staffing, equipment and other resources are distributed is established at the corporate level. Market definition is also in the domain of corporate-level strategists, the responsibility for diversification, or the addition of new products or services to the existing product/service line-up, also falls within the realm of corporate-level strategy. Similarly, whether to compete directly with other firms or to selectively establish sstrategic alliances—falls within the purview corporate-level strategy. Critical questions answered by corporate-level strategists tinclude: •

What should be the scope of operations-what businesses should the firm be in?

•

How should the firm allocate its resources among existing businesses?

•

What level of diversification should the firm pursue;- which businesses represent the company's future? Are there additional businesses the firm should enter or are there businesses that should be targeted for termination or divestment?

•

How diversified should the corporation's business be?

•

How should the firm be structured? Are the responsibilities or each business unit clearly identified and is accountability established?

2|Page

•

Should the firm enter into strategic alliances—cooperative, mutually-beneficial relationships with other firms?

CORPORATE GRAND STRATEGIES Corporate-level strategists have a tremendous amount of leeway as well as responsibility. Corporate-level strategy decisions are classified into three grand strategies. These grand strategies involve efforts to expand business operations (growth strategies), decrease the scope of business operations (retrenchment strategies), or maintain the status quo (stability strategies).

Analysis: Corporate strategies represent the long-term direction for the organization. The top management has the primary decision making responsibility in developing corporate strategies and these managers are directly responsible to shareholders. They are paralyzed without accurate and up-to-date information from managers at the businesslevel. Corporations are responsible for creating value through their businesses which they do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and ensuring that each business is compatible with others in the portfolio.

Example: The Tata group has a wide range of business from cars,software to Insurance .The main strategic responsibilities of Tata’s CEO Ratan N.Tata is to i. Overall strategic objectives ii. Deciding whether the firm should divest itself from any of its business iii. Allocating resources among different business iv. Decisions on any new acquisitions or mergers for any particular unit v. Corporate strategies and policies for business which fall under the brand umbrella ‘Tata’ vi. Managing corporate portfolio of business vii. Maximize corporate responsibility 3|Page

viii.Give a sense of direction to the Corporation

Business Unit Level Strategy (SBU) Strategic decisions made at the business level reflect various means that have been adopted to achieve the mission, goals, and objectives of a single business, or division, of the firm. A strategic business unit may be a division or a product line that can be planned independently from the other business units of the firm. Analysis: At the business level, the strategy formulation phase deals with: •

positioning the business against rivals

•

anticipating changes in demand and technologies and adjusting the strategy to accommodate them

•

influencing the nature of competition through strategic actions such as vertical integration

•

Developing and sustaining a competitive advantage for the goods and services that are produced.

According to Michael Porter three generic strategies-cost leadership, differentiation, and focus can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces. Taking again Tata group as an example and in particular Tata consultancy services. The responsibility of the Managing Director,N.Chandrasekharan will be to i. Translate the general statement of intent from the CEO into strategies for TCS ii. Formulate strategy for TCS iii. Take strategic decisions regarding the company’s market foray iv. Develop strategies against competitors v. Assess and take appropriate action on the progress of the company in the market vi. Lookout for suitable acquisitions which will help enhance the competitiveness of the company

Functional Level Strategy 4|Page

The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Analysis: Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed. For example in the above two cases where the CEO gave direction to the conglomerate as a whole and the managing director of TCS set to implement his company’s strategy on the lines of the corporate policy, it will actually be the Functional level managers such as in Human resource, product development, customer service etc who actually carry on the task of implementing this strategy.As above it could be in production, service ,finance or any integral functional unit in the company.The manager in product development in TCS will have his work cut out as follows

i. Implement the general strategic outline provided by the managing director ii. Plan,communicate and implement the strategic outline provided by the MD iii. Determine which products are to be followed up with,products which are to be done with iv. Identifying the right,viable products for R&D v. Ensure quality conforming to the standards of the organization vi. Ensure smooth running of the product development unit vii. On the look out for new technologies to acquire viii.Staying tuned with the competitiors R&D work ix. Give feedbackto the corporate & business level managers about the sucees of their policies or drawbacks since they are in the frontline of the battle.

Societal strategies

5|Page

A societal strategy is how the company perceives itself in its role towards the society, in terms of a particular vision / mission statement that it strives to fulfill corporate level strategies are then derived from the societal strategy.

Levels of Strategy

MISSION / VISION LEVEL

CORPORATE LEVEL

FUNCTIONAL LEVEL

6|Page

STRATEGIES [CORPORATE]

SBU1

SBU2

SBU3 (SBU LEVEL)

FUNCTIONAL LEVEL STRATEGIES

OPERATIONAL LEVEL

Conclusion In this Essay,I have broadly outlined what strategy is,the different levels of strategy with examples. All three levels of strategy are equally important and they complement each other.I conclude by saying that for a corporate, synergy of all the three strategic planes is very crucial to its success

References: 1. Strategic management from theory to Implementation-David Hussey 4th ed 2. Concepts

in

Strategic

management

and

business

policy(Thomas

L.Wheelan,J.David ( 9ed) 3. Strategic

management

R.Jones 6 ed)

7|Page

an

Integrated

approach(CharlesW.L.Hill,Gareth

Word Count: 1172

8|Page