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Levels of strategy

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Hemant Kumar
Hemant Kumar

This document discusses different levels of strategy within an organization. It defines key terms like industry, value chain, company, and market. It then explains Rumelt's typology of diversification which categorizes companies based on their revenue sources. The document outlines some common levels of strategy as corporate, business, functional, and operational. It provides examples of each level and how the levels support each other. Finally, it includes organization charts to illustrate how strategies are implemented within single product, related product, and unrelated product businesses.

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Levels of Strategy PRESENTED BY: HEMANT KUMAR MBA 3rd sem
Terms  Arrange the following terms in a logical hierarchy:          Company Division Strategic Business Unit (SBU) Corporation Industry Value Chain Person Department Market
Terms  Arrange the following terms in a logical hierarchy: Industry  Value Chain  Company  Department  Person  Corporation  Division / SBU  Company  A market refers to the place where goods and services are exchanged.
Rumelt's Typology of Diversification 1. Single Product: 95% of revenues from a single product line 2. Dominant Product: 70-94% of revenue from a single product line 3. Related Product: Less than 70% of revenue from a single product line and and the remainder of revenues from a related product domain 4. Unrelated Product: Less than 70% of revenue from a single product and remainder of revenues from an unrelated product domain
Some Levels of Strategy The Impact of IT on strategy is dramatically different depending on the level of strategy. On what level is your paper?  Corporate  Business  Functional  Operational
Corporate Level Strategy   What businesses are we in? What businesses should we be in? Four areas of focus Diversification management (acquisitions and divestitures)  Synergy between units  Investment priorities  Business level strategy approval (but not crafting) 
Corporate-Level Strategies Valuable strengths Firm Status Concentric Diversification (Economies Corporate of Scope) growth strategies Conglomerate Diversification (Risk Mgt.) Critical weaknesses Abundant environmental opportunities Corporate stability strategies Corporate retrenchment strategies Can still go for business-level growth (economies of scale) Environmental Status Critical environmental threats
The BCG “Portfolio” Matrix Market Share High Stars High Anticipated Growth Cash Cows Rate Low Low Question Marks ? Dogs ? ? ?
Business Level Strategy    How do we support the corporate strategy? How do we compete in a specific business arena? Three types of business level strategies:     Low cost producer Differentiator Focus Four areas of focus     Generate sustainable competitive advantages Develop and nurture (potentially) valuable capabilities Respond to environmental changes Approval of functional level strategies
Functional / Operational Level Strategy   Functional: How do we support the business level strategy? Operational: How do we support the functional level strategy?     An example. Business L.S.: Become the low cost producer of widgets Functional L.S. (Mfg.): Reduce manufacturing costs by 10% Operational (Plant #1): Increase worker productivity by 15%
A Simple Organization Chart (Single Product Business) Business Level Strategy Research and Manufacturing Development Functional Level Strategy Business Marketing Human Resources Finance
A Simple Organization Chart (Dominant or Related Product Business) Corporate Level Business Level Multibusiness Corporation Business 1 (Related) Business 2 (Related) Business 3 (Related) Functional Level Research and Manufacturing Development Marketing Human Resources Finance
An example of an Unrelated Product Business (Note: By itself, an SBU can be considered a related product business) SBU: a single business or collection of related businesses that is independent and formulates its own strategy A (Multi-business) Corporation Strategic Business Unit 1 Company 1 Co. 2 Ex.: G.E. (General Electric Corp.) S.B.U. 2 Co. 3 Division 1 Div. 2 Div. 3
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Levels of strategy

  • 1. Levels of Strategy PRESENTED BY: HEMANT KUMAR MBA 3rd sem
  • 2. Terms  Arrange the following terms in a logical hierarchy:          Company Division Strategic Business Unit (SBU) Corporation Industry Value Chain Person Department Market
  • 3. Terms  Arrange the following terms in a logical hierarchy: Industry  Value Chain  Company  Department  Person  Corporation  Division / SBU  Company  A market refers to the place where goods and services are exchanged.
  • 4. Rumelt's Typology of Diversification 1. Single Product: 95% of revenues from a single product line 2. Dominant Product: 70-94% of revenue from a single product line 3. Related Product: Less than 70% of revenue from a single product line and and the remainder of revenues from a related product domain 4. Unrelated Product: Less than 70% of revenue from a single product and remainder of revenues from an unrelated product domain
  • 5. Some Levels of Strategy The Impact of IT on strategy is dramatically different depending on the level of strategy. On what level is your paper?  Corporate  Business  Functional  Operational
  • 6. Corporate Level Strategy   What businesses are we in? What businesses should we be in? Four areas of focus Diversification management (acquisitions and divestitures)  Synergy between units  Investment priorities  Business level strategy approval (but not crafting) 
  • 7. Corporate-Level Strategies Valuable strengths Firm Status Concentric Diversification (Economies Corporate of Scope) growth strategies Conglomerate Diversification (Risk Mgt.) Critical weaknesses Abundant environmental opportunities Corporate stability strategies Corporate retrenchment strategies Can still go for business-level growth (economies of scale) Environmental Status Critical environmental threats
  • 8. The BCG “Portfolio” Matrix Market Share High Stars High Anticipated Growth Cash Cows Rate Low Low Question Marks ? Dogs ? ? ?
  • 9. Business Level Strategy    How do we support the corporate strategy? How do we compete in a specific business arena? Three types of business level strategies:     Low cost producer Differentiator Focus Four areas of focus     Generate sustainable competitive advantages Develop and nurture (potentially) valuable capabilities Respond to environmental changes Approval of functional level strategies
  • 10. Functional / Operational Level Strategy   Functional: How do we support the business level strategy? Operational: How do we support the functional level strategy?     An example. Business L.S.: Become the low cost producer of widgets Functional L.S. (Mfg.): Reduce manufacturing costs by 10% Operational (Plant #1): Increase worker productivity by 15%
  • 11. A Simple Organization Chart (Single Product Business) Business Level Strategy Research and Manufacturing Development Functional Level Strategy Business Marketing Human Resources Finance
  • 12. A Simple Organization Chart (Dominant or Related Product Business) Corporate Level Business Level Multibusiness Corporation Business 1 (Related) Business 2 (Related) Business 3 (Related) Functional Level Research and Manufacturing Development Marketing Human Resources Finance
  • 13. An example of an Unrelated Product Business (Note: By itself, an SBU can be considered a related product business) SBU: a single business or collection of related businesses that is independent and formulates its own strategy A (Multi-business) Corporation Strategic Business Unit 1 Company 1 Co. 2 Ex.: G.E. (General Electric Corp.) S.B.U. 2 Co. 3 Division 1 Div. 2 Div. 3