What is Strategy:
Strategy in management is a plan to achieve an organization's long-term goals and objectives. It
involves making decisions about how to allocate resources, what activities to perform, and how
to respond to the environment.
Levels of Strategy:
The three levels of strategy are corporate, business, and functional.
Corporate level
● The highest level of strategy in an organization
● Defines the organization's overall direction
● Involves investment and divestment decisions, mergers, and acquisitions
● Typically created by leadership, such as the CEO and top management
● Strategies are more conceptual and futuristic than other levels.
Types of Corporate Level Strategy
1. Growth Strategies: Focus on expanding the company’s reach through new markets,
products, or acquisitions.
2. Stability Strategies: Aim to maintain current operations, focusing on consistent revenue
generation.
3. Retrenchment Strategies: Involve cutting back to focus on core competencies and
stabilize the company during turbulent times.
4. Combination Strategies: Employ a mix of growth, stability, and retrenchment depending
on market and internal conditions.
Business level
● Involves actions to achieve a competitive advantage in a specific market segment
● Involves making choices about how to allocate resources, differentiate offerings, and
create unique value for customers
● Involves designing ways for a business to compete, position itself, and master its rivalry
interactions
Types of Business Level Strategy
1. Cost Leadership: Building a competitive advantage by achieving the lowest operational
cost in the industry.
2. Differentiation: Offering unique attributes that set the company’s products or services
apart from competitors.
3. Focus: Concentrating on a niche market to serve a well-defined customer group
exceptionally well.
Functional level
● Involves how each functional area of the organization will contribute to the overall
strategic goals
● Involves maximizing the effectiveness of each department
● Involves aligning functional strategies with the greater business strategy
Functional Level Strategy Examples
1. Marketing Strategy: Develop a social media campaign to reach a specific target
audience and increase brand awareness (aligned with a market expansion goal).
2. Financial Strategy: Implement cost-saving measures to reduce operational expenses by
10% (aligned with a cost leadership strategy).
3. Human Resource Strategy: Launch a training program to upskill employees on new
technologies needed for a product launch (aligned with an innovation strategy).
4. Operations Strategy: Streamline production processes to improve efficiency and reduce
waste (aligned with a cost reduction goal).
5. Research and Development Strategy: Invest in research on new materials to develop a
more sustainable product line (aligned with a social responsibility focus).
6. Purchasing Strategy: Negotiate bulk discounts with suppliers to secure lower raw
material costs (aligned with a cost leadership strategy).
7. Information Technology Strategy: Upgrade the company’s data analytics software to gain
better customer insights.
Types of Strategies
1. Organizational
2. Corporate
3. Business Unit
4. Competitive
5. Functional
6. Customer Service
7. Innovation
Strategic Management Process
Step 1: Identify the Organization’s Current Mission, Objectives, and Strategies
Mission: the firm’s reason for being
The scope of its products and services
Goals: the foundation for further planning
Measurable performance targets
Step 2: Conduct an External Analysis
The environmental scanning of specific and general environments
Focuses on identifying opportunities and threats
Step 3: Conduct an Internal Analysis
Assessing organizational resources, capabilities, activities, and culture:
Strengths (core competencies) create value for the customer and strengthen the competitive
position of the firm
Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.
Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities,
and Threats)
Step 4: Formulate Strategies
Develop and evaluate strategic alternatives
Select appropriate strategies for all levels in the organization that provide relative advantage
over competitors
Match organizational strengths to environmental opportunities
Correct weaknesses and guard against threats
Step 5: Implement Strategies
Implementation: effectively fitting organizational structure and activities to the environment
The environment dictates the chosen strategy; effective strategy implementation requires an
organizational structure matched to its requirements
Step 6: Evaluate Results
How effective have strategies been?
What adjustments, if any, are necessary
Types of Strategies:
1. Corporate-level Strategies
Top management’s overall plan for the entire organization and its strategic business units
Types of Corporate Strategies
Growth: expansion into new products and markets
Stability: maintenance of the status quo
Retrenchment: addresses organizational weaknesses that are leading to performance declines
Corporate portfolio analysis: involves a number of businesses; guides resource allocation
Growth Strategy
Seeking to increase the organization’s business by expansion into new products and markets
Types of Growth Strategies
Concentration
Vertical integration
Horizontal integration
Diversification
Stability Strategy
A strategy that seeks to maintain the status quo to deal with the uncertainty of a dynamic
environment, when the industry is experiencing slow- or no-growth conditions, or if the owners
of the firm elect not to grow for personal reasons
Retrenchment Strategy
Reduces the company’s activities or operations
Retrenchment strategies include:
Cost reductions
Layoffs
Closing underperforming units
Closing entire product lines or services
2. Business-Level Strategy
A strategy that seeks to determine how an organization should compete in each of its SBUs
(strategic business units)
3. Competitive Strategies
● Cost Leadership Strategy
Seeking to attain the lowest total overall costs relative to other industry competitors
● Differentiation Strategy
Attempting to create a unique and distinctive product or service for which customers will pay a
premium
● Focus Strategy
Using a cost or differentiation advantage to exploit a particular market segment rather than a
larger market
● Stuck in the Middle
Organizations that are unable to develop a cost or differentiation advantage
4. Functional-level strategies
They support the business-level strategy i.e., Marketing, human resources, research and
development, and finance all support the business-level strategy. Problems occur when
employees or customers don’t understand a company’s strategy
5. Customer Service Strategies
Giving the customers what they want, Communicating effectively with them and
Providing employees with customer service training.
6. Innovation Strategies: :
● Possible Events
○ Radical breakthroughs in products
○ Application of existing technology to new uses
● Strategic Decisions about Innovation
○ Basic research
○ Product development
○ Process innovation
● First Mover
○ An organization that brings a product innovation to market or uses a new process
innovation