UNIT II - PLANNING -

DELIVERING STRATEGIC
VALUE
A GENERAL FRAMEWORK FOR
PLANNING
Planning is a complex and comprehensive process involving a series of overlapping and
interrelated elements or stages, including strategic, and operational planning. Strategic
planning establishes master plans that shape the destiny of the fi rm. An example of strategic
planning is when the executive team at Harley-Davidson Inc. planned how to deal with the
demographic shit of their customer base becoming much older. The strategic issue is faced
was whether to change its iconic product line to win over young buyers. A second type of
planning is needed to support strategic planning, such as how to build motorcycles that fi t
the preferences o younger motorcyclists. Tactical planning translates strategic plans into
specifi c goals and plans that are most relevant to a particular organizational unit. The
tactical plans also provide details of how the company or business unit will compete within
its chosen business area. Middle managers have the primary responsibility for formulating
and executing tactical plans.
A GENERAL FRAMEWORK FOR
PLANNING
These plans are based on marketplace realities when developed for a business.
Conditions can change rapidly in competitive fi elds such as Korean company suddenly
developing a substantially lower-priced sports bike. The scope o tactical plans is
broader than operational plans (described next), but not as broad as that of strategic
plans. A third type of planning is aimed more at day-to -day operations or the nuts and
bolts of doing business. Operational planning identifi es the specifi c procedures and
actions required at lower levels in organization. If Harley-Davidson wants to revamp an
assembly line distinction between tactical planning and operational planning is not
clear-cut. However, both tactical plans and operational plans must support the strategic
plan such as revamping manufacturing and marketing to capture a larger group of young
cyclists.
 DEFINE THE PRESENT
SITUATION

Knowing where you are is critical to establishing goals for change. Defi ning the present
situation includes measuring success and examining internal capabilities and external
threats. Harley-Davidson has had a long tradition off success. At one time the
motorcycle has a youth- oriented counterculture mystique. By the mid-2000s, Harley had
become a middle-aged nostalgia brand. Because of so many loyal customers, Harley has
been able to turn small product improvements into sustained growth. Many Harley-
Davidson customers own multiple—sometimes even 12 – Harley motorcycles. At the
moment the new, bigger Twin Cam engine and six-speed transmission was announced in
July 2006, orders began pouring into dealers. Annual sales of 6 billion were forecast.
Another capability o Harley is a fast-growing overseas fan base the perceives the
Harley-Davidson in the best possible sense, referring to being powerful and free. Over
one-fi fth of Harleys are sold outside the United States.
 DEFINE THE PRESENT
SITUATION

A major external threat facing Harley-Davidson was the long-time

prediction that a demographic time bomb would blow up the
company. The median age of a Harley buyer had leapt from 35 in
1987 to nearly 47 in 2010. The company has done little to shake
its imagine with people in their twenties as Granddad’s or
Grandma’s bike. ‘’They haven’t kept up with the younger riders,”
says a 44 year- old business analyst who owns two Harleys.
 ESTABLISH GOALS AND
OBJECTIVES

Th e second step in plan nin g is to establish goals an d identify

objectives that contribute to th e attainmen t of goals. (G oals are
broader than objectives, w h ereas objectives fu n ction as smaller goals
th at support the bigger goals.) A major goal Harley managemen t
might establish is to contin u e to cultivate people over 30 w h o prefer
th e big, loud bikes that allow for smooth rides on lon g trips. An other
goal would be to promote th e Harley as a retiremen t treat, especially
for young retirees.
 ESTABLISH GOALS AND
OBJECTIVES

Genevieve Schmitt, founding editor of Women Riders Now. Com, believes

Harley should established the goal of continuing to focus on what do
best, She says, “They’ve responded to the needs of smaller, less
muscular riders by off ering motorcycles with lower motors. They realize
women are an up-and-coming segment and that they need to
accommodate them. They don’t market to a specifi c gender, but are
gender-neutral. They market a lifestyle, with daughters and moms, dads
and sons.” Following this thought Harley might establish the goal making
their marketing more gender neutral.
 ANALYZE THE ENVIRONMENT TO
FORECAST AIDS AND BARRIERS TO
GOALS AND OBJECTIVES
A s an ex te nsio n o f de fi ning the pre se nt situatio n, the m ana ge r o r o the r
planne r atte m pts to pro duct w hich internal and external fa cto rs w ill fo ste r o r
hinde r attainm e nt o f the de sired e nds. A ke y strength o ff Ha rl e y be ing a ble to
re tain its pro m ine nce in the m o to rcycle busine ss is that its brand is so w e ll
e stablishe d. The lo y al and tale nte d Harle y-Davidso n wo rk fo rce w ill be a ble to
adapt to any shifte r to w ard sm aller, sportier bikes.
A pote ntial barrie r in the e nvironm e nt to the co ntinue d succe ss o f Ha rle y is
that the Japa ne se bike m a ke rs quick ly change to suit the shifting ta ste o f
custo m e rs. In co ntrast, Harley is ov er 100 ye ars o ld and m uch m o re
co nse rv ative . Co m pany m a nage m e nt is less than eage r to m e ss w ith its ico nic
im age: Ke nt Gra y so n, a m arke ting professo r at No rthwe ste rn U niv e rsity say s,
“It’s m ore tha n a bra nd. It’s a culture .” Anothe r barrie r to atta ining go a ls is
that Europe an a nd Ja pa ne se m otorcycle m anufacturers do m inate sa le s o f
sm alle r bike s in the U nite d State s.
 DEVELOP ACTION PLANS TO REACH
GOALS AND OBJECTIVES

Goals and objectives are only wishful thinking until action plans are
drawn. An action plan consists o the specifi c steps necessary to achieve
a goal or objective. The planners must fi gure out specifi cally how they
will accomplish such ends as encouraging Harley users to keep
motorcycling until later in life. Other action plans might include more
advertising aimed at women, including the objective of featuring women
celebrities in advertisements for Harley-Davidson. Another action plan
might include free seminars for seniors about the joy of motorcycles. By
2008, Harley-Davidson began purposely reaching out to younger drivers
in its marketing campaigns. The recession that continued for a couple of
years made it diffi cult to evaluate how successful this program would
prove to be.
 DEVELOP ACTION PLANS TO REACH
GOALS AND OBJECTIVES

In mid-2000, Harley-Davidson acquired two manufacturers of

sports bikes, Buell and Mv Augusta. (Sports bikes are lightweight,
can accelerate quickly, and turn corners at high speeds.)
Company management dropped the Buell lines in 2009, and was
looking to sell MV Augustin in 2010 because neither motorcycle
was really bringing in y oung riders. As a result, the company was
thinking of de-emphasizing going after younger motorcy cle riders,
and concentrating on global expansion, including the Mexican and
Indian markets. (The take away lesson here is that is a strategic
plan is not working, a backup strategy must be developed quickly.
 DEVELOP BUDGETS

Planning usually results in action plans that require money to

implement. Among the expenses would be larger advertising and
promotion budgets geared to younger people and women. Another
budget item would include safe-driving campaigns to help soften the
image of motorcycling being so dangerous. If the international
expansion plan is pursued heavily, that too would involve expanses in
establishing dealers in other countries.
 IMPLEMENT THAT PLANS

If the plans developed in the previous fi ve steps are to benefi t the

fi rm, they must be put to use. A frequent criticism of planners is that
develop elaborate plans and then abandon them in favor of
conducting business as usual. One estimate is that 70 percent of the
time when CEOs fail, the major cause of failure is poor execution, not
poor planning. Poor execution in this study included not getting
things done, being indecisive, and not delivering on commitments.
Furthermore, execution is considered to be a specifi c set of behaviors
and techniques that companies need to master in order to maintain a
competitive advantage.
 CONTROL THE PLANS
Planning does not end with implemen tation , bec ause plans may not always
proc eed as conceived. The c ontrol proc ess measu res progress toward goal
and indic ates corrective ac tion if too muc h deviation is detec ted. The
deviation from expected performan c e c an be n egative or positive. Progress
against all of the goals and objec tives men tioned above mu st be measured.
On e goal was to hold on to muc h of the existing cu stomer base. Mark
Barn ett, an El Paso, Texas, Harley dealer believes that Harley is attainin g
this goal. He observes: “When th ey get into their 30s and 40s, people slow
down an d get tired of sports bikes. If you look at the sport bike
demograph ic s, the number on them over 40 is pretty low. As long as people
don ’t qu it riding motorcycles altogether, they’re going to be ou r c ustomer
when they turn 40.” Company management n eeds more time to kn ow if th e
goal for getting more young r ider s and r ider s from oth er c oun tries to
pu rc hase Harley bikes has been suc c essful.
 MAKE CONTINGENCY PLANS

Many pla nne rs develo p a set of backup plans to be used in case

things do no t pro cee d s hoped. A contingency plan is an
alternat ive plan t o be used original plan cannot be implemented
or a cris is develo ps . (The familiar expression “Let’s try plan B”
gets at the e s s ence of contingency planning.) One potential
crisis fo r H arley m anagement wo uld be substantial climate
change s in t he fo rm of rain, snow, and ice that would make
motorcycle riding les s feasible in many parts of the world.
Another cris is w o uld be the escalation of motorcycle insurance
prem ium s to the po int that the demand for motorcycles would
decline s ha rply.
 MAKE CONTINGENCY PLANS

Contingency plans are often developed from o bjectives defi ned

in earlier s teps in planning. The plans are triggered into action
when t he planner de tects, ho wever early in the planning process,
deviat io ns fro m o bjectives. Construction projects, such as
building an airpo rt hangar, are particularly prone to deviations
from co m pletio n dat es because do many diff erent co ntractors
and s ubco ntra ct o rs are involved.
An exit s trat egy m ight be part of the contingency plan. For
exam ple , if the de m and for bikes declined to the point o f major
losses , the Harley facilities might be sold to Suzuki. Harley
manage m ent, o f co urs e , does not envision this crisis.
 STRATEGY INVOLVES MORE THAN
OPERATIONAL EFFECTIVENESS

A sta rtin g po in t in un de rstanding the nature o f busine ss

str ate gy is to u nde r stan d that it involve s mo re than
o pe r atio na l e ff e ctive n e ss o r being e ffi cie nt. In re ce nt ye ars
m a n y fi rm s in th e pr iva te an d public se cto rs have be co me
m o re e ffi cie n t thro u gh such me ans as downsizing,
pe rf o rm in g w o rk m o re e ffi cie ntly, and o utsourcing.
A lth o ugh im pro ve m e n ts in ope rations m ay o ften be
dra m a tic, th e y ra re ly le a d to sustainable im prove me nts in
pro fi tability. A s m an y to p- le ve l exe cutive s have said, “Yo u
ca n’ t co st-c ut y o u r w a y to gro wth.” Strate gy esse ntially
in vo lv e s pe r fo rm ing activitie s diff e re ntly, as doe s 1 -8 0 0 -
M ATT RESS, th e c o m pa n y th at pio ne ered se lling mattre sses
o ve r th e ph o ne . Be in g a ble to purchase a m attre ss o ve r the
ph o n e is a c o n ve n ie n ce tha t adds value to the purchase of
a m attre ss.
 STRATEGY RESTS ON UNIQUE
ACTIVITIES

Co m pe titiv e str ate gy m e a ns de libe rate ly choo sing a

diff e re nt se t o f a ctiv itie s to de live r a unique value . An
o fte n - cite d ex am ple is So uth we st A irline s. T he y o ff e r
sh o rt- h au l, lo w -c o st, dire ct service be twe e n midsized cities
a nd se co nda ry a ir po r ts in large citie s. So uthwe st’ s
fre qu e n t de pa rture s a n d lo w fare s attract price-co nscio us
cu sto m e rs w h o w o u ld o the r wise trave l by car and bus.
So u thw e st c usto m e r s w illin gly fo re go frills such as in-fl ight
m e a ls to sa ve m o n e y a nd have a wide choice o f fl ight
de pa r tu re s. A ll So u th w e st activitie s fo cus o n de livering
lo w -c o st co n ve n ie n t se r vice on its ro ute s. By doing away
w ith adde d fe a tu re s su ch as m eals and inte rline transfe r o f
bagga ge , the air lin e can a ch ie ve gate turnaro unds in about
1 5 m in u te s. P lan e s ca n th e n be airbo rne mo re o f the time ,
a llo wing fo r mo re f re qu e n t fl ights.
A SUSTAINABLE STRATEGIC POSITION
REQUIRES TRADE-OFFS

After a fi rm fi nds a strategic position (or place in the

market), it can best sustain it by making trade- off s
with other positions. Trade- off s are necessary when
activities are incompatible. A good example is shopping
through the Internet. If you want the convenience of
shopping anytime from your home or offi ce, you
sacrifi ce interacting with the sales associate who can
answer your questions. Another trade- off with e-
commerce (and shopping by phone) is that defective or
ill-fi tting merchandise must be repacked and shipped
back to the merchant. For many people, repacking and
reshipping is more inconvenient than driving back to
the merchant with a product that doesn’t work.
 FIT DRIVES BOTH COMPETITIVE
ADVANTAGE AND SUSTAINABILITY
Strategy i ncludes effi cientl y combi ni ng acti vi ti es rel ated to maki ng a
product or service. Company acti vi ti es fi t and suppo rt each other to form
an eff ecti ve system. Bic Corporati on i s an exampl e of the fi t aspect of
strategy. The company sel l s a narro w l i ne of standard, l o w-pri ced
bal l poi nt pens to the maj o r custo mer markets (retai l , co mmerci al ,
promoti o nal ) through practi cal l y every avai l abl e channel . Bi c targets the
co mmo n need for a low-pri ce, acceptabl e pens throughout the markets i t
serves. The company gain the benefi t of co nsi stency across nearl y al l
acti vi ti es, meaning that they do not need di ff erent equi pment o r staff to
co nduct thei r business with di ff erent custo mer gro ups. Bi c achi eves fi t by
means of a product design that emphasi zes ease off manufacturi ng;
manufacturi ng plants desi gned for l o w-cost, l arge-scal e purchasi ng to
mi ni mi ze material costs; and i n-house parts pro ducti o n whenever co st
eff ecti ve.
 FIT DRIVES BOTH COMPETITIVE
ADVANTAGE AND SUSTAINABILITY

As mentioned in passing at the outset of this section, business

strategy also involves “thinking big,” or taking an overall
perspective even when it means glossing over some worrisome
details. For example, business strategists never seem to
mention that many customers fail to pay their bills or attempt
to defraud companies.
 THE DEVELOPMENT OF BUSINESS
STRATEGY
Elaborate methods of pl anning are often used to help develop
business strategy. The pl anning model presented earl ier in the
chapter contai ns the foundation of these tool s; SW OT analysi s
presented later is another planning tool . In the opi nion of
some management, the best strategy emerges when an
organization has a grand purpose. The eff ective leader, and
often the founder, sets the purpose of the fi rm. Coca Col a
began this way, and so did the Boei ng Corp. and the Sl oan
Kettering Cancer Insti tute. After the fi rm’ s purpose i s
established, the leader becomes the steward of the strategy.
Mintzberg argues that i f you want good strategy, skip al l the
elaborate planning and focus on having a great vision.
 THE DEVELOPMENT OF BUSINESS
STRATEGY

Strategic planning and setting the vision without planning

share an important purpose. Both strive to motivate
managerial workers throughout the organization to think
future. One of the central challenges of modern
organizations is motivating leaders at all levels of the fi rm
to think strategy including seeing the overall picture as
they go about their work.
 THE DEVELOPMENT OF BUSINESS
STRATEGY

Strategic planning encompasses those activities that lead

to the statement off goals and objectives and the choice
of strategies to achieve them. The fi nal outcomes of
strategic planning are statements of vision, mission,
strategy and policy. A vision is an idealized picture o the
future of the organization. The mission identifi es the
fi rm’s purpose and where its fi ts into the world. A mission
is more grounded in present-day realities than is a vison,
but some companies use the terms interchangeably. A
fi rm’s mission may not be apparent to the casual observer.
 GATHERING MULTIPLE INPUTS TO
FORMULATE STRATEGY

Strategic managers and leaders are often thought of as

mystics who work independently and conjure up great
schemes for the future. In reality, many strategic leaders
arrive at their ideas for the organization’ s future by
consulting with a wide range of parties at interest.
Strategy theorist Gary Hamel advises executives to make
the strategy-creation process more democratic. He
reasons that imagination is scarcer than resources. As a
consequence, “We have to involve hundreds, if not
thousands of new voices in the strategy process if we
want to increase the odds of seeing the future.
 ANALYZING THE REALITIES OF THE
BUSINESS SITUATION

To develop an eff ective business strategy, the strategists must make

valid assu mptions about the environ ment. When th e assumptions are
in c orrec t, the strategy might bac kfi re. Let’s be preposterous for a
momen t. Assume that Krispy Kreme regards e-c ommerc e as the wave of
the futu re and therefore halts its plans to ven d donuts through stores of
its own and in grocery stores and servic e station s. Instead, Krispy
Kreme develops Web sites so people c an purc h ase don uts an d c off ee
online and pay for quick delivery ser vic e. The wrong assumption s is that
potential Krispy Kreme customers through out the world own c ompu ters,
are online, have credit cards, and are willin g to pay a premiu m to h ave
don uts an d coff ee delivered to th eir home or offi c e. The e-tailing
strategy fails because assu mption s about th e potential c u stomer base
were fl awed
 PERFORMING A SWOT ANALYSIS
Quite often strategic planning takes the form of a SWOT
analysis, a method of considering the strengths, weaknesses,
opportunities, and threats in a given situation. The strengths
and weaknesses take into account internal resources and
capabilities; opportunities and threats refer to factors eternal
to the organization. SWOT is considered the most applicable
to the early stages of strategic and marketing planning.
Elements of a SWOT analysis are included in the general
planning model and in the strategic inventory used to size up
the environment. Because of SWOT’s straightforward appeal,
it has become a popular framework for strategic planning. The
framework, or technique, can identify a niche the company
has not already exploited.
 PERFORMING A SWOT ANALYSIS
Quite often strategic planning takes the form of a SWOT
analysis, a method of considering the strengths, weaknesses,
opportunities, and threats in a given situation. The strengths
and weaknesses take into account internal resources and
capabilities; opportunities and threats refer to factors eternal
to the organization. SWOT is considered the most applicable
to the early stages of strategic and marketing planning.
Elements of a SWOT analysis are included in the general
planning model and in the strategic inventory used to size up
the environment. Because of SWOT’s straightforward appeal,
it has become a popular framework for strategic planning. The
framework, or technique, can identify a niche the company
has not already exploited.
 CONDUCTING THE ANALYSIS

To illustrate the used of the model, we turn to Ulysse Nardin,

a Swiss manufacturer of fi ne watches founded in 1846. The
price range of Ulysse Nard in watches is between 6,000 and
38, 000. Assume that top executives at Ulysse Nardin are
thinking about fi nding another niche by manufacturing
luxury pens in the 200 to 500 range. S ome of their thinking
in regard to a SWOT analys is might proceed as follows:
 CONDUCTING THE ANALYSIS
Strengths Weaknesses
´W hat are t h e good poi nts about a
C o nside r the risks of pursuing a
par ticular alt ernat i ve? Use your judgem ent
and intuit ion; ask know ledgeable people. particular co urse of action, such as
Selling luxur y pen s appears to be a ge tting into a busine ss yo u do not
reasonable fi t w i t h t h e w at ch line because unde rstand. We are watchm aker s,
a luxury pens i s oft en w orn as jewelry. We pure and sim ple . We wo uld ne e d to
are great at m akin g sm al l-size luxury train our skille d craftspe ople to
item s. People wh o j ust w ant a wr iting
m ake pe ns or hire new wo rke rs. If
instrum ent cou l d set t l e for a B ic or
com petitive br an d. Th e profi t m argins on
only a handful of com panies
luxury pens are qui t e good and they are m anufacture luxury pe ns, it could
not likely to be deepl y discount ed in be be cause it is a tough m arke t to
departm ent st ores or di scou nt st ores. We crack. We are so we ll known for
can also m ain t ain low in ven t ories until we watche s that our clientele m ight
assess the t r u e dem an d. As our sales
no t perceive us to be a cr afte r of
representatives an d di st r i butors receive
fountain pe ns.
order s, we can m an ufact u re pens quickly.
 CONDUCTING THE ANALYSIS
Opportunities Threats

´Think of the opportunities that Every alternative has its d ownsid e, so it

is im p ortant to think ahead to allo w for
welcome you if you choose a promising
c o nting enc y planning. Ask p eop le who
strategic alternative. Use your
have tried in the past what you are
imagination and visualize the
attem pting now. But don’t b e dissuad ed
opportunities. The opportunities could b y the naysayers, heel dragg ers, and
be quite good in term of snob appeal. p essim ists. J ust take ac tion. Several
Maybe large numbers of consumers m anufac turers o f high-end prod uc ts in
would welcome the opportunity to carry jewelry, c lo thing , and autom o biles have
a Ulysse Nardin anything in a shift c heap ened their im age and lost m arket
pocket, handbag, or attache case. share when they spread their b rand
Many of the people who become nam e to o thin. Following this app ro ac h,
Ullysse Nardin luxury pen customers we c ould wind up having no t only Ulysse
might want to step up to become a Nardin pens b ut also wallets and
Ulysse Nardin watch owner. handb ag s. At that point the hig h
p restig e o f the Ulysse Nardin brand
wo uld be at risk.
LEVELS OF STRATEGY, COMPETITIVE
FORCES, AND TYPES OR STRATEGIES

The nature of strategy and how it is developed may appear

complex. Yet strategy statements themselves, as expressed by
managers and planners, are usually straightforward and
expressed in a few words. “We will be cost leaders” or “ We
will be competitive by off ering superior service.” Keep in mind
that businesspeople are likely to have a less precise and less
scientifi c meaning of strategy than do strategy researchers. A
variety of business strategies have already been mentioned in
this chapter.
 LEVELS OF BUSINESS
STRATEGIES

A strategy chosen to reach an important goal depends

considerably on the level it serves within the organization. At
the level of the overall fi rm, Amazon. com might decide that its
strategy is to allow people throughout the world to purchase
as many products online as they wish. At the level of the
distribution centers, the managers must develop a strategy for
enabling world-wide distribution off products at a reasonable
cost.
 FIVE COMPETITIVE FORCES

[Link] power of customers to aff ect pricing and reduce profi t

margins. Informed customers become empowered customers. If
customers can readi ly purchase your product or service from a
competitor, you must keep costs low.
[Link] power suppli ers to infl uence the company’s pricing.
Manufacturing compani es are dependent on suppliers for raw
materials and components. With the growth of outsourcing,
companies are someti mes dependent on suppliers for marketing,
research and devel opment, and even staffi ng. High-price suppl iers
could drive up costs, forci ng a company to think of better ways of
attracting customers other than low prices.
[Link] threat of si mi lar or substitute products to limit market
freedom and reduce prices and thus profi t. Alternatives to a
company’s products are a constant menace even for stable products
and services. The Internet has accelerated the power of thi s
competitive force; peopl e now purchase investments online, thus
decreasing the percei ved need for personal advice from a
stockbroker.
 FIVE COMPETITIVE FORCES

[Link] power of customers to aff ect pricing and reduce profi t

margins. Informed customers become empowered customers. If
customers can readi ly purchase your product or service from a
competitor, you must keep costs low.
[Link] power suppli ers to infl uence the company’s pricing.
Manufacturing compani es are dependent on suppliers for raw
materials and components. With the growth of outsourcing,
companies are someti mes dependent on suppliers for marketing,
research and devel opment, and even staffi ng. High-price suppl iers
could drive up costs, forci ng a company to think of better ways of
attracting customers other than low prices.
[Link] threat of si mi lar or substitute products to limit market
freedom and reduce prices and thus profi t. Alternatives to a
company’s products are a constant menace even for stable products
and services. The Internet has accelerated the power of thi s
competitive force; peopl e now purchase investments online, thus
decreasing the percei ved need for personal advice from a
stockbroker.
 FIVE COMPETITIVE FORCES

4. The level of existi ng competition that aff ects investment i n

marketing and research and thus erodes profi ts. Every shopper
knows it; the greater the competition, the lower the price. A few
years ago Wal-Mart priced more than 300 generic drugs at $4 per
prescription in 14 states. Within a couple of weeks many
supermarkets and pharmacy chains followed suit, lowering profi ts
for all.
[Link] threat of new market entrants to intensify competition and
further aff ect pri cing and profi tability. Some business are more
diffi cult to enter than others, often depending on the amount of
investment and ti me required both in the home country and
elsewhere. Rel ati vel y few new tire manufacturers emerge, but new
online shoppi ng sites dail y. Complexity and bigness tend to lower
the competiti ve threat of new entrants.
 TYPES OF BUSINESS STRATEGIES
Companies use a variety of strategies to survive and
prosper, and these strategies have been classifi ed in
several ways. For convenience in integrating our
discussion of strategy, we present eight types of strategy
placed under the level in which they most nearly fi t.
Managers tend to think in terms of the strategy type
rather than worrying about which competitive force it
best meets.
Corporate-level Strategies Three examples of
corporate-level strategies are strategic alliances,
diversifi cation, and sticking to core competencies.

[Link] alliances. A widely used business strategy

calls for forming alliances or sharing resources with other
companies to exploit a market opportunity. A major factor
contributing to the growth of alliances is the enormous
cost and time involved in developing and distributing
products when a company starts from zero.
 TYPES OF BUSINESS STRATEGIES

2. Diversifi cation of goods and services. “Don’t put

all your eggs in one basket” is a standard business
strategy. One of the many reasons that diversifi cation
is an eff ective strategy is that it serves as a hedge in
case the market for one group of products or services
softens. Another advantage of diversifi cation is that it
can lead to immediate growth at the same time.

3. Sticking to core competencies. It may be

valuable not only to avoid putting all your eggs one
basket, but also to guard against spreading yourself to
thin. Many fi rms of all sizes believe they will prosper if
they confi ne their eff orts to business activities they
perform best their core competencies.
 TYPES OF BUSINESS STRATEGIES

Business-lev el Strategies. Three exa mples of

business-level strategies a re product
diff erentiation, focus a nd cost lea dership.

[Link] t Diff erentiation . A diff erent ia t ion

strategy attempts to fi nd a niche or off er a product
or service perceived by the cust omer a diff erent
from ava ilable alternatives. Ma ny compa nies
believe they have a diff erentia t ed product unless
their strategy is to imita te a not her product or
service or produce knock off mercha ndise. Luxury
brands often stem from a diff erent ia t ion s tra t egy.
 TYPES OF BUSINESS STRATEGIES

2. Focus. In a focus, the organization concentrates on

a specifi c regional or buyer market. To gain market
share, the company uses either a diff erentiation or a
low-cost approach in a targeted market. Some
companies have several products or services catering
to a buyer market, such as vitamins for seniors, but
this does not constitute a full focus strategy
specialized medical products, such as leg and arm
prostheses, are based on a focus or niche strategy.
3. Cost leadership. The cost leader provides a
product or service at a low price in order to gain
market share. Save-A-Lot has become one of the most
successful grocery chains in the United States by
serving a demographic that most supermarkets have
long ignored the poor.
 TYPES OF BUSINESS STRATEGIES
Functional-Level Strategy.
Two examples of functional-level strategy are fi nding
and retaining the best people and moving at high speed.

[Link] and retain the best people. A foundation

strategy for becoming and remaining a successful
organization is to fi nd and retain competent people.
Such people will help the organization develop products
and services that are in demand, and they will fi nd ways
to reduce costs and behave ethically. Concentrating on
hiring talent can be considered a functional-level
strategy because people are usually hired into specifi c
departments. Top management at Microsoft and Amazon.
Com attribute most of their success to hiring only
intelligent, motivated job candidates. Fast Company
magazine off ers this advice to modern business
executives.
 TYPES OF BUSINESS STRATEGIES

[Link] speed. Satisfy customer needs more quickly

and you will make more money. High-speed managers
focus on speed in all of their business activities,
including product development, sales response, and
customer service. Knowing that “time is money,”
they use time as a competitive resource. It is
important to get products so market quickly to
prevent the competition from being there fi rst.