Wednesday, March 10, 2010
Levels/Types of Strategy
• In large firms there are four levels of functional and operational. However, in small firms, there are three levels: company, functional and operational. strategies: corporate, business or divisional,
• Corporate: Type of strategy addressing what businesses the organization will operate, how strategies of those businesses will be coordinated to strengthen the organization's competitive position and how resources will be allocated among businesses.
• Strategic Business Unit: Distinct business with its own competitors, which can be managed relatively independently of other businesses within the organization.
• Business Level Strategy
• Functional Level: Type of strategy focusing on action plans for managing a particular functional area within a business in a way that supports business level strategy.
• Operational Level: is the “lowest” level of strategy. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria.
Types of Strategy:
The following are the alternative strategies that an organization can peruse.
1. Integration Strategies
a. Forward Integration
b. Backward Integration
c. Horizontal Integration
2. Intensive Strategies
a. Market Penetration
b. Market Development
c. Product Devlopment
3. Diversification Strategies
a. Concentric Diversification
b. Horizontal Strategies
c. Conglomerate Diversification
4. Defensive Strategies
1. Integration Strategies Integration strategies allow a firm to gain control over the distributors, suppliers and/or competitors.
a. Forward Integration: Involves gaining ownership or increased control over distributors.
b. Backward Integration: is a strategy of seeking ownership or gaining a firm’s supplies.
c. Horizontal Integration: Refers to a strategy of seeking ownership of or increased control over a firm’s competitors.
2. Intensive Strategies They require intensive efforts if a firm’s competitive position with existing products is to improve.
a. Market Penetration
A market penetration strategy seeks to increase market for present product or services in present market through greater marketing efforts.
b. Market Development
Market Development involves introducing present products or services into new geographic areas.
c. Product Development:
is a strategy that seeks increased sales by improving or modifying present products or services.
3. Diversification Strategiesa. Concentric Diversification
Adding new but related products or services is called concentric diversification.
b. Horizontal Diversification
Adding new unrelated products or services for present customers is called horizontal diversification.
c. Conglomerate Diversification.
Adding new but unrelated products or services is called conglomerate Diversification.
4. Defensive Strategiesa. Retrenchment:
Occurs when an organization regroups through cost and asset reduction to reverse declining sales and profit.
Selling a division or a part of an organization.
Selling all of a company’s assets , in parts, for their tangible worth is called liquidation.
Means for Achieving Strategies:
1. Joint Venture
Joint venture is a popular strategy that occurs when two or more companies form temporary partnership or consortium for the purpose of capitalizing opportunity.
2. Merger/ Acquisition
Merger occurs when two organizations of about equal size unite to form one enterprise.
Acquisition occurs when a large organization purchases (acquires) a smaller firm or vice versa.
First Mover Advantage: First mover advantages refers to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms. Some advantages of being first mover include:
Securing access to rare resources
Gaining knowledge of key factors and issues
Carving out market shares and a position that is easy to defend and costly for rival firms to overtake.
Outsourcing: Business-Process outsourcing (BPO) is a rapidly growing new business that involves taking over the functional operations such as human resources, information systems, payroll, customers service and even marketing of other firms. Reasons for outsourcing are as follows:
Allows business to focus on it core businesses
Enables the firm to provide better service.