strategy management in business

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Three Levels of Strategy-The Company's Strategy-
making Hierarchy
Module 1
Business Policy
Semester 4
mchaudhary@ amity.edu

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Introduction
Strategy can be formulated at three levels
There is a clear hierarchy in levels of strategy, with
corporate level strategy at the top, business level strategy
being derived from the corporate level, and the functional
level strategy being formulated out of the business level
strategy.
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Levels of Strategy Formulation
Corporate
Level
Business Level
Functional
Level
Strategy can be
formulated at three
levels, namely, the
corporate level, the
business level, and
the functional level.
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Introduction to Levels of Strategy
.
At the corporate level, strategy is formulated for your
organization as a whole. Corporate strategy deals with
decisions related to various business areas in which the
firm operates and competes.
At the business unit level, strategy is formulated to
convert the corporate vision into reality.
At the functional level, strategy is formulated to realize the
business unit level goals and objectives using the strengths
and capabilities of your organization.
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Business Scenario
In a single business scenario, the corporate and business
level responsibilities are clubbed together and undertaken
by a single group, that is, the top management
In a multi business scenario, there are three fully operative
levels. These can be related business or unrelated
business
Example of single business scenario – a company is
operating in tea business
Examples of multi business scenario – a company in
soups, snacks, water, tea 5

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Definition of strategic business units
The SBUs are the natural ‘grouping’ of part of a corporation.
• The SBU has a range of related products/services which
has similar technologies and production processes.
• The products/services are sold in similar or related market
segments.
• The production/services are sold against a well-defined
set of competitors.
• An SBU is managed by an SBU manager, largely as an
independent unit.
• The SBU has its own set of goals and strategies.
• Each SBU in a particular organization should be able to
operate independently of any other SBU.
Eg – Tata Tea is an SBU of Tata Group

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Strategic Business Unit (SBU)
A strategic business unit (SBU) is a part of an
organisation for which there is a distinct external
market for goods or services that is different from
another SBU

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Corporate levels strategy
• Corporate level strategy defines the business areas in which your
firm will operate.
• It deals with aligning the resource deployments across a diverse set
of business areas, related or unrelated.
• Strategy formulation at this level involves integrating and managing
the diverse businesses and realizing synergy at the corporate level
• The corporate strategy reflects the path toward attaining the vision
of your organization.
-For example, your firm may have four distinct lines of business
operations, namely, automobiles, steel, tea, and telecom. The
corporate level strategy will outline whether the organization
should compete in or withdraw from each of these lines of
businesses, and in which business unit, investments should be
increased, in line with the vision of your firm.

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Business Level Strategy
• Business level strategies are formulated for specific
strategic business units and relate to a distinct product-
market area.
• It involves defining the competitive position of a strategic
business unit. The business level strategy formulation is
based upon the generic strategies of overall cost
leadership, differentiation, and focus.
For example, your firm may choose overall cost leadership as a
strategy to be pursued in its steel business, differentiation in its tea
business, and focus in its automobile business.
• The business level strategies are decided upon by the
heads of strategic business units and their teams in light
of the specific nature of the industry in which they
operate. 9

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Functional Level Strategy
• Functional level strategies relate to the different functional areas
which a strategic business unit has, such as marketing, production
and operations, finance, and human resources. These strategies are
formulated by the functional heads along with their teams and are
aligned with the business level strategies.
• The strategies at the functional level involve setting up short-term
functional objectives, the attainment of which will lead to the
realization of the business level strategy.
• For example, the marketing strategy for a tea business which is
following the differentiation strategy may translate into launching and
selling a wide variety of tea variants through company-owned retail
outlets. This may result in the distribution objective of opening 25
retail outlets in a city; and producing 15 varieties of tea may be the
objective for the production department. The realization of the
functional strategies in the form of quantifiable and measurable
objectives will result in the achievement of business level strategies
as well. 10

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Strategic Intent
VISION, MISSION & BUSINESS DEFINITION
Module 1

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The Background
• Strategy Management is defined as a
dynamic process of formulation,
implementation, evaluation, and control of
strategies to realise the organization’s
strategic intent
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Strategic Intent
In 1989, Gary Hamel and
C.K. Prahalad created the
concept of Strategic Intent
It was published in
Harvard Business Review
They argued that in order to
achieve success, a
company must reconciles
purpose (end) with its
means through Strategic
Intent
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What is Strategic Intent ?
• Strategic Intent is an ambitious &
compelling dream that energizes, which
provides the emotional and intellectual
energy for the journey to the future
• They say if strategic architecture is the
brain, Strategic Intent is the heart.
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Purpose of these statements
• Vision- Business aspiration, serves the purpose
of stating what an organization wishes to
achieve in the long run.
• Mission - why company exists , it relates an
organization to society
• Business explains the business of an
organization in terms of customer needs,
customer groups and alternative technologies.
• Values – the way the company wants to do
business
• Objectives state what is to be achieved in a
given time period. 15

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Mission & Vision Statements
• Companies summarize their goals and
objectives in statements. Both these things
serve different purposes for the company.
• The statements are
- Mission
- Vision
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Vision Statement
• A Vision statement outlines WHERE a company
wants to be.
• Communicates both the purpose and values of
the business of organization.
• A vision statement talks about future of
organization.
• It answers the question, “Where do we aim to
be?”
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Examples of Vision
• Infosys- To be globally respected
company that provides best of breed
software solutions by best-in-class people
• Tata tea- To be India’s foremost tea
based beverage company
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Characteristics of a good Vision Statement
1. A vision must be clear and written in well articulated words
2. A vision must drive the organization to a common goal
3. A vision must be capable of attract / retains people to
organization
4. A vision must guide the organization’s decision makers
5. A vision must establish a standard of excellence
6. A vision bridges the present to the future for an organization
It bridges the present to the future for an organization
A clear vision must able to make the organization to prepare
for its future. A good clear vision must have the characteristics
to run a successful organization today and also in future. 19

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Top 10 Vision Statements
https://www.ebaqdesign.com/blog/vision-
statements
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What is mission statement?
• A mission statement is a role, or purpose, by
which an organization intends to serve its
stakeholders.
• It describes what the organization does (current
capabilities), who it to serve (stakeholders), and
what makes the organization unique (justification
for existence).
• Mission statements always exist at the top level
of an organization, but may also be set for
different organizational levels or components.
• A mission statement is simply an organizations
reason for existing. 21

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Mission Statement
• Gives organization its own special identity,
business emphasis, and direction
- sets it apart from similar companies
- not “ to make money”
• It always answer the question – who we
are? & what we do ?
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A company’s mission is not to make profit. The real mission is always – What
Will we do to make a profit

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Components of Mission
• Customers
• Product or service
• Markets
• Technology
• Distinctive competence or major competitive
advantage
• Corporate philosophy
• Concern for survival, growth and profitabilty
• Concern for society
• Concern for employees
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Examples of Mission Statement
• Infosys: To achieve our objectives in a
environment of fairness, honesty and courtesy
towards our clients, employees, vendors and
society at large
• Tata Tea:
- Achieve market and thought leadership for
branded tea in India
- Drive long term profitable growth
- Co create enhanced value for stakeholders
- Make Tata a great place for work
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Business Model
• Business model can be understood as a
strategy for the effective functioning of the
business, ascertaining sources of income,
desired customer base, and financing
details. Competitors operating in the same
industry rely on the different business
models due to their strategic choice.
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HOW DOES 10 MIN DELIVERY BUSINESS
FUNTION?
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Goals and Objectives
• Goals denote what an organization hopes to accomplish
in a future period of time. They represent the future state
or outcome of effort put in now.
• Objectives are the ends that state specifically how the
goals shall be achieved. They are concrete and specific
in contrast to goals that are generalized • Goals and
objectives are the end results which an organization
strives for
• There may be different ways in expressing end result like
market leadership , a certain percentage increase in
sales in particular year
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Features of Goals & Objectives
SMART
S – Specific
M – Measurable
A – Attainable
R – Relevant
T – Time bound
DUMB
D – Doable
U – Understandable
M – Manageable
B - Beneficial
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Role of Objectives
• Directions for decision making
• Objectives work as motivating force
• Performance standards
• Defines relationship with environment
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Business Definition
- Is clear cut statement of the business or a
set of business, the org. engages in
presently or wishes to pursue in future.
-Business explains the business of an
organization in terms of customer needs,
customer groups and alternative
technologies.
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Defining Business
To assess where and how companies compete in the
present day, the marketer must analyse the internal and
external environments of the company.
The most important of these analyses revolve around the
customer; the customer value proposition; the business
model; and the industry and macro environments in which
the company competes.
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Defining Business
“Defining the business is the true starting
point of strategic market planning.”
- Prof. Derek Abell
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Business Definition Model
• The Abell matrix is a three
dimensional tool most often
is referred to as the Three
Dimensional Business
definition model.
• The model is used to analyze
the scope of operation for a
business
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Derek Abell is Professor Emeritus
and co-founder of the European
School of Management and
Technology (ESMT)

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Abell Three Dimensional Business
Definition Model
• According to this model a
business can be defined in
terms of three dimensions
- Customer needs ( WHAT is
being satisfied)
- Customer groups ( WHO is
being satisfied)
- Alternative technologies (
HOW are customer needs
satisfied)
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Abell used three key questions as
the three dimensions on his model
and these are the foundation for the
formulation of the mission statement
itself.

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Dimension1
What is Being Satisfied ( Customer Needs)
• This leg of the model identifies and lists down all the customer
needs that are relevant to the company in question. Customer needs
are identified based on the product offering and a link is made to
customer benefits.
• Waterproof watch, digital watch,
smartwatch
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Dimension 2
Who is Being Satisfied ( Customer Groups)
• Company needs to work toward acquiring as much knowledge as
possible about the different target groups and offer specific products
or campaigns to these segments
• B2b, b2c, youth, sports persons
• Marketing process and target groups
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Dimension 3
How will we serve the needs ( Technologies)
The word technologies is taken here in a broader context to describe all
those technologies that are used to create a product as well as put in
on the market.
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Application of Three Dimensional Framework
The matrix can be used in a number of ways by an organization. Some
of these uses include:
• Defining the business scope at three business levels including the
corporate level, the business level and the lower organizational
levels
• Describing and communicating changes in the business definition.
These changes may usually be a result of the company’s offering
moving through the product life cycle
• Describing and communicating the business of any competitors in
the market. This definition can be extremely helpful to the
organization to better understand who they are up against
• Analyzing the growth opportunities for a business in a systematic
and organized way which can help keep a track of these and
implement at the right times
• Describing and communicating the evolution of markets
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Example of Business Definition
HUL business definition: “To meet everyday
needs of people everywhere with branded
products”
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The significance
• A clear business definition is helpful in
identifying several strategic choices.
• The choices regarding various customer groups,
various customer functions and alternative
technologies give the strategists various
strategic alternatives.
• The diversification, mergers and turnaround
depend upon the business definition.
• Customer oriented approach of business makes
the organization competitive
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Linkage of the statements
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PSDA 1
Compare the strategic intent of two companies
operating in the same industry by analysing their
vision statements
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Challenges
• Social interest and environment concern
• Ethical dilemma
• Balancing the interest of stakeholders
• Dynamic/ ever changing environment
• Organisational adaptation
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Thank you
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