Business Level Strategies & Functional Level Strategies


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Business Level Strategies
Functional Level Strategies

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  • Business Level Strategies & Functional Level Strategies

    1. 2. Presentation Topic Business Level Strategies & Functional Level Strategies
    2. 3. Presented by Arbab Rahim Ayyaz Mehmood
    3. 4. Assigned by Madam Mehwish Aziz
    4. 5. What is strategy? A plan of action or policy designed to achieve a major or overall aim.
    5. 6. Business-Level Strategy <ul><li>Business-level strategy : an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets </li></ul>
    6. 7. The Central Role of Customers <ul><li>In selecting a business-level strategy, the firm determines </li></ul><ul><ul><li>1. who it will serve </li></ul></ul><ul><ul><li>2. what needs those target customers have that it will satisfy </li></ul></ul><ul><ul><li>3. how those needs will be satisfied </li></ul></ul>
    7. 8. Managing Relationships With Customers <ul><li>Customer relationships are strengthened by offering them superior value </li></ul><ul><ul><li>help customers to develop a new competitive advantage </li></ul></ul><ul><ul><li>enhance the value of existing competitive advantages </li></ul></ul>
    8. 9. Five Generic Strategies Competitive Advantage Competitive Scope Cost Uniqueness Broad target Narrow target Cost Leadership Differentiation Focused Cost Leadership Focused Differentiation Integrated Cost Leadership/ Differentiation
    9. 10. Cost Leadership Strategy <ul><li>An integrated set of actions designed to produce or deliver goods or services at the lowest cost , relative to competitors with features that are acceptable to customers </li></ul><ul><ul><li>relatively standardized products </li></ul></ul><ul><ul><li>features acceptable to many customers </li></ul></ul><ul><ul><li>lowest competitive price </li></ul></ul>
    10. 11. Cost Leadership Strategy <ul><li>Cost saving actions required by this strategy: </li></ul><ul><ul><li>building efficient scale facilities </li></ul></ul><ul><ul><li>tightly controlling production costs and overhead </li></ul></ul><ul><ul><li>minimizing costs of sales, R&D and service </li></ul></ul><ul><ul><li>building efficient manufacturing facilities </li></ul></ul><ul><ul><li>monitoring costs of activities provided by outsiders </li></ul></ul><ul><ul><li>simplifying production processes </li></ul></ul>
    11. 12. Differentiation Strategy <ul><li>An integrated set of actions designed by a firm to produce or deliver goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them </li></ul><ul><ul><li>price for product can exceed what the firm’s target customers are willing to pay </li></ul></ul><ul><ul><li>nonstandardized products </li></ul></ul><ul><ul><li>customers value differentiated features more than they value low cost </li></ul></ul>
    12. 13. Differentiation Strategy <ul><li>Value provided by unique features and value characteristics </li></ul><ul><li>Command premium price </li></ul><ul><li>High customer service </li></ul><ul><li>Superior quality </li></ul><ul><li>Prestige or exclusivity </li></ul><ul><li>Rapid innovation </li></ul>
    13. 14. Differentiation Strategy <ul><li>Differentiation actions required by this strategy: </li></ul><ul><ul><li>developing new systems and processes </li></ul></ul><ul><ul><li>shaping perceptions through advertising </li></ul></ul><ul><ul><li>quality focus </li></ul></ul><ul><ul><li>capability in R&D </li></ul></ul><ul><ul><li>maximize human resource contributions through low turnover and high motivation </li></ul></ul>
    14. 15. Focused Business-Level Strategies <ul><li>A focus strategy must exploit a narrow target’s differences from the balance of the industry by: </li></ul><ul><ul><li>isolating a particular buyer group </li></ul></ul><ul><ul><li>isolating a unique segment of a product line </li></ul></ul><ul><ul><li>concentrating on a particular geographic market </li></ul></ul><ul><ul><li>finding their “niche” </li></ul></ul>
    15. 16. Advantages of Integrated Strategy <ul><li>A firm that successfully uses an integrated cost leadership/differentiation strategy should be in a better position to: </li></ul><ul><ul><li>adapt quickly to environmental changes </li></ul></ul><ul><ul><li>learn new skills and technologies more quickly </li></ul></ul><ul><ul><li>effectively leverage its core competencies while competing against its rivals </li></ul></ul>
    16. 17. Benefits of Integrated Strategy <ul><li>Successful firms using this strategy have above-average returns </li></ul><ul><li>Firm offers two types of values to customers </li></ul><ul><ul><li>some differentiated features (but less than a true differentiated firm) </li></ul></ul><ul><ul><li>relatively low cost (but not as low as the cost leader’s price) </li></ul></ul>
    17. 18. FUNCTIIONAL LEVEL STRATEGIES :- <ul><li>Function strategy is the approach a functional area takes to achieve a corporate and business unit objectives and strategies by maximizing resource and productivity. </li></ul>
    18. 19. Importance of functional level strategy <ul><li>It is important that an organization periodically (at least annually, usually as part of the medium-term planning process) review all functional strategies to assure that they are </li></ul><ul><li>Consistent with the business strategy </li></ul><ul><li>Supportive of the business strategy </li></ul><ul><li>Consistent with other functional strategy </li></ul>
    19. 20. Formulation: - <ul><li>Functional strategies are formulated by specialists in each area. Functional strategies work as a backbone of the organization. It provides the basic information on resources and capabilities on which the higher level strategy is designed. It involves coordinating the various functions and operations needed to design, manufacture, deliver and support the product or service of each business with in the corporate portfolio. </li></ul>
    20. 21. Basic Task Of Functional Strategy :- <ul><li>The task of function unit of any organization is to formulate higher level strategies by providing input into business unit level and corporate level strategy.processing the available information and using it for higher level strategy formulation. </li></ul>
    21. 22. Corporate-Level Strategy <ul><li>What is Corporate Level Strategy? </li></ul><ul><li>Definition: Action taken to gain a competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets. </li></ul>
    22. 23. 1. What businesses should the corporation be in? 2. How should the corporate office manage the array of business units? Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts Key Questions of Corporate Strategy
    23. 24. Levels and Types of Diversification Low Levels of Diversification Moderate to High Levels of Diversification Very High Levels of Diversification Related linked (mixed) < 70% of revenues from dominant business, and only limited links exist A B C Single business > 95% of revenues from a single business unit A Dominant business Between 70% and 95% of revenues from a single business unit B A Unrelated-Diversified Business units not closely related A B C < 70% of revenues from dominant business; all businesses share product, technological and distribution linkages Related constrained A B C
    24. 25. Strategic Leadership involves: Strategic Leadership The ability to anticipate, envision, maintain flexibility and empower others to create strategic change Multi-functional work that involves working through others Consideration of the entire enterprise rather than just a sub-unit A managerial frame of reference
    25. 26. Strategic Competitiveness Above-Average Returns Effective Strategic Leadership influence shapes the formulation of Successful Strategic Actions Formulation of Strategies Implementation of Strategies Strategic Leadership and the Strategic Management Process and Strategic Intent Strategic Mission
    26. 27. Managerial Discretion Factors Affecting Managerial Discretion External Environment Industry Structure Rate of market growth # and type of competitors Political/Legal constraints Product differentiation Interpersonal skills Tolerance for ambiguity Commitment to the firm Aspiration level Self-confidence Characteristics of the Manager Employee interaction Organizational Characteristics Resource availability Size and age Culture
    27. 28. Exercise of Effective Strategic Leadership Establishing balanced organizational controls Emphasizing ethical practice Developing human capital Exploiting and maintaining core competencies Sustaining an effective organizational culture Determining strategic direction Effective Strategic Leadership
    28. 29. Determining Strategic Direction <ul><li>Strategic direction means the development of a long-term vision of a firm’s strategic intent </li></ul><ul><li>A charismatic leader can help achieve strategic intent </li></ul><ul><li>It is important not to lose sight of the strengths of the organization when making changes required by a new strategic direction </li></ul><ul><li>Executives must structure the firm effectively to help achieve the vision </li></ul>
    29. 30. Exploiting and Maintaining Core Competencies <ul><li>Core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals </li></ul><ul><li>Strategic leaders must verify that the firm’s competencies are emphasized in strategy implementation efforts </li></ul>
    30. 31. Exploiting and Maintaining Core Competencies <ul><li>In many large firms, and certainly in related-diversified ones, core competencies are exploited effectively when they are developed and applied across different organizational units </li></ul><ul><li>Core competencies cannot be developed or exploited effectively without developing the capabilities of human capital </li></ul>
    31. 32. Developing Human Capital <ul><li>Human capital refers to the knowledge and skills of the firm’s entire workforce </li></ul><ul><li>Employees are viewed as a capital resource that requires investment </li></ul><ul><li>No strategy can be effective unless the firm is able to develop and retain good people to carry it out </li></ul><ul><li>The effective development and management of the firm’s human capital may be the primary determinant of a firm’s ability to formulate and implement strategies successfully </li></ul>
    32. 33. Sustaining an Effective Organizational Culture <ul><li>An organizational culture consists of a complex set of ideologies, symbols, and core values that is shared throughout the firm and influences the way it conducts business </li></ul><ul><li>Shaping the firm’s culture is a central task of effective strategic leadership </li></ul>
    33. 34. Sustaining an Effective Organizational Culture <ul><li>An appropriate organizational culture encourages the development of an entrepreneurial orientation among employees and an ability to change the culture as necessary </li></ul><ul><li>Reengineering can facilitate this process </li></ul>
    34. 35. Changing Culture and Reengineering <ul><li>Every job in the company is essential and important </li></ul><ul><li>All employees must create value through their work </li></ul><ul><li>Constant learning is a vital part of every person’s job </li></ul><ul><li>Teamwork is essential to implementation success </li></ul><ul><li>Problems are solved only when teams accept the responsibility for the solution. </li></ul>The benefits of business reengineering are maximized when employees believe that:
    35. 36. Emphasizing Ethical Practices <ul><li>Ethical practices increase the effectiveness of strategy implementation processes </li></ul><ul><li>Ethical companies encourage and enable people at all organizational levels to exercise ethical judgment </li></ul>
    36. 37. Emphasizing Ethical Practices <ul><li>To properly influence employee judgment and behavior, ethical practices must shape the firm’s decision-making process and be an integral part of an organization’s culture </li></ul><ul><li>Leaders set the tone for creating an environment of mutual respect, honesty and ethical practices among employees </li></ul>
    37. 38. Establishing Balanced Organizational Controls <ul><li>Organizational controls provide the parameters within which strategies are to be implemented and corrective actions taken </li></ul><ul><li>Financial controls are often emphasized in large corporations and focus on short-term financial outcomes </li></ul><ul><li>Strategic control focuses on the content of strategic actions, rather than their outcomes </li></ul>
    38. 39. Establishing Balanced Organizational Controls <ul><li>Successful strategic leaders balance strategic control and financial control (they do not eliminate financial control) with the intent of achieving more positive long-term returns </li></ul>
    39. 40. Why do a situation analysis? Situation analysis concentrates on generating solid answers to a well-defined set of strategic questions and using these answers to: <ul><ul><li>Appraise the company’s strategic situation and business position </li></ul></ul><ul><ul><li>Craft a suitable strategy </li></ul></ul>
    40. 41. Situation analysis focuses on: <ul><ul><li>EXTERNAL FACTORS – the firm’s MACRO-environment (industry and competitive conditions) </li></ul></ul><ul><ul><li>INTERNAL FACTORS – the firm’s immediate MICRO-environment (its own internal situation and competitive position) </li></ul></ul>
    41. 42. The Key Questions in Company Situation Analysis <ul><li>How well is the company’s present strategy working? </li></ul><ul><li>What are the company’s strengths, weaknesses, opportunities, and threats? </li></ul><ul><li>Are the company’s prices and costs competitive? </li></ul><ul><li>How strong is the company’s competitive position? </li></ul><ul><li>What strategic issues does the company face? </li></ul>
    42. 43. SWOT Analysis <ul><li>SWOT represents the first letter in Strengths, Weaknesses, Opportunities, and Threats. </li></ul><ul><li>SWOT analysis </li></ul><ul><ul><li>Involves sizing-up a company’s INTERNAL strengths and weaknesses and its EXTERNAL opportunities and threats </li></ul></ul><ul><ul><li>Is an easy to use tool for getting a quick overview of a company’s strategic situation </li></ul></ul>
    43. 44. Why SWOT Analysis is Important <ul><li>It is the basis for matching strategy to the company’s situation – </li></ul><ul><ul><li>To its internal strengths and weaknesses </li></ul></ul><ul><ul><li>To its external threats and opportunities </li></ul></ul>A winning strategy must always fit the company’s situation.
    44. 45. Strengths <ul><li>What is a company Strength? </li></ul><ul><ul><li>Something a company is good at doing or a characteristic that gives it an important capability. </li></ul></ul>
    45. 46. Weaknesses <ul><li>What are company weaknesses? </li></ul><ul><ul><li>Something a company lacks or does poorly (in comparison to others) or a condition that puts it at a disadvantage. </li></ul></ul>
    46. 47. Opportunities <ul><li>What are company opportunities? </li></ul><ul><ul><li>Those that offer important avenues for profitable growth, those where a company has the most potential for competitive advantage, and those which the company has the financial resources to pursue. </li></ul></ul>
    47. 48. Threats <ul><li>What are company Threats? </li></ul><ul><ul><li>Certain factors in a company’s external environment that pose a threat to its well-being. </li></ul></ul>
    48. 49. Some questions to consider once the SWOT listings have been compiled are: <ul><li>Does the company have internal strengths or core competencies an attractive strategy can be built around? </li></ul><ul><li>Do company weaknesses make a company vulnerable and does it disqualify a company from pursuing industry opportunities? </li></ul><ul><li>Which weaknesses does a company need to correct? </li></ul>
    49. 50. <ul><li>Which opportunities does the company have the skills and resources to pursue with a real chance for success? Which opportunities are the best from the company’s standpoint? (Remember: Opportunity without the means to capture is only an illusion.) </li></ul><ul><li>What external threats should management be worried most about and what strategic moves need to be made to craft a good defense? </li></ul>Some questions to consider once the SWOT listings have been compiled are: