Strategic Management and the Organizational Strategies
Strategic management and the organizational strategies are the key ingredients for the business to keep abreast of the competitors. Strategy is the plan or action implemented to accomplish the company’s specific goals.
Corporate level strategy is the overall managerial game plan for a diversified company to establish business positions in different industries and the approaches used to manage the corporation’s different businesses. Also, business level strategy is the managerial plan for a single business composed of the pattern of approaches and moves expertly crafted by management in its drive to successfully perform in one specific line of business.
Finally, function level strategy is the managerial game plan for a particular functional activity business process or key department within a business.
Strategic Management and the Organizational Strategies
Strategy is defined as the plan or action put into place to accomplish the company’s specific goals. It is the art or skill of using stratagems in endeavors such as politics and business. The following paragraphs explain the three kinds of organizational strategies.
Corporate level strategy. It is the overall managerial game plan(Strickland, (1999) for a diversified company. Corporate level strategy is company wide for it consists of the moves made to establish business positions in different industries and the approaches used to manage the corporation’s different businesses. Corporate strategy includes making the moves to establish positions in different businesses and to achieve diversification, initiating actions to boost the combined performances of the businesses the firm has diversified into, pursuing ways to capture the synergy among related business units and turn it into competitive advantage and finally to establish investment priorities and steering corporate resources into the most attractive business units.
Corporate level strategy includes making the moves to establish positions in different businesses and achieve diversification. The chief operating officer or a person of similar rank has to decide which types of businesses the corporation will venture into. The new organization could start by putting up a new business. Or, the company could begin by buying an existing company. The top ranking organizational officer could decide whether to diversity into putting up related businesses or setting up unrelated businesses. The organization could put up a large building where a portion will be allocated to its grocery chain business. And, the corporation could rent some of its vacant spaces to tenants under its rent business. Also, the organization could set up another business which is the food court in another part of the building. The company could also put up another business which is the hardware store in another part of the building. And, the COO could set up a specialty line clothing and shoes business in another vacant part of the building. Corporate level strategy that includes making the moves to establish positions in different businesses and achieve diversification will actually help each department generate more sales for the loyal customers of the grocery business do not have to go far to buy their hardware, clothes, shoes, food and other needs since they are all located inside one huge building.
And, it also includes initiating actions to boost the combined performances of the businesses the firm has diversified into. The COO or other officer could concentrate on strengthening its current competitive market position. One business within the organization will help much in increasing sales of its other subsidiary businesses as explained in the above paragraph. When one business is strong, its strength in terms of sales and net income will spill over to its nearby subsidiaries such as the grocery, food, shoes, clothes, rent and hardware businesses. As a result, the combined sales of the entire conglomerate of businesses will increase. Management’s overall corporate strategy(Wheelen, 1996) in managing its many subsidiary businesses must be to apply rapid growth strategies in its most promising businesses while keeping its other subsidiaries healthy and alive with the direct help of its strong businesses. The grocery business, in the above example, will help its other subsidiary businesses increase their sales for the grocery customers would prefer to buy their hardware and other needs in the nearest possible location to save time and travel efforts. This strategy includes initiating actions to boost the combined performances of the businesses the firm has diversified into will help increase the sales of the corporation’s other subsidiaries.
Furthermore, it includes pursuing ways to capture the synergy among related business units and turn it into competitive advantage. When the corporation diversifies into other businesses with related technologies, similar operating characteristics, common distribution channels or customers, or some other synergistic relationship, the corporation gains a decisively clear competitive advantage. In our example, the different businesses above such as hardware, clothes, shoes, grocery and rent are focusing its corporate level strategy to the same customers. The corporate level strategy is to expand to other related businesses to fill the discriminating tastes, needs and wants of its grocery customers. Likewise, the hardware and clothes clients could be enticed to buy their groceries inside the same building. Pursuing ways to capture the synergy among related business units and turn it into competitive advantage will increase the sales of its other businesses while decreasing the competitors’ market share.
Finally, it includes to establish investment priorities and steering corporate resources into the most attractive business units. The Chief operating officer would prefer to allocate more of its scarce resources like cash to businesses that generate the most sales and/or net income. Common sense tells us that it is a better alternative to divest money from a business that has poor sales performance in order to stop future throwing away of cash. Withdrawing money from a subsidiary business that does not generate income will
Be a good corporate level strategy for the scarce money can be funneled into the businesses that generate profit.
Business level trategy
It is defined as the managerial plan(No author, 1999) for a single business. It is composed of the pattern of approaches and moves expertly crafted by management in its drive to successfully perform in one specific line of business . For a stand alone single business company, corporate strategy and business strategy is the same because there is only one business. On the contrary if the corporation is engaged in many businesses, then each business in the organization has to generate its one unique business strategy that may or may not be similar to the business strategy of the other businesses of the corporation.
Furthermore, some business strategies include maintaining as well as increasing its current market share in relation to its competitors(No author, 1998). To accomplish this, the company should offer lower prices as compared with its competitors. Also, the business could concentrate on offering that unique service to a specific market where other competitors cannot offer the same quality products or quality services. The company must offer high quality products as well as above par after-sales service to its clients that have already both their products by offering one year free service warranty on parts and services and other similar promotional strategies. The business must exert all efforts to strive to be the industry’s low cost producer. To increase its current market share, another strategy is to pursue differentiation of its products and services based on quality, performance, service, styling, technological superiority & quality. The business center must continue to maintain and simultaneously increase its current market share in order for the company to survive until the next decade and more.
And, another business strategy is to respond to the changing industry conditions and other emerging developments in the external environment. An example is the printing press industry. The printing jobs used to be done with big heavy printing machines that occupy so much space and cost so much in terms of capital expenditures. The business strategy should then be to change to the new printing press industry conditions and other developments in the external business environment which is the replacement of the big high value printing machines with the COMPUTERS. Yes, the simple personal computer that has a printing business software can do the same job and even produce better quality printing outputs as the traditional printing machines. The cost will be lesser and the space will be also smaller. The business within the corporation must respond to the changing industry conditions in order to maintain its current market share of the customer pie.
And, the business entity must secure its competitive edge in the market place. This can be done by allocating a percentage of its assets to research and development activities. The company must continue to research on improving its current products sold to the market as well as research on the products sold by its competitors. By knowing its competitors’ products, the company can set up business strategies that will effectively conquer the competitors’ customer base. The company can also research and develop new products in order to increase its overall sales performance. The new products will be tested on a small market like the Los Angeles or New York arena to determine the feasibility of the new product or process. If the test market indicates that the new product has been a success, then the business can launched the new product or service to feed the demands of all the states. Finally, the company can launch the product internationally to prospective clients in Europe and other countries. The business should secure its competitive edge in the market place in order to continue generating much needed sales.
Also, the business strategy should also include marketing, promotions and distribution of its current and new products. The business can advertise the advantages of buying its products through the radio, television and the newspapers. Promo persons will be hired to persuade grocery customers to try the company’s new products. Discounts can also be given for volume orders. Also, distribution costs to deliver the products from the manufacturing plant to the customers can be reduced by sending products in bulks and using less costly transportation alternatives. Furthermore, the products must reach uncharted territories including the infiltration of the competitors’ market to increase its net income. This sudden sales attack will keep some of the competitors off guard because had been sleeping instead of concentrating their efforts on doing research and development strategies. Marketing, promotions and distribution of its current and new products will surely take away a big scoop of the competitors’ customer base.
Furthermore, another business strategy is to increase or improve its internal manufacturing company operations. The company can purchase an additional manufacturing equipment in order to produce more finished goods. This is a good strategy if the current production processes cannot satisfy the increasing demands of its current clients. Another strategy is to replace it obsolete and fully depreciated manufacturing machines with new machines that can produce more finished goods in a shorter time period using lesser raw materials, labor and factory overhead costs. An obsolete machine can no longer produce high quality goods because the machine could be damaged or the products it makes are no longer needed by the customers. Many customers changed their preferences to buy newer products for one reason or another. For example, the customers would prefer to buy the computers instead of buying a typewriter. The customers would prefer to shop in a new optical shop because it can produce eye glasses in the shorter one hour as compare to some eye glass shops that produced eye glasses in a day or more. Increasing its manufacturing and internal company operations will lessen its manufacturing costs and increase net income.
And, another business strategy is to hire persons that can help increase the business’ market share. The company can hire highly qualified and skilled persons in its factory to produce high quality goods in a shorter time period. The company can hire sales and promotions people that can effectively increase product sales. The company can hire skilled workers to give after-sales service repairs to its current customers. The company can also hire accounting and other line and staff personnel that can produce quality sales and cost reports to aid the marketing and production department heads in their decision whether to increase production or decrease production of its finished goods. Hiring person that can help increase the business’ market share will surely increase the overall company revenues.
Function level strategy
This refers to the managerial game plan for a particular functional activity business process or key department within a business(Luchs, 1998). A specific functional activity is the company’s marketing strategy. The functional level strategies can be divided into marketing level strategy, finance level strategy, information technology level strategy and research and development level strategy. The functional level strategy are narrower in scope than the business level strategy but functional level strategies are written in more detail than the business level strategy. The major role of functional level strategy is to support the overall organizational business plan and competitive approach.
The marketing functional level strategy shows in detail how the products will be sold. The marketing functional level strategy includes who will be hired as sales, promotions and advertising persons. It also includes how much money will be allocated to entertaining prospective clients as well as regular customers. It also includes which advertising media will be used to promote their products like what specific radio station, newspaper or television station. The marketing functional activity showing in detail how the products will be sold will serve as a guide for all concerned parties in the organization.
The finance functional level strategy shows in detail how much money will be budgeted for each organizational activity. The marketing department will submit its proposed marketing budget. The manufacturing department will also tender its estimated budget for raw materials, labor and factory overhead for the next accounting period. The accounting department uses the approved budget as a guide as to how much each department or unit in the organization will spend in its day to day operational activities. Also, the finance department studies the effects of borrowing money to finance its daily activities like production, marketing, after sales services and others. The finance functional level strategy showing in detail how much money will be budgeted for each organizational activity will be the basis for amount each department is allowed to use during a certain accounting period.
The information technology functional level strategy shows how the computers and the internet will be used to gather much needed data for the department heads’ decision making activities. The information technology strategy uses computers to speed up the processing of marketing, production and other accounting information. This functional level strategy also uses the internet to hasten research on the economics political, social, technological and other statistical information to help in the formulation of marketing, production and other business strategies. The information technology functional level strategy showing how the computers and the internet will be used to gather much needed data for the department heads’ decision making activities will surely be an influential factor in increasing sales and researching on the competitors’ strategies.
The research and development functional level strategy shows how the research and development department of the organization will use its budget allocation to experiment on new products and processes. The research and development department will also concentrate its efforts on improving the quality of its current products and decreasing the costs and expenses of producing its products in the market place. The research and development functional level strategy showing how the research and development department of the organization will be using its budget allocation to experiment on new products and processes will be a major arsenal in combating the competitors on the level marketing arena.
The production functional level strategy will show how its finished products will be manufactured. The production department will base its production levels on the future sales projections of the marketing department. The production department will buy raw materials using the raw materials beginning inventory and the department’s ending inventory finished jobs as criteria. The production department can hire additional factory personnel to produce the goods needed by the marketing department. The production functional level strategy showing how its finished products will be manufactured will keep the production people on their toes as they exert extra effort to exceed their production quota.
The human resources functional level strategy will show who the HRD will hire or fire based on their job performance ratings. The heads will rate their subordinates based on their performance benchmarks. The human resource department also processes the firing of employees that do not repeatedly meet organizational benchmarks. The human resources functional level strategy showing who to hire or fire will help maintain or increase the organizational sales because only persons meeting the minimum performance standards will be allowed to stay on in the company while the poor performers could either be suspended or terminated.
Corporate strategy concentrates on the diversification of an organizations’ different businesses. Meanwhile, business strategy is defined as the managerial plan for a single business. It composed of the pattern of approaches and moves expertly crafted by management in its drive to successfully perform in one specific line of business. This refers to the managerial game plan for a particular functional activity, business process or key department within a business. A specific functional activity is the company’s marketing strategy. The functional level strategies can be divided into marketing level strategy, finance level strategy, information technology level strategy and research and development level strategy. In conclusion, strategies are the key ingredients for the business to keep abreast of the competitors and venture into uncharted sales territories.
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