Organizational Level Strategies

Session 7

Salma Rahman

Business Goals

Goals or objectives convert the organization’s mission into tangible actions and results that are to be achieved, often within a specified time frame.

Three major categories of goals:

1. Production

2. Financial

3. Marketing

Corporate-Level

Strategy

Corporate-Level

Strategy

Functional-Level

Strategy

Functional-Level

Strategy Set of S. Alt. that an org. chooses from as it manages its

operations simultaneously across several industries & Markets.

Set of S. Alt. that an org. chooses from as it manages its

operations simultaneously across several industries & Markets.

Set of S. Alt. that an org. chooses

from as it conducts

business in a particular

industry or market.

Set of S. Alt. that an org. chooses

from as it conducts

business in a particular

industry or market.

Developed for single functional

area.

Developed for single functional

area.

TypesTypes

Business-LevelStrategy

Business-LevelStrategy

Types of Strategic Alternatives:

Organizational Levels of Strategies

• Action plans for each functional area

BUSINESS STRATEGIES

FUNCTIONAL STRATEGIES

CORPORATE STRATEGIES

• Type ofBusiness to compete in

• Competitive position• Resource development

• How to compete in a particular market

• How to achieve competitive advantage

Organizational Strategic Plans

Organization Level

Type of Plan Key Strategic Decisions

Corporate Corporate strategic plan

• Corporate vision• Corporate objectives &

resource allocation• Corporate growth

strategies• Business-unit composition

Business Corporate strategic plan

• Market scope• Competitive advantage

Marketing Marketing strategic plan

Product marketing plan

• Target market approach • Marketing mix approach

• Specific target market• Specific marketing mix• Execution action plan

Corporate level strategies

Growth Strategies

For org’l expansion along some major

dimensions.

Growth Strategies

For org’l expansion along some major

dimensions.Retrenchment

StrategiesInvolves shrinking

operations & eliminating

unprofitable ones. Downsizing.

Retrenchment Strategies

Involves shrinking operations & eliminating

unprofitable ones. Downsizing.

Stability Strategies

Call for maintaining status

Quo. Includes Portfolio

Strategies.

Stability Strategies

Call for maintaining status

Quo. Includes Portfolio

Strategies.

GRAND STRATEGIES

Provide strategic direction at

corporate level.

GRAND STRATEGIES

Provide strategic direction at

corporate level.

Formulation of Corporate Level Strategies

GrowthStrategiesGrowth

Strategies

Diversification Vs Single productDiversification Vs Single product

Other Growth Strategies

ACQUISITION (Purchase of all/part of org.)MERGER (Combination of two firms)

JOINT WORKING (Two/ more firms workingtogether)

Other Growth Strategies

ACQUISITION (Purchase of all/part of org.)MERGER (Combination of two firms)

JOINT WORKING (Two/ more firms workingtogether)

Integration

Vertical (Backward & Forward)

Integration

Vertical (Backward & Forward)

Formulation of Corporate Level Strategies

Internal Growth

Tools for Analyzing

Corporation and Strategic choice

of businesses

Tools for Analyzing

Corporation and Strategic choice

of businesses

Identify SBU

After identification of SBUs comes the categorization

Identify SBU

After identification of SBUs comes the categorization

Formulation of Corporate Level Strategies

G E ScreenG E Screen

B C G MatrixB C G Matrix

Portfolio Models for Allocating Resources - BCG Matrix

Mar

ket

Gro

wth

Rat

e

Relative Market Share

High

High

Low

Low

10%

10x 0.1x1x

Star

Cash Cow Dog

Question Mark

Limitations of Growth Share Matrix

Mkt growth rate – an inadequate descriptor of overall industry attractivenessRelative Market share - an inadequate descriptor of overall competitive strengthOutcomes of growth-share analysis are highly sensitive to variations in how growth and share are measuredLack of guidance on how best to implement investment strategies for each businessModel assumes implicitly assumes that all business units are independent of one another except for the flow of cash

GE MatrixM

arke

t A

ttra

ctiv

enes

s

Business Position or strength

High

Low

Medium

MediumStrong WeakBusiness Strength

Low

Business Level Strategies

Portfolio Management Techniques

Method of analyzing an organizational mix of SBUs and matching them with strategic

goals.

SBU: Strategic Business Unit. Is a division within firm with its own

mission, competitors, & strategy.

Formulation of Business Level Strategies (How a particular business competes)

Porter's Generic Strategic ModelStructure-conduct-performance paradigm

Porter's Generic Strategic ModelStructure-conduct-performance paradigm

Miles and Snow TypologyStrategic Orientation

Miles and Snow TypologyStrategic Orientation

Growth strategiesAnsoff’s Growth Share Matrix

Growth strategiesAnsoff’s Growth Share Matrix

Product Life Cycle Strategies Product Life Cycle Strategies

Focus Cost LeadershipDifferentiation

No DifferentiationNo Cost LeadershipNo Focus

Pro

fita

bil

ity

(RO

I)

Scope of Target MarketNarrow Broad

Low

High

Each of the three strategies is based on having a strong Differential Advantage so this

factor is not plotted.

Porter’s Generic Strategic Model

Text Page 27

Rivalry

Customer BargainingPower

Threat ofNew Entrants

Threat ofSubstitutes

CustomerCompany

Supplier BargainingPower

SupplierCompany

PORTERS FIVE COMPETITIVEFORCES MODEL

Miles & Snow Typology

Robert Miles and Charles Snow identified another set of business strategies based on a business’s intended rate of product-market development (new product development, penetration of new markets). They classify business units into four strategic types: prospectors, defenders, analyzers, and reactors

Miles & Snow Typology

CultureCulture Response StyleResponse Style

ProspectorProspector

ReactorReactor

DefenderDefender

AnalyzerAnalyzer

Capitalize on Emerging OpportunitiesCapitalize on Emerging Opportunities

Maintain the Status QuoMaintain the Status Quo

Reduce Operating CostsReduce Operating Costs

Defend Stable Market, Aggressively Enter Emerging Opportunities as “Second In”

Defend Stable Market, Aggressively Enter Emerging Opportunities as “Second In”

Implementation of Miles & Snow Typology

Alternative Corporate Growth Strategies

Market Penetration StrategiesIncrease usage rate or users

Market Penetration StrategiesIncrease usage rate or users

Product Development Strategies

New product category

Product Development Strategies

New product category

Market Development StrategiesEnter new geographical

market or market segment

Market Development StrategiesEnter new geographical

market or market segment

Diversification StrategiesDevelop an entirely new product for an

entirely new market

Diversification StrategiesDevelop an entirely new product for an

entirely new market

Current products New Products

Current Markets

NewMarkets

Alternative Corporate Growth Strategies - Examples

Market Penetration StrategiesMarket Penetration Strategies Product Development Strategies

Product Development Strategies

Market Development StrategiesMarket Development Strategies Diversification StrategiesDiversification Strategies

Current products New Products

Current Markets

NewMarkets

• Price reductions• Advertising stressing the many benefits of the product• Packaging in different sized packages• Making it available at more locations

• Offering a different version of an existing product: mini-Oreos• Offering a new-improved version of the product: Gillette’s latest improvements in shaving technology• Offering new ways to use an existing product

• Arm & Hammer continues to seek new uses for its baking soda• McDonald’s

• Philip Morris, originally into cigarettes, diversified into financial services, Post cereals, Sealtest Dairy and Kraft Cheese• Sara Lee acquired Coach Leather Products

Product Life Cycle

A concept that provides a way to trace the stages of a

product’s acceptance, from its introduction (birth)

to its decline (death).

Product Life Cycle

1. Like humans, Product also have Life Cycle.

2. This term is applied to generic category of product not to specific brands.

3. PLC consists of aggregate demand over an extended period of time for all brands in generic product category.

4. Length of PLC varies.

5. PLC is related to a market.

Product Life Cycle

Time

Dollars

ProductCategory Profits

ProductCategory Sales

IntroductoryStage

GrowthStage

MaturityStage

DeclineStage

0

Extending the PLC

Change product

Change product use

Change product image

Change product positioning

Introductory Stage

High failure rates Unpredictable conditionsLittle competition Not ImportantFrequent product modification Standards being

DevelopedLimited distribution Selective Channels as

build up takes placeNegative profits High marketing and

production costsPromotion Strategy Aim at early adopters Promotion Emphasis Awareness and

informationSales Promotion Intensive personal selling to channels to stock

Full-Scale Launch of New ProductsFull-Scale Launch of New Products

Growth Stage

Competition Some emulators threatens competitive

advantage of firm Strategy Market penetrationsProfits From high prices and Increasing rate of demandGoal is quality and ensuring distributionDistribution Market consolidation through

intensive distributionPromotion Strategy Emphasizes brand benefitsEmphasis Word of mouth; minimal advertPrices Normally start to fallSales Promotion Build Brand preference

Offered in more sizes, flavors, options

Offered in more sizes, flavors, options

Maturity StageCompetition Maximum competitors Declining sales growth and Saturated markets, Marginal competitors drop out Strategy Defend Brand position extend

product line by Stylistic product changes

Prices What the market can bear, avoid pricewar and profits fallPromotion Strategy Use as a vehicle for differentiationPromotion Emphasis Moderate since buyers are awareHeavy promotions To encourage brand switching

convert buyers to loyal buyersMarket is fragmented Niche marketers emerge

Many consumer products are in Maturity

Many consumer products are in Maturity

Decline Stage

Competition Few with rapid shake outStrategy Prepare for removal and milk the brandProfits Decline as Long-run drop in sales due to declining demand and push up costsPrices Low to permit quick liquidation of Large inventories of unsold itemsDistribution Selective with unprofitable outlets

closed downPromotion Strategy promote low price to reduce stockEmphasis Elimination of all nonessential marketing expenses

Rate of decline depends on change in tastes or

adoption of substitute products

Rate of decline depends on change in tastes or

adoption of substitute products