- Corporate Level Strategy Pdf Download
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- Toyota Corporate Level Strategy
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It is also critical for a theory of corporate strategy to explain how the multibusiness firms create value at the corporate level that cannot be created by neoclassical single-business firms. In our next post we will get into the details on the levels, but for now here is a top level view. The three levels of strategy are: Corporate level strategy: This level answers the foundational question of what you want to achieve. Is it growth, stability, or retrenchment? Business unit level strategy: This level focuses on how you’re going. When classifying the types of strategy employed, it is often useful to describe them as occupying different tiers. The CEO are involved in corporate-level strategy. Regional directors or managers are involved in business level strategy. Individual store managers are.
As with many other human endeavors, strategy is an important element for success in business. Although the word 'strategy' is related to the term 'stratagem,' which has connotations of deception or guile, the word is also used for any systematic decision-making process intended to produce a specified result. In the world of business, of course, the goal is to produce profit. However, there are many decisions to be made on the road to prosperity and various tiers of strategic thinking attend to them.
Tiers of Strategic Decisions
Operatives of the company from the CEO to the night-shift stock person all employ strategy. Although the stock person might make a strategic decision as to how many items to carry up the ladder to place on the shelf in one trip, the highest-ranking executives make decisions involving the opening or closing of plants, factories or distribution centers. Obviously, the scale of these decisions is quite disparate. When classifying the types of strategy employed, it is often useful to describe them as occupying different tiers. The CEO are involved in corporate-level strategy. Regional directors or managers are involved in business level strategy. Individual store managers are involved in functional or department level strategy.
Corporate-level strategy occupies the highest tier in this hierarchy. The most general questions are addressed at this level. What products or services should the firm provide? How should the firm be organized, i.e. a partnership, a privately held firm, a publicly traded company? Should the operation of individual divisions or properties be largely autonomous, or should a strict hierarchy with extensive involvement of centralized managers be used? Addressing these questions is essential to the success of the firm. Even with motivated workers, efficient clerical staff and fair, organized managers, a firm that tries to provide a service that is no longer wanted or a product that has become obsolete is doomed to failure. Conversely, even merely adequate implementation in a lucrative market or an exceptional product can produce impressive revenues. Similar potential for success or failure exists in selection of markets, organizational structure and nurture of corporate culture.
Lower Strategic Tiers
Lower tiers of strategic decision-making can be just as vital, however. At the business-unit level, strategic decisions are made regarding how to deal with specific competitors, adjust to changes in demand or implement newer technologies. An example of a business-unit level decision is making the choice between three generic strategies. A differentiation strategy seeks to provide product or service that is clearly superior to its competitors. On the other hand, a price-leader strategy seeks to provide a product that is comparable but offers substantial savings to potential customers. A third strategy, focus, concentrates on providing a price or differentiation advantage aimed at a narrow segment of the consumer market.
Vertical integration is an example of a strategy that highlights a sometimes confusing aspect of corporate-level strategy. In vertical integration, a firm acquires either its customers, its suppliers or sometimes both. The firm that owns steel mills would be utilizing vertical integration if it purchases iron or coal mines or if it opened facilities for producing prefabricated metal goods. But is this activity an example of a corporate-level strategic decision or a business-level decision? Different sources will answer in different ways, but it's clear that there is no obvious line of demarcation between the two.
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Strategy is at the heart of business. All businesses have competition, and it is strategy that allows one business to rise above the others to become successful. Even if you have a great idea for a business, and you have a great product, you are unlikely to go anywhere without strategy.
Many of the most successful business men and women throughout history have been great strategic thinkers, and that is no accident. If you wish to take your business to the top of the market as quickly as possible, it is going to be strategy that leads the way.
Of course, before you can get into the process of determining your own business strategies, you need to understand what the word ‘strategy’ really means in a business context. Does it involve long-term planning as to the general course of the business? Or is it related to the day-to-day operations and how they are designed in order to achieve success? Well, in practical application, strategy can refer to both of those things and more.
To help you understand strategy in business, this article is going to look at the three levels of strategy that are typically used by organizations. Only when all three of these levels are carefully considered will your business be able to get on the right path toward a prosperous future.
The first level of strategy in the business world is corporate strategy, which sits at the ‘top of the heap’. Before you dive into deeper, more specific strategy, you need to outline a general strategy that is going to oversee everything else that you do. At a most basic level, corporate strategy will outline exactly what businesses you are going to engage in, and how you plan to enter and win in those markets.
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It is easy to overlook this planning stage when getting started with a new business, but you will pay the price in the long run for skipping this step. It is crucially important that you have an overall corporate strategy in place, as that strategy is going to direct all of the smaller decisions that you make.
For some companies, outlining a corporate strategy will be a quick and easy process. For example, smaller businesses who are only going to enter one or two specific markets with their products or services are going to have an easy time identifying what it is that makes up the overall corporate strategy. If you are running an organization that bakes and sells cookies, for instance, you already know exactly what the corporate strategy is going to look like – you are going to sell as many cookies as possible.
However, for a larger business, things quickly become more complicated. Carrying that example forward to a larger company, imagine you run an organization that is going to sell cookies but is also going to sell equipment that is used while making cookies. Entering into the kitchen equipment market is a completely different challenge from selling the cookies themselves, so the complexity of your corporate strategy will need to rapidly increase. Before you get any farther into the strategic planning of your business, be sure you have your corporate strategy clearly defined.
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It is best to think of this level of strategy as a ‘step down’ from the corporate strategy level. In other words, the strategies that you outline at this level are slightly more specific and they usually relate to the smaller businesses within the larger organization.
Toyota Corporate Level Strategy
Carrying over our previous example, you would be outlining separate strategies for selling cookies and selling cookie-making equipment at this level. You may be going after convenience stores and grocery stores to sell your cookies, while you may be looking at department stores and the internet to sell your equipment. Those are dramatically different strategies, so they will be broken out at this level.
Even in smaller businesses, it is a good idea to pay attention to the business strategy level so you can decide on how you are going to handle each various part of your operation. The strategy that you highlighted at the corporate level should be broad in scope, so now is the time to boil it down into smaller parts which will enable you to take action.
This is the day-to-day strategy that is going to keep your organization moving in the right direction. Just as some businesses fail to plan from a top-level perspective, other businesses fail to plan at this bottom-level. This level of strategy is perhaps the most important of all, as without a daily plan you are going to be stuck in neutral while your competition continues to drive forward. As you work on putting together your functional strategies, remember to keep in mind your higher level goals so that everything is coordinated and working toward the same end.
It is at this bottom-level of strategy where you should start to think about the various departments within your business and how they will work together to reach goals. Your marketing, finance, operations, IT and other departments will all have responsibilities to handle, and it is your job as an owner or manager to oversee them all to ensure satisfactory results in the end. Again, the success or failure of the entire organization will likely rest on the ability of your business to hit on its functional strategy goals regularly. As the saying goes, a journey of a million miles starts with a single step – take small steps in strategy on a daily basis and your overall corporate strategy will quickly become successful.
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Good strategy alone isn’t going to automatically lead you to success in business, but it certainly is a good place to start. Once you have sound strategies in place, the focus of the organization will shift toward executing those strategies properly day after day. Of course, your strategies will need to be continually monitored and adjusted as you move forward to ensure you are staying on a path that is consistent with the goals of the business, so always keep the three levels of strategy near the front of your mind as your guide your company.
You can read more about the three levels of strategy in our free eBook ‘Top 5 Strategy Development Tools’. Download it now for your PC, Mac, laptop, tablet, Kindle, eBook reader or Smartphone.
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- All organizations have competition, and it is strategy that allows one business to rise above the others to become successful.
- There are three levels of strategy that are typically used by organizations.
- Corporate level strategy covers actions dealing with the objective of the organization, including acquisitions and the coordination of strategies of individual business units for optimal performance.
- Strategic decisions tend to be value-oriented, conceptual and less concrete than decisions at the business or functional level. It is concerned mainly with growth and renewal rather than in market execution.
- Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets.
- Functional strategy involves providing objectives for specific functions, allocation of resources among different operations within that functional area and coordination between them.