Strategy sets the organizations direction and provides the framework that management will use to achieve to goals through strategic, tactical and operational planning. When developing a strategy, managers answer such questions as "What products should we make?" "What markets should we serve?" What operations should we use?" "How should we compete?" To effectively answer these questions, managers consider four elements when they create organizational strategies.
Although alignment of strategic initiatives is a corporate-wide effort, considering strategy in terms of levels is a convenient way to distinguish among the various responsibilities involved in strategy formulation and implementation. A convenient way to classify levels of strategy is to view corporate-level strategy as responsible for market definition, business-level strategy as responsible for market navigation, and functional-level strategy as the foundation that supports both of these (see Table 1).
Corporate-level strategies address the entire strategic scope of the enterprise. This is the "big picture" view of the organization and includes deciding in which product or service markets to compete and in which geographic regions to operate. For multi-business firms, the resource allocation process—how cash, staffing, equipment and other resources are distributed—is typically established at the corporate level. In addition, because market definition is the domain of corporate-level strategists, the responsibility for diversification, or the addition of new products or services to the existing product/service line-up, also falls within the realm of corporate-level strategy. Similarly, whether to compete directly with other firms or to selectively establish cooperative relationships—strategic alliances—falls within the purview corporate-level strategy, while requiring ongoing input from business-level managers. Critical questions answered by corporate-level strategists thus include: Corporate, Business, and Functional Strategy
|Level of Strategy |Definition |Example | |Corporate strategy |Market definition |Diversification into new product or geographic markets | |Business strategy |Market navigation |Attempts to secure competitive advantage in existing product or | | | |geographic markets | |Functional strategy |Support of corporate strategy and |Information systems, human resource practices, and production processes| | |business strategy |that facilitate achievement of corporate and business strategy |
1. What should be the scope of operations; i.e.; what businesses should the firm be in? 2. How should the firm allocate its resources among existing businesses? 3. What level of diversification should the firm pursue; i.e., which businesses represent the company's future? Are there additional businesses the firm should enter or are there businesses that should be targeted for termination or divestment? 4. How diversified should the corporation's business be? Should we pursue related diversification; i.e., similar products and service markets, or is unrelated diversification; i.e., dissimilar product and service markets, a more suitable approach given current and projected industry conditions? If we pursue related diversification, how will the firm leverage potential cross-business synergies? In other words, how will adding new product or service businesses benefit the existing product/service line-up? 5. How should the firm be structured? Where should the boundaries of the firm be drawn and how will these boundaries affect relationships across businesses, with...
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