PGD - LEVEL 7
Lcm - Corporate & Business Management
Lecturer - Dr. Samta Rai
Date – 1st Feb, 2011
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A Brief introduction about the module
Learning Outcomes
References
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Importance of Strategic Management
All organisations need to be able to manage strategies.
In this Unit we shall consider the role and importance of corporate strategy and
strategic management in modern organisations.
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A. WHAT IS STRATEGY?
Dictionary definitions of strategy tend to emphasise it in terms of a military context,
such as "the science of forming and carrying our projects of military operations,
general ship", but also add "finesse in carrying out any project".
In management terms, to paraphrase Koontz and O'Donnell, they describe it as "a
decision about how to use available resources to secure a major objective in the
face of possible obstructions……such as competitors, public opinion, legal status,
taboos and similar forces".
Strategy implies action as well as decision-making and involves consideration of the
environment in which it operates.
The term "corporate strategy" relates to strategy applied by organisations of all
types, both private and public, and of all sizes both large and small.
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According to Johnson & Scholes, Strategy is the direction & scope of an
organisation over the long term, which achieves advantage for the organisation
through its configuration of resources within a changing environment & to fulfil
stakeholder expectations.
The characteristics of strategic decisions
•The long term direction of an organisation
• The scope of an organisation’s activities – it means should the organisation
concentrate on one area of activity, or should it have many?
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• It should bring advantage for the organisation over competition
• Strategic fit with the business environment – Organisations need appropriate
positioning in their environment, for example in terms of the extent to which products
or services meet clearly identified market needs
• Strategy is about exploiting the strategic capability of an organisation, in terms of
its resources & competences, to provide competitive advantage and/or yield new
opportunities.
• Strategy should meet the expectations of powerful actors in and around the
organisation.
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LEVELS OF STRATEGY
There are three levels of strategy which we can consider: corporate strategy,
business strategy and operational strategy.
Corporate Strategy
This embraces the overall scope of the organisation, its operation in structural or
financial terms, and the allocation of its resources throughout its various business
or divisions.
This level involves senior management in determining the key activities of the
company in terms of the nature and extent of the product markets in which it will
operate.
At this level the strategic planner has to look ahead and decide which businesses
the company will be involved in for the future.
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For example, at the corporate level a transport company will need to decide which
markets it
will operate in:
• Will they consider only road transport and, if so, will it be in the public or
commercial areas?
• Will they also want to be involved in rail transport and, if so, will they want to be
innovative and consider light rail or monorail methods of travel?
•They may also need to consider diversification and integration with other
operators.
Strategic decisions with regard to finance will concern the overall financial
structure of the company, including the nature and number of strategic business
units (SBUs) which will be established.
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Finally, strategic planning at the corporate level has to take account of the
expectations of the company's shareholders and others who have an interest in it
such as financial houses, employees, etc. These are the company's stakeholders.
Business Strategy
This deals with the competitive position of the specific SBUs or divisions with
respect to those products or services which should be developed and the markets
towards which they should be aimed. Decisions taken at this level include deciding
between cost leadership, differentiation, and focus.
Having decided upon the core competitive strategy, decisions then have to be
made as to whether the particular strategy selected will be pursued alone or, for
example, in partnership within a strategic alliance.
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Operational Strategy
This third level of strategy is concerned with specific functions within the
organisation, such as marketing or finance, and the contribution which these make
to the other strategic levels.
For example, operational strategies for marketing would include strategies for
segmentation and targeting and strategic decisions for each of the elements of the
marketing mix, i.e. product, price, place and promotion.
There is considerable overlap between the three different levels of strategy,
although they are effectively a hierarchy. Corporate strategies first help to delineate
and then to constrain business unit strategies, which in their turn help to delineate
operational strategies, so they all need to be consistent with one another.
Operational strategies must be relied upon to deliver the corporate and business
level strategies.
This vital integration between the three strategy levels is dependent upon effective
communication between management at the different levels within the organisation.
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THANK YOU ALL
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