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Levels of Strategy

Levels of Strategy. Terms. Arrange the following terms in a logical hierarchy: Company Division Strategic Business Unit (SBU) Corporation Industry Value Chain Person Department Market. Terms. Arrange the following terms in a logical hierarchy:. Industry Value Chain Company

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Levels of Strategy

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  1. Levels of Strategy

  2. Terms • Arrange the following terms in a logical hierarchy: • Company • Division • Strategic Business Unit (SBU) • Corporation • Industry • Value Chain • Person • Department • Market

  3. Terms • Arrange the following terms in a logical hierarchy: • Industry • Value Chain • Company • Department • Person • Corporation • Division / SBU • Company A market refers to the place where goods and services are exchanged.

  4. Rumelt's Typology of Diversification 1. Single Product: 95% of revenues from a single product line 2. Dominant Product: 70-94% of revenue from a single product line 3. Related Product: Less than 70% of revenue from a single product line and and the remainder of revenues from a related product domain 4. Unrelated Product: Less than 70% of revenue from a single product and remainder of revenues from an unrelated product domain

  5. Some Levels of Strategy The Impact of IT on strategy is dramatically different depending on the level of strategy. On what level is your paper? • Corporate • Business • Functional • Operational

  6. Corporate Level Strategy • What businesses are we in? What businesses should we be in? • Four areas of focus • Diversification management (acquisitions and divestitures) • Synergy between units • Investment priorities • Business level strategy approval (but not crafting)

  7. Concentric Diversification (Economies of Scope) Corporate growth strategies Corporate stability strategies Corporate retrenchment strategies Corporate-Level Strategies Valuable strengths Conglomerate Diversification (Risk Mgt.) Firm Status Can still go for business-level growth (economies of scale) Critical weaknesses Abundant environmental opportunities Critical environmental threats Environmental Status

  8. The BCG “Portfolio” Matrix Market Share High Low Stars Question Marks ? ? ? High ? Anticipated Growth Rate Cash Cows Dogs Low

  9. Business Level Strategy • How do we support the corporate strategy? • How do we compete in a specific business arena? • Three types of business level strategies: • Low cost producer • Differentiator • Focus • Four areas of focus • Generate sustainable competitive advantages • Develop and nurture (potentially) valuable capabilities • Respond to environmental changes • Approval of functional level strategies

  10. Functional: How do we support the business level strategy? Operational: How do we support the functional level strategy? An example. Business L.S.: Become the low cost producer of widgets Functional L.S. (Mfg.): Reduce manufacturing costs by 10% Operational (Plant #1): Increase worker productivity by 15% Functional / Operational Level Strategy

  11. A Simple Organization Chart(Single Product Business) Business Level Strategy Business Research and Development Human Resources Manufacturing Marketing Finance Functional Level Strategy

  12. Business Level Business 1 (Related) Business 2 (Related) Business 3 (Related) Functional Level Research and Development Human Resources Manufacturing Marketing Finance A Simple Organization Chart(Dominant or Related Product Business) Corporate Level Multibusiness Corporation

  13. Company 1 Co. 2 Co. 3 Division 1 Div. 2 Div. 3 An example of an Unrelated Product Business(Note: By itself, an SBU can be considered a related product business) SBU: a single business or collection of related businesses that is independent and formulates its own strategy A (Multi-business) Corporation Ex.: G.E. (General Electric Corp.) Strategic Business Unit 1 S.B.U. 2

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