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Strategic Management : Hierarchy of Strategy

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Hierarchy of Strategy Presentation Transcript

Slide 1 - HIERARCHY OF STRATEGY (Strategic Management)
Slide 2 - Implementing business level strategies: structures and control Figure 7.4: Hierarchy of Strategy
Slide 3 - We can distinguish four types of strategies: Cost leadership Differentiation Cost focus Differentiation focus
Slide 4 - 1 - Implementing Cost Leadership To obtain competitive advantage with a cost leadership strategy, a firm must obtain optimal efficiency from its operations. Usually this strategic option includes producing a standardized product at a low cost per unit. With this strategy, the firm seeks to establish economies of scale and incrementally increase efficient production capacities. Market share is important, especially when market demand increases with price concessions.
Slide 5 - 2 - Implementing the Differentiation Strategy A firm seeking to differentiate particularly needs support from its manufacturing and marketing functions. These two functions allow for modification of existing production and quick response to changes in volume and demand. Efficient and flexible manufacturing systems are particularly valuable.
Slide 6 - 3 - Implementing the Integrated Low Cost/Differentiation Strategy Differentiation requires an emphasis on marketing and new product R&D, with relatively frequent product changes to maintain perceptions of product exceptionality. These different functional emphases make implementation difficult. However, with the use of flexible manufacturing Systems and horizontal coordination, such as cross-functional teams, more firms are effectively implementing an integrated low cost/differentiation strategy, in addition, some firms have been ab1e to do both by focusing on low-cost products, while creating other unique features, such as quality service, such as quality service.
Slide 7 - Functional structure for implementation of a differentiation strategy
Slide 8 - 4 - Implementing a Focus Strategy Focus strategies are not easy to implement and the structure can have considerable effect on their success. As firms diversify, the simple and the functional structures are no longer effective. Next we discuss the type of structures necessary to implement strategies of greater diversification...
Slide 9 - 5 - Implementing corporate level strategies: Once a firm diversifies away from a dominant-product business strategy, implementation becomes more complex. As earlier section described, evolution to a diversification strategy usually requires the implementation of the multidivisional structure. Multidivisional structures are organized around products or geographic markets. Each division has its own departments with specialists organized into their functional specialties; Divisions are relatively autonomous and governed by a central corporate office.
Slide 10 - 6 - Implementing the Related-Constrained Strategy Linkages among business units are important to related-constrained diversification strategy. Because of these linkages, top executives must encourage appropriate cooperation among divisions. Cooperation among these divisions is necessary to realized. This centralization is needed to ensure coordination between divisions that are vertically integrated. In this situation, capital investment decisions are more centralized in firms with a high degree of interdivision integration.
Slide 11 - 7 - Implementing the Mixed Related and Unrelated Strategy (Related-Linked) Implementing the mixed related and unrelated (related-linked) strategy requires a different structure form than the related-constrained strategy. Because the mixed strategy seeks to implement both related and unrelated divisions, the strategic business unit structure is needed for organizing its businesses.
Slide 12 - SBU Form of the Multidivisional Structure for Implementation of a Related-Linked Strategy
Slide 13 - 8 - Implementing the Unrelated Diversification Strategy An unrelated firm can create value through efficient internal capital allocation or restructuring, buying and selling businesses. However, the appropriate organization for this strategy differs from those- used when implementing a related diversification strategy. The structure implemented in this situation is the competitive form where the structure and controls emphasize competition between separate (usually unrelated) divisions for corporate capital to realize benefits from efficient allocation of resources.
Slide 14 - THANK YOU