Q2. What is strategy? At what levels is it formulated?

INTRODUCTION: -

To understand the process of strategic management the concept should be understood and controlled. The term strategy is derived from the Greek word “STRATEGOS” à Generalship. The actual direction of military force, as distinct from governing its deployment. The word strategy means “ THE ART OF GENERAL ”. Based on the studies and views by various experts and management gurus Strategy in business has taken various connotations.

STRATEGY:

1.   Before making a decision managers have to look into the course of deciding since

Strategy involves situations like

a)    How to face the competition.

b)   Whether to undertake expansions/diversification

c)    To be focused/ broad based

d)   How to chart a turn around

e)    Ensuring stability/should we go in for disinvestments etc

2.   An establishment and successful company would start to face new threats in the environment. This is due to its success and emergence of new competitors. It has to rethink the course of action it has been following. This is called strategy.

3.   With such rethinking and environment analysis, new opportunities may emerge and be identified.

4.   To make use of these opportunities, the company might fundamentally rethink and reason the ways and means, the actions it had been following in the past. These are called “ strategies “.

5.   For a company to survive and to be successful strategy is one of the most significant concepts to emerge in the field of management. According to Alfred chandler the determination of basic long-term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources for carrying out these goals.

William Gluck defines strategy as “a unified, comprehension and integrated plan designed to assure that the basic objectives of the enterprises are achieved”.

6.   Michael Porter views strategy as the  “ core of general management is strategy”.

Managers must make companies flexible, respond rapidly, benchmark the best practices, outsource aggressively, develop core competencies; Infact should know how to play new roles everyday. Hyper competition is a common phenomenon that rivals copy very fast.

7.   Companies can outperform rivals only if it can establish a difference it can preserve and deliver greater value at a reasonable cost.

8.   Strategy rests on unique activities –“ The essence of strategy is in the activities – choosing to perform things differently and to perform different activities than rivals”.

9.   Strategy is long term. If company focus is only on operational effectiveness.  It can become good and not better. Overemphasis on growth leads to the dilutions of strategy. Growth is achieved by deepening strategy.  

10.                Strategy is the future plan of action, which relates to the companies activities and its mission/vision i.e. when it would like to reach from its current position.

11.                It is concerned with the resource available today and those that will be required for the future plan of action. It is about the trade off between its different activities and creating a fit among these activities.

LEVELS OF STRATEGY:

1.   When a company performs different business/ has portfolio of products, the company will organize itself in the form of strategic business units (SBU’s).

2.   In order to segregate different units each performing a common set of activities, many companies are organized on the basis of operating divisions/decisions. These are known as strategic business units.

3) Strategies are looked at                

v  Corporate level

v  SBU level

4) There exists a difference at functional levels like marketing, finance, productions etc. Functional level strategies exist at both corporate and SBU level. It has to be aligned and integrated.

5) CORPORATE LEVEL STRATEGY: It’s a broad level strategy and all its plan of actions is at corporate level i.e. what the company as a whole. It covers the various strategies performed by different SBU’s. Strategies needs should be in align with the company objective.

6) Resources should be allocated to each SBU and broad level functional strategies. To ensure things there would need to have co-ordination of different business of the SBU’s.

FUNCTIONAL STRATEGY: As the SBU level deals with a relatively. Smaller area that provides objectives for a specific function in that SBU environment are marketing, finance, production, operation etc.

7)       For most companies strategies plans are made at 3 levels.

a)            FUNCTIONAL STRATEGY

b)           SOCIETAL STRATEGY

c)            OPERATIONAL STRATEGY

Societal Strategy: Larger Companies like conglometers with multiple business in different countries needs larger level strategy.

1)    A relatively smaller company may require a strategy at a level higher than corporate level.

2)    It’s how the company perceives itself in its role towards the society/ even countries in terms of vision/ mission statement/ a set of needs that strives to fulfill corporate level strategies are then derived from the societal strategy.

Operational Level Strategy:

In the dynamic environment & due to the complexities of business strategies are needed to be set at lower levels i.e. one step down the functional level, operational level strategies.

There are more specific & has a defined scope. E.g. Marketing Strategy could be subdivided into sales Strategies for different segments & markets, pricing, distribution etc.

Some of them may be common & some unique to the target markets.

It should contribute to the functional objectives of marketing function. These are interlinked with other strategies at functional level like those of finance, production etc