Strategic Management in Higher Education
5.2 Hierarchies of Strategy
5.2.1 Corporate Strategy
The crown strategy in the business world which is at the top level is a corporate strategy. A corporate strategy describes a company‘s overall direction towards growth by managing the businesses and product lines. It gives the overall scope and direction for a company and lays down the path for its various business operations and works together to achieve particular goals. The corporate strategy deals with the exact businesses that the company is going to engage in, and how to plan to enter and win in those markets. A corporate-level strategy addresses the entire strategic scope of the enterprise. It is the "big picture" view of the business and may include deciding in which product or service markets to compete and the geographical boundaries of the firms‘ operations. For multi-divisional organizations or enterprises, decisions relating to capital, staffing, and other resource allocation is generally established at the corporate level. In addition, whether to compete with other companies or to selectively set up cooperative partnering arrangements, or ‗strategic alliances‘, is a
Corporat e Strategy Business Strategy
Functional Strategy
Top Management
Middle Management
Lower
Management Source: Own Analysis
Figure 5.1-Hierachies of Strategy
96 decision taken by corporate-level strategy.Top management plays a primary decision in making responsibility while developing corporate strategies. Growth strategies, stability strategies, retrenchment strategies and global strategies are some of the important aspects of a corporate level strategy. Following type of decisions are related to corporate level strategies.
1. Allocating resources among the various businesses of the firm 2. Transferring resources from one set of business to others 3. Managing and nurturing a portfolio of the business.
5.2.2 Business Strategy
Business level of strategy is concerned with developing a firm‘s specific business model that allows the firm to gain competitive advantage over its rivals in the industry in which it operates. The question explored in Business level strategy is: how can we best compete in the industry we are in. this is different level of interest than that explored by functional level strategies and corporate level strategies. Business level strategies are the steps followed by an organization for each of its business individually to handle identified customer groups and provide value to the customer by satisfaction of their needs. In the process, the organization uses their competencies to gain sustain and enhance its strategic or competitive advantage. At the business level the aim is to use these resources skills and synergies to enhance its competitiveness. Business-level strategy puts the customer first and makes them the centerpiece of all corporate endeavors. This is done in order to enhance consumer and the company relationships and entice customers to maintain long-term relations with specific businesses. By attracting clients back time and again, firms are able to reckon on this dedicated piece of the market and improve operational steadiness based on the reliability of funding from long-standing customers. These strategies also call for employee training and investment that support such endeavors. Generating a more positive and proactive workforce that is dedicated to shopper satisfaction is important.
The concept of Business Level strategies can be best understood with understanding the Porters Generic Strategies model.
97 a) Cost Leadership: In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the quest of economies of scale, proprietary technology, favored access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. In case a firm can attain and maintain overall cost leadership, then it can be an above ordinary performer in its industry, provided it can mandate prices at or near the industry average
b) Differentiation: In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It prefers one or more features that a lot of buyers in an industry perceive as important,
Source: Michael Porter‘s Competitive Advantage
Figure 5.2- Porter’s Generic Competitive Strategies
98 and especially positions it to meet those needs. It is rewarded for its
uniqueness with a premium price.
c) Cost Focus: Here a business seeks a lower-cost advantage in just one or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers.
d) Differentiation Focus: In this type of strategy, a business aims to differentiate within equitable one or a small number of target market segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The critical issue for any business taking up this strategy is to make sure that customers actually do have diverse needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those needs and wants.
Differentiation focus is the classic niche marketing strategy. Many small businesses are able to establish themselves in a niche market segment using this strategy, achieving higher prices than un-differentiated products through specialist expertise or other ways to add value for customers.
5.2.3 Functional Strategy
The goal of this strategy is to improve the effectiveness of various functions within an organization and to enable them to obtain competitive advantage. This is the day-to- day strategy that is going to keep your organization moving in the right direction.
Many a time‘s business organizations fail to work out at this bottom-level. This level of strategy is perhaps the most important of all, as without a daily plan one can get stuck in neutral while the competition continues to drive forward. As the firm work on putting together their functional strategies, care must be taken to keep in mind the higher level goals so that everything is coordinated and working toward the same end.
It is at this bottom-level of strategy where one should start to think about the various departments within their business and how they will work together to reach goals. The
99 marketing, finance, operations, IT and other departments will all have responsibilities to handle, and it is the job of the strategy makers or managers to oversee them all to ensure acceptable results in the end. The success or failure of the entire organization again is likely to rest on the ability of the business to hit on its functional strategy goals regularly. As per the saying, a journey of a million miles starts with a single step; an organization should take small steps with respect to strategy on a daily basis so that the overall corporate strategy will quickly become successful.