Page 24 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Strategic Management

Notes This comprises the overall strategy elements for the corporation as a whole, the grand
strategy, if you please. Corporate strategy involves four kinds of initiatives:
(a) Making the necessary moves to establish positions in different businesses and achieve
an appropriate amount and kind of diversification. A key part of corporate strategy
is making decisions on how many, what types, and which specific lines of business
the company should be in. This may involve deciding to increase or decrease the
amount and breadth of diversification. It may involve closing out some LOB's (lines
of business), adding others, and/or changing emphasis among LOB's.
(b) Initiating actions to boost the combined performance of the businesses the company
has diversified into: This may involve vigorously pursuing rapid-growth strategies
in the most promising LOB's, keeping the other core businesses healthy, initiating
turnaround efforts in weak-performing LOB's with promise, and dropping LOB's
that are no longer attractive or don't fit into the corporation's overall plans. It also
may involve supplying financial, managerial, and other resources, or acquiring
and/or merging other companies with an existing LOB.
(c) Pursuing ways to capture valuable cross-business strategic fits and turn them into
competitive advantages – especially transferring and sharing related technology,
procurement leverage, operating facilities, distribution channels, and/or customers.

(d) Establishing investment priorities and moving more corporate resources into the
most attractive LOBs.
2. Competitive Strategy: It is quite often called as Business Level Strategy. This involves
deciding how the company will compete within each Line of Business (LOB) or Strategic
Business Unit (SBU). In this second aspect of a company's strategy, the focus is on how to
compete successfully in each of the lines of business the company has chosen to engage in.
The central thrust is how to build and improve the company's competitive position for
each of its lines of business. A company has competitive advantage whenever it can attract
customers and defend against competitive forces better than its rivals. Companies want to
develop competitive advantages that have some sustainability (although the typical term
"sustainable competitive advantage" is usually only true dynamically, as a firm works to
continue it). Successful competitive strategies usually involve building uniquely strong
or distinctive competencies in one or several areas crucial to success and using them to
maintain a competitive edge over rivals. Some examples of distinctive competencies are
superior technology and/or product features, better manufacturing technology and skills,
superior sales and distribution capabilities, and better customer service and convenience.
3. Functional Strategy: These more localized and shorter-horizon strategies deal with how
each functional area and unit will carry out its functional activities to be effective and
maximize resource productivity. Functional strategies are relatively short-term activities
that each functional area within a company will carry out to implement the broader,
longer-term corporate level and business level strategies. Each functional area has a number
of strategy choices, that interact with and must be consistent with the overall company
strategies.
Three basic characteristics distinguish functional strategies from corporate level and
business level strategies: shorter time horizon, greater specificity, and primary
involvement of operating managers.

A few examples follow of functional strategy topics for the major functional areas of
marketing, finance, production/operations, research and development, and human
resources management. Each area needs to deal with sourcing strategy, i.e., what should
be done in-house and what should be outsourced?

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