The Mutibusiness strategy & Implementation

Week-6 DQs

1.        How does strategic analysis at the corporate level differ from strategic analysis at the business level?

Strategic analysis is concerned with whether a business or corporate achieves its competitive advantage by leveraging its core competencies that has been previously expected to arise. It is true that a competitive advantage can only be achieved by outperforming in some aspects of business at a lower cost than its competitors. For example, Samsung Inc. when focuses on just mobile industry, selling a mobile at a profit is concerned with business level strategy whereas when it focuses on which business units to keep (e.g. Mobile industry) and which to sell (e.g. outsourcing of battery) is concerned with corporate level strategy. Other major differences are highlighted as follows:

Strategic Analysis at the corporate level: The corporate level strategy is a top level strategy comprised of a broad of directors, chief executive, and administrative officers that is made up of multiple business units, operating in multiple markets (Pearce II, J.A.,& Robinson, R.B., 2012). It mainly deals with strategic domain choice so as to involve in such business which could maximize the value to stakeholders. Having said this, it strives to answer the question, how we structure the overall business so that all of its parts create more value i.e. synergy than they would individually? At this level, it is important to think how all these businesses fit together and how resources should be deployed to create a strong corporate value. Some of the important tools used in this analysis are porter’s generic strategies, Boston Matrix, ADL Matrix and VRIO analysis and so on. The organization’s design at this level of strategy corporates how organizational resources such as people, money, machine, material are allocated to gain a competitive advantage and support strategic goals.

Strategic Analysis at the business level: The business level strategy is a middle level strategy comprised of business and corporate managers (Pearce II, J.A.,& Robinson, R.B., 2012). It basically deals with specific business units that is formulated in order to gain a competitive advantage in the specific industry. It addresses the question like how do we win in this market? It is important to think that how a business unit can meet their customers’ need in the best possible way by using its core competencies. Some of the important tools used in this level are USP analysis, Porter’s Five Forces model, and SWOT analysis. Using these tools, a business unit can know how to strengthen the business competitive position by addressing the opportunities and threats in the particular market.

In conclusion, strategies for a firm may be classified by the level of the organization responsible for the strategy. Corporate-level strategies concern top management and address strategic issues of facing the organization as a corporate whole whereas business-level strategies deal with major business units or divisions of the corporate portfolio. Business-level strategies are generally developed by upper and middle-level business unit managers, in negotiation on key targets with the top corporate managers, and are intended to help the organization achieve its corporate level strategy.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from http://smallbusiness.chron.com/difference-between-corporate-strategy-business-strategy-57411.html

(n.d.) Retrieved from https://www.mindtools.com/pages/article/what-is-strategy.htm

2.        What is the portfolio approach? How would multi-business companies find it useful? What are the limitations and weakness of this approach?

The portfolio approach is a historical starting point for strategic analysis and choice in multi-business firms (Pearce II, J.A.,& Robinson, R.B., 2012).The portfolio approach would be useful tool for strategic managers to allocate resources in multi-business firms. This approach is pioneered by the Boston Consulting Group (BCG) for the purpose of helping managers to make a balance flow of cash resources among their various businesses by identifying their basic strategic options within the overall portfolio.

For example, Robert Cushman, CEO of Norton Company, 1971-1980 clearly stated that “Portfolio planning became relevant to me as soon as I became CEO. I was finding it very difficult to manage and understand so many different products and markets. I just grabbed at portfolio planning because it provided me with a way to organize my thinking about our businesses and the resource allocation issues facing the total company. I became, and still am, very enthusiastic.” Hence, having said this, it is now clear that using this approach is both useful as well as challenging in a real business world.

The usefulness in multi-business companies:

The usefulness of this approach in the multi-business companies are as follows:

a)      This approach conveys the large amount of information about diverse business units and incorporates these for making the strategic plans in a more simplified way. It also shows the similarities and differences among the different business units that can be useful incorporating the same logic in each of the business units.

b)      It helps manager to make priorities for sharing corporate resources among diverse business units.

c)      It clearly reflects the ways in which a corporate manager knows the sense of what should be accomplished- a balanced portfolio of businesses- and a proper allocation of various resources among these business units.

The limitations and weakness of portfolio approach:

While this approach is highly useful for managers, there are also several weaknesses and limitations of this approach which are as follows:

a)      It is true that this approach is not likely to address accurately in terms of value it generates among the different business units. It is not as easy as the matrices portrays in regards to its measurement for matrix classification.

b)      This approach assumes that there is a positive relationship between market share and profitability. It means that higher the market share, higher will be the profit. However, it is not true all the time because sometimes it may vary across industries and market segments, and a firm with low market share can generate superior profitability with differentiation advantages.

c)      This approach assumes the notion that firms should have self-sufficient fund. However, it does not consider the capital raised in capital markets.

d)     It typically fails to compare the competitive advantage a business received from being owned by a particular company with the costs of owning it. It is also true that this matrix is supposed to be wrong for average businesses in average-growth markets as limited options prevail in the basic strategic missions.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from https://hbr.org/1986/07/making-planning-strategic

3.        How can management empower operational personnel in implementing corporate and business strategies and in the development of functional tactics?

It is true that translating the strategies or tactics into actions and then into meaningful results takes management efforts while empowering operational personnel in implementing corporate and business strategies in the development of functional tactics. In many cases, business strategies are derived from corporate strategies, and functional tactics are derived from business strategies. However, empowering operating personnel by the management includes the following key activities to be undertaken into account:

1.      By Using standard operating procedures or policies: Operating personnel can be empowered through policies that provides guiding behavior, decisions, and actions at the firm's operating levels in such a manner, consistent with its business and functional strategies. They allows operating personnel to make decisions and take action quickly. For example, General Electric has been allowing the appliance repair personnel to decide about warranty credits on the spot, which used to take several days and multiple organizational tasks to complete.

2.      By Using Compensation rewards and bonus: It is also possible to empower the operating personnel through compensation plans. For this, firms first have to identify the strategic objectives of stakeholders and then approach them accordingly to fulfill their needs on the way they want. There are five bonus compensation plans that can be structured to provide the executive with an incentive to work toward achieving those goals (Pearce II, J.A.,& Robinson, R.B., 2012).

3.      By regulating and controlling their daily activities: Having a clear cut regulation and control, management can make sure that operating personnel is doing what they are assigned to do. For this, management has to carefully observe their daily activities in order to control if anything went wrong and rectify them immediately to achieve better results.

4.      By matching corporate and business strategies with operational tactics: It is true that when a company’s corporate and business strategies are well equipped with the operating tactics then there is high chance of getting the right actions done. It sometimes plays a pivotal role in empowering the operating personnel and achieving the company’s goals effectively.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

 (n.d.) Retrieved from https://hbr.org/2008/06/the-secrets-to-successful-strategy-execution

4.        What key concerns must functional tactics address in marketing? finance? production/operations? R&D? and human resources?

Functional tactics refer to the key routine activities that must be undertaken in each of functional areas-marketing, finance/accounting, production/operation, R& D, and Human Resource- in order to provide the business’s products and services. Stated another way, functional tactics translate thought or strategies into actions and then into meaningful results (Pearce II, J.A.,& Robinson, R.B., 2012). The key concerns that must be addressed by the functional tactics in the field of marketing, finance, production/operation, R&D, and human resource are outlined as follows:

Functional tactics in Marketing: The role of marketing function is to accomplish the firm’s objectives by improving the sales of business’ products or services in target markets. The functional tactics in the field of marketing include 4Ps and issues related to them are:

·         Product or service: It basically deals with the core product that is profitable to firms. It consists of products and services to meet the customers’ needs, their taste and preferences and other product related services.

·         Price: It deals with the price of business’s products or services. It includes setting of the price of products in compared to its competitors, discounts, price segment and pricing policies etc.

·         Place: It focuses on the target market, priority of geographic locations, channels of distribution, salesforce management, and distribution of goods and services.

·         Promotion: It includes key promotional strategies, advertising, communication mix, and appropriate medial selection.

Functional Tactics in Finance/accounting: The roles of finance and accounting are great in determining the financial fund or capital required to operate the business activities. The functional tactics in terms of finance/accounting are related with short term and long term capital and their relative values in contributing the overall success of the business. Some of the major tactics are:

·         Capital Acquisition: It deals with fund raising through internal and external sources, proportion of long-term and short-term loan, level of common stock and preferred stock, and required cost of capital.

·         Capital Allocation: It is basically concerned with division of funds to most important projects or activities, decision regarding capital and demands of capital for different tasks.

·         Dividend & working capital management: It addresses the level of cash flow required, credit policies, payment terms, and portions of dividend or earning levels to set dividend stability etc.

·         Accounting: It gives emphasis on the cost of creating products or services and value they create within different parts of businesses.

Functional Tactics in Production and Operation: The role of production and operation is very important for manufacturing companies and others. The production or operations functional tactics strive to address the choices about how and where the products or services will be manufactured or delivered, technology to be used, management of resources, plus purchasing and relationships with suppliers. Some of the major tactics are:

·         Facilities and equipment: It basically deals with kinds of facilities, integrated process, automation, and level of normal capacity etc.

·         Sourcing: It includes the supplier selection, sources of supply, and maintaining the relationship with suppliers etc.

·         Operation Planning and Control: It consists of work schedule, production time, inventory level setting, quality control measures, and job standard or specialization.

Functional Tactics in Research and Development: The role of R & D has been growing more rapidly than ever before due to advancement of new and better technologies to be used in the firms. Some of the major tactics regarding R&D are:

·         Basic Research, Product and process development: It focuses on the level of research required for innovation, breakthrough, product development and product growth.

·         Time Horizon: It includes the time period-short term or long term and business or marketing strategies to be used in the company.

·         Organizational Fit: It deals with cheaper R&D either in house or outsourcing, centralized or decentralized and relationship with other business units.

·         Basic R&D Posture: It includes the offensive or defensive posture in responding or leading innovation in the industry.

Functional Tactics in Human Resource: The role of Human resource function basically deals with people’s talent, skills and abilities in utilizing the organizational resources in a better way. Some of the major tactics in regard to HR are:

·         Recruitment, selection, and orientation: It deals with choosing the required human resources, recruiting them, selecting them and keeping them for longer period within the firms.

·         Career development and training: It requires the future need of HR, preparing them through training, and developing them.

·         Compensation and bonus: It deals with setting the appropriate level of payments, intrinsic and extrinsic motivations, and other benefits-bonuses, incentives etc.

·         Evaluation, Discipline, and control: It requires the employee evaluation, formal or informal policies to regulate the employees’ behaviors, and controlling individual or group performance etc.

·         Labor Relations, and equal opportunity requirements: It basically deals with labor-management relations, policies regarding minorities/women, and other hiring policies etc.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from http://onstrategyhq.com/resources/functional-tactics-implementation/