by Benjamin Z.

Macapagal
Management Policy
MBA
Corporate- level Strategies
Business unit Strategies
Functional Strategies

Corporate-Level Strategies
1. Growth strategies
a. Internal growth
b. Mergers
c. Horizontal integration
d. Conglomerate diversification
e. Vertical integration
f. Joint ventures
Alternatives
2. Stability strategy
3. Retrenchment Strategies
a. Turnaround
b. Divestment
c. Liquidation
4. Combination strategies
Internal growth and Mergers
Internal growth is achieved through increasing a
firms sales, production capacity, and work force.
Mergers-- two or more firms combine into one
through an exchange of stock( to share resources
and gain market share). Normally, mergers
involve firms of roughly similar sizes.
*an attempt to compete more effectively against
giant firms.
Horizontal integration and
Conglomerate diversification
Horizontal integration--Many firms expand by
acquiring or creating other companies in their
same line of business (related). Can result in
increased operational flexibility and market share.
Ex. When Texas Air Corporation acquired
Continental Airlines, Eastern Airlines, and People
Express, it attempted to gain flexibility through
increased access to more airport hubs, air routes,
and resources.
Conglomerate Diversification
Firms may also expand through unrelated or
conglomerate diversification in which a firm
acquires or starts businesses in industries that
are unrelated to its original business.
Ex: ITT Corporation owns such diverse
entities as the Hartford Insurance Group and
Sheraton Corporation and also operates in such
varied industries as automobile parts, defense,
and pulp and timber.
Vertical integration and Joint
ventures
Vertical integrationa company obtains control of
its suppliers (backward integration)
Ex: Du Ponts purchase several years ago of
Conoco. Conoco, an oil company, supplies
petroleum products that Du Pont uses in
manufacturing its chemicals. By buying its
suppliers, a firm assures itself of a steady source
of supply at a predictable price.
Joint Ventures
Joint ventures are partnerships.
Two or more firms that carry out a specific
project or cooperate in a selected area of
business.
Can be temporary or long term.
May be undertaken for a variety of reasons
political, economic, or technological.
Examples
In certain countries, a foreign firm may only be
permitted to operate if it enters into a joint venture
with a local partner.
In some cases, a particular project may be so
large that it strains a single companys resources.
So that company may enter into a joint venture
with another firm to gain the resources to
accomplish the job.
2. Stability Strategy
In which some firms attempt to maintain their size
and current lines of business.
Do not attempt to grow either through increased
sales or through the development of new
products or markets.
May be forced to do so if it operates in a low-
growth or no-growth industry.
Example
Consider Peets Coffee and Tea, a group of eight
coffeehouses that employs 170 employees in the
San Francisco Bay area.
Although the owner ,Gerald Baldwin, has
received numerous lucrative offers to franchise
his business nationwide, he has always refused.
His concern is that with growth, quality may
suffer. He fears that some franchisees might
serve coffee that was not freshly roasted to cut
their costs and increase profits.
3. Retrenchment Strategies
When a firms performance is disappointing or, at
the extreme, when its survival is at stake, then
this strategy may be appropriate.
Three forms:
a. Turnaround-- cost-cutting, downsizing
b. Divestment--sells 1 of its business units
c. Liquidation--sale of its assets
4. Combination Strategies
Companies that operate multiple business units
often adopt a combination of strategies
simultaneously.
One business unit, for example, may grow
internally while another grows by acquiring an
independent firm and another is retrenching.
Firms with a number of business units are said to
manage a portfolio of businesses.
Business Unit Strategies
A business unit is an organizational subsystem
that has market, a set of competitors, and a
mission distinct from those of the other
subsystem in the firm.
Because each business unit serves a different
market and competes with different companies
than the firms other business units, it must
operate with its own mission, objectives, and
strategy.
Generic Strategies (SBUs)
These strategic alternatives are termed generic
because they can be adopted by any type of
business unit (manufacturing company, a hi-tech
firm, or a service organization)
1. Niche-low cost strategyemphasizes
keeping overall costs low while serving a narrow
segment of the market. ( no-frills products for
price sensitive customers)
Generic Strategies
2. Niche-Differentiation Strategy is appropriate
for business units that produce highly
differentiated, need fulfilling products/services for
the specialized needs of a narrow range of
customers ( high prices are acceptable to certain
customers who need product performance,
prestige, safety, or security.)

Niche-Low Cost/Differentiation
Strategy
Produce highly differentiated, need fulfilling
products/services for specialized needs of a
select group of customers or a market niche while
keeping their costs low.
Ex: Porsche has low costs relative to Rolls-
Royce while offering a high degree of output
differentiation.
Functional Strategy
For effective implementation, it needs to be
translated into more detailed policies that can be
understood at the functional level of the
organization.
The expression of the strategy in terms of
functional policies also serves to highlight any
practical issues that might not have been visible
at a higher level.
Implementation
The strategy should be translated into specific
policies for functional areas such as:
a. Marketing
b. Research & Development
c. Procurement
d. Production
e. Human Resources
f. Information System
Implementation
In addition to developing functional policies, the
implementation phase involves identifying the
required resources and putting into place the
necessary organizational changes.
Thank You!


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A Hierarchy of Policies
Company Strategy
Acquire a chain of retail stores to meet our sales
growth and profitability objectives.
Supporting Policies
1. All stores will be open from 8 a.m. to 8 p.m.
Monday through Saturday. ( This policy could
increase retail sales if stores currently are open
only 40 hours a week.)
2. All stores must submit a Monthly Control Data
Report. (This policy could reduce expense to-
sales ratios.)


Supporting Policies (cont)
3. All stores must support company advertising
by contributing 5 percent of their total monthly
revenues for this purpose. (This policy could
allow the company to establish a national
reputation.)
4. All stores must adhere to the uniform pricing
guidelines set forth in the Company Handbook.
(This policy could help assure customers that the
company offers a consistent product in terms of
price and quality in all its stores.)
Divisional Objective
Increase the divisions revenues from $10 million
in 2013 to $15 million in 2014.
Supporting Policies
1. Beginning in January 2013, each one of this
divisions salespersons must file a weekly activity
report that includes the number of calls made, the
number of miles traveled, the number of units
sold, the dollar volume sold, and the number of
new accounts opened. (This policy could ensure
that salespersons do not place too great an
emphasis in certain areas.)
Supporting Policies (cont)
2. Beginning in January 2013, this division will
return to its employees 5 percent of its gross
revenues in the form of a Christmas bonus. (This
policy could increase employee productivity.)
3. Beginning in January 2013, inventory levels
carried in warehouses will be decreased by 30
percent in accordance with a Just-in-Time (JIT)
manufacturing approach. (This policy could
reduce production expenses and thus free funds
for increased marketing efforts.)

Production Department Objective
Increase production from 20,000 units in 2013 to
30,000 units in 2014.
Supporting Policies
1. Beginning in January 2013, employees will
have the option of working up to 20 hours of
overtime per week. (This policy could minimize
the need to hire additional employees.)
2. Beginning in January 2013, perfect
attendance awards in the amount of $100 will be
given to all employees who do not miss a
workday in a given year. (This policy could
decrease absenteeism and increase productivity.)
Supporting Policies (cont)
3. Beginning in January 2013, new equipment
must be leased rather then purchased. (This
policy could reduce tax liabilities and thus allow
more funds to be invested in modernizing
production processes.)

END