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Level of strategies
Company
Division Level
Functional Level
Operational Level
5Ch 5 -
Types of Strategies
company
A small
Company Functional
Level
Operational Level
6Ch 5 -
Corporate Strategy
• The first level of strategy (corporate strategy) is related to determining the
corporate strategy. It is fundamentally and simply concerned with deciding
what type of business the organization should be in and how the overall
group of activities should be formed and managed .Corporate strategy
deals with issues of strategic management at the level of the firm as a
whole. Such issues involve the basic character, capability and competence
of the firm; the direction in which it should develop its activity; the nature
of its internal architecture; governors and structure; the nature of its
relationships with its sector, its competitors and the wider environment.
Corporate strategies usually fit within the three main categories of
stability, growth and retrenchment
7Ch 5 -
Business Strategy
business strategy refers to the actions and
approaches crafted by management to create
successful performance in one particular line
of business. It is also concerned with creating
competitive advantage in each of the strategic
.business units of the organization
• Forward integration
• Backward integration
• Horizontal integration
Forward
Integration Example
• Motel 8 acquired a
Defined furniture
manufacturer.
• Seeking
ownership or
increased control
of a firm’s
suppliers
• Palestinian Islamic
Defined Bank acquired Cairo-
Amman Bank Islamic
• Seeking transaction branch.
ownership or
increased control
over competitors
Intensive Strategies
• Market penetration
• Market development
• Product development
Example
Defined
• Khuzendar Tiles maker
• Introducing introduce his product
present products to Gulf markets.
or services into
new geographic
area
Diversification Strategies
• Concentric diversification
• Conglomerate diversification
• Horizontal diversification
Defined • Consultant
Construction
• Adding new, Engineering acquired
unrelated products Bisects factory.
or services
Example
Defined
• The El-Awda Co.
• Adding new, provide ice-cream
unrelated products product to present
or services for customer
present customers
Defensive Strategies
• Joint venture
• Retrenchment
• Divestiture
• Liquidation
Joint Venture
Example
Defined
• Lucent Technologies
• Two or more and Philips Electronic
sponsoring firms NV formed Philips
forming a separate Consumer
organization for Communications to
cooperative make and sell
purposes telephones.
Example
Defined
• Regrouping through • A company sold off a
cost and asset land and 4 apartments
reduction to reverse to raise cash needed.
declining sales and It introduce expense
profit. Sometimes it is
called turnaround or
effective control
reorganizational system.
strategy.
38 Prof. Dr. Majed El-Farra 2009
Strategies in Action
Guidelines for Retrenchment
Firm has failed to meet its objectives and goals consistently over
time but has distinctive competencies
Firm is one of the weaker competitors
Inefficiency, low profitability, poor employee morale, and
pressure from stockholders to improve performance.
When an organization’s strategic managers have failed
Very quick growth to large organization where a major internal
reorganization is needed.
Divestiture
Example
Defined
• Harcourt General, the
• Selling a division large US publisher, is
or part of an selling its Neiman
organization Marcus division.
Liquidation
Defined Example
Differentiation Strategies
Focus Strategies
(Low-Cost Focus &
Best-Value Focus)
–Differentiation strategy
•Unique/superior value, quality, features,
service
Competitive Advantage --
Cost Leadership --
Differentiation –
Cost-Focus –
Differentiation Focus –
• The most important factors can be brought out by going through each functional
area. For example, under marketing, a strong market research group may be able
to identify the kinds of niches available to the products or services under
consideration.
• In terms of finance, the production of a large number of low-priced products
suggests a large capital intensive manufacturing facility.
• To produce a few high quality goods with a small amount of capital because the
needed manufacturing facilities may be small, utilizing craft labor. R&D may be an
important consideration also.
• In order to produce high-quality products, a fairly sophisticated applied R&D effort
may be needed. An expensive engineering staff may be needed,
• In terms of human resource management, a fairly unskilled and low paid
workforce cannot normally be expected to produce a high quality product on old
assembly line machinery. Either the workforce would need to be replaced or an
extensive job training and job enrichment program would need to be established.
Either approach costs both time and money.
67 Prof. Dr. Majed El-Farra 2009
Is it possible for a company or business unit to follow
a cost leadership strategy and a differentiation
strategy simultaneously? Why or why not?
• Michael Porter argues that a business unit which is unable to
achieve one of the competitive strategies is likely to be "stuck in the
middle" of the competitive marketplace with no competitive
advantage. That unit, according to Porter, is doomed to below-
average performance.
• Research by Greg Dess and Peter Davis as well as by Rod White,
suggests however, that this may not be the case. Examples can be
found of businesses which have been able to jointly follow overall
low cost and high quality differentiation strategy. Japanese
companies such as Toyota in automobiles and Matsushita
(Panasonic and National) in consumer electronics are good
examples. Their offer of low price and high quality created serious
problems for those companies following only cost leadership in the
U.S.
68 Prof. Dr. Majed El-Farra 2009
How can a company overcome the limitations
of being in a fragmented industry?
• Businesses tend to be local and oriented to market segments. This may
occur because the industry is relatively new - based upon a product in the
early stage of its product life cycle.
• Entry barriers are probably low and new entrants are constantly moving
into the industry as others leave or go bankrupt. Often, the trick to be a
successful firm in this kind of industry is to find the key to standardization
which allows economies.
• Domino's Pizza achieved success in fast food by providing standardized
pizza throughout North America and by guaranteeing delivery time faster
than competition. Before Pizza Hut and Domino's settled upon
standardized pizza appealing to a wide variety of tastes across North
American, the pizza business was a fragmented industry characterized by
many small pizza "parlors" serving small market segments in cities
throughout America .
69 Prof. Dr. Majed El-Farra 2009