Basis of Strategic Planning
Managers engage in three levels of strategic planning for their firms. In order to achieve what they want they make different types of strategy.
1. Corporate-level Strategy: A company’s corporate level strategy identifies the portfolio of businesses that comprise the organization and the ways in which these businesses relate to one another. These strategy revolve around the question of whether to continue or change the business enterprise is currently in or improve efficiency effectiveness with which the firm achieves its corporate objectives.
There are four types of corporate level strategy, they are stability strategies include maintenance of status quo, sustainable growth etc. Growth strategies which include internal growth, concentration strategies, mergers, takeovers, acquisitions, horizontal integration, conglomerate diversification, vertical integration and joint ventures. Retrenchment strategies include turnaround, captive company transformation, divestment, liquidation. Finally combination strategies which include portfolio restructuring.
2. Business Level Competitive Strategy: This strategy identifies how its managers will build and strengthen that business’s long term competitive position in the marketplace. It is also called strategic business unit (SBU) level strategies where organizational activities are divided in to strategic subsystems which have a set of products or services, competitors and a goal distinct from those of other subsystem. Strategies are formulated for each subsystem consistent with corporate level strategies.
Generic strategies are formulated at the SBU level based on product differentiation, market segmentation and distinctive competency. The generic strategies are low cost leadership, differentiation and focus.
3. A Competitive Advantage: That supports its competitive strategy and sets it apart from those it competes with.
4. Functional Strategy: Identify the basic courses of action that each of the departments will pursue in order to help the business attain its competitive goals. These functional strategy have to make sense in terms of the business’s competitive strategy. The strategies at the departmental level such as separate departments such as production may adopt flexible manufacturing , lean production , six sigma; Marketing may focus customer focus , customization ; HRM may focus on build skills , selection based on attitude and emotion , pay for performance , create self-managing teams , outsourcing ; Materials management involves just in time , total quality management , rationalize suppliers ; R&D involves new products , new processes etc.
