hello student welcome to the lecture on business level strategy after studying this chapter you will be able to explain the production or operation strategies discuss the research and development plans and policies understand the corporate retrenchment strategy reviewed the turnaround strategy defined functional strategies describe the generic strategies what is business level strategy there are many organization then run many business verticals at the same time for example PepsiCo has many products which have their own brand image and are responsible for their respective annual profits losses and management like Pepsi uncle Chips 7up Mirenda cracker oats etc all of these products have a different brand image capture a different market segment play within different pricing strategy and they even have different market competitors for each of their products hence a separate strategy an entirely separate and dedicated to you is required to run each business vertical arm is responsible for its profits the strategy required for each product in such a scenario is called business level strategy but as a whole corporation Pepsi corporation will have a general vision and mission and policies it will live by these are corporate level strategies so now you know what is the difference between business level strategy and corporate level strategy corporate strategy is not the sum total of the business strategies corporates study is concerned with the shape and balancing of growth it does find a reflection in the business strategies because it defined the overall corporate vision business strategy provides competitive strategies for business to identify its competencies in the market it is targeting and provide value to the customers according to Michael I portal 2 factors determine a firm’s com but if strategy are the overall industry structure and the positioning of the film within the industry structure what determines the industry structure five factors determine it threat of new entrants threat of substitute products or services bargaining power of suppliers bargaining power of buyers rivalry among existing competitors on the other hand a firm’s positioning within the industry is determined by competitive advantage and competitive scope there usually two approaches by a firm for competeing in the market the low-cost approach and the differentiation approach low-cost approach is the one where the firm can provide similar products to the customers at prices lower than the competing firms differentiation is when the firm can provide unique and superior value products to the customers and charge a premium price there are combination of business level strategies which are affected at different operational and function levels in organizations production or operation strategies production or operation management POF is the core function in the business form it is the process of converting the raw material or the input into a value enhance output this function might sound like one being associated with manufacturing firms but in principle it is applicable to all kind of firms for example in a business consultancy firm the raw material other input would be the clients problem for which he is seeking your consultation and the output would be the solution you would as a consultancy firm provide to him to enhance his business performance similarly in a college or university the raw material or the input would be the students taking up admission at the college and the value enhance output would be the refined well-educated well-trained graduates that it produces for the job market function strategies in P or M must guide decision regarding the basic nature of the first pol system seeking and optimum balance between investment input and production or operations output location facilities design and process planning on a short-term basic the facilities and equipment component of P om strategy involves decision regarding and location size equipment replacement and facilities utilization that should be consistent with the main company’s strategy

similarly the purchasing function should also be addressed in P om what kind of raw materials should be purchased who are the best vendors what quantities should be purchased at once function strategies provide guidelines for ongoing production operation they are meant to encourage efficient organization of production or operations resources to match long range overall demand often this component dictates whether production or operation will be demand oriented inventory oriented also contracting oriented if demand is silikal or seasonal then P om strategy must ensure that production or operation processes are efficiently geared to this pattern a bathing-suit manufacturer would prefer inventories to be at their highest in the early spring for example not 34 if demand is less silikal a firm might emphasize producing to inventory wanting a steady level of production and inventories when demand fluctuations are less predictable many firms subcontract to handle sudden increases in demand while avoiding idle capacity and excess capital investment after this another strategic question is the long-term capacity built up of the film again there are many methods of this joint ventures mergers and in capacity and so on and so forth all of these position never function in silos meaning they affect each other decision of a firm’s competitive strategy long tumble up etc affect the firm’s financial decision marketing decision location decision etc research and development strategies and policies with increasing rate of technological change in most competitive industry research and development R&D has assumed a key functional role in many organization in the technology intends computer and former silikal industries for example firms typically spend between four and six percent of their sales rupees on R&D in other industries such as the hotel or motel and construction industries R&D spending is less than 1% of sales there’s R&D may be a vital function a key instrument of business strategy order in stable less innovative industries already is less critical as a functional strategy then is marketing or finance they will 5.2 illustrates the types of questions addressed by an R&D operating strategy first R&D strategy should clarify whether basic research or productive Lachman research will be emphasized several major oil companies now have solar energy subsidiaries with R&D strategy emphasis on basic research while smaller competitors emphasize productive Lachman research please consider the table at the background for a few moments this table captures the various question that the R&D strategy makers of firm face does the firm want to be an innovator or the best and the latest or does the film want to focus efforts on producing what’s most feasible to earn profits does the firm one long-term or short-term profits that is does the firm one to extract all accrete solar energy devices clearly the formal will give you quick profits but it is a short-term idea on the other hand we that solar energy is the thing of the future soon as non renewable energy sources get exhausted the world will largely depend upon sources like solar energy which require R&D investment now but will ensure the firm’s profit for the long term does the firm want to control all its R&D itself or just contract our particular ideas on which it would like to get some R&D done this decision again is interconnected with all the other strategies and question discussed above if the phone wants to be a long-term innovative leader it might make sense to have in-house R&D when the R&D be marketing oriented or product oriented for example companies like Duff and Unilever invest huge amounts of money for marketing related R&D to study consumer behavior they also invest money on R&D in producing new products they have introduced many breakthrough products in the past changing the way people expect products to work for them such R&D intents are called offensive postures where firms produce newer products the kind of products that no one else is currently producing and

which are better than all the other offerings in the market consumer naturally love to try out these enhanced products then the competitors rush to inculcate these new features into their products – this is called defensive R&D when firms use R&D only to respond to new products already introduced by their competitors all of these decision that we have discussed above which are crucial decision a firm should take and should be clear upon have a major impact on the finances of a firm offensive R&D can take a lot of money and time and can be a continuous drink on the first profits for many years until it produces a breakthrough marketing related R&D – takes a long time as it collects huge data and studies it for many months many different cultural scenarios the strategy of vertical integration example backward or forward expansion in function is another area where rnd policy becomes particularly relevant the technologies involved in providing inputs are subsequent processing of outputs associated with changing functions would normally require policies to provide for resources and expertise in the new areas of activity another area would include the relative focus of a foot on performing basic or applied research few companies will authorize a research department to study anything if scientists may be interested in but the extent of concern which shot a term commercialization versus theoretical knowledge which may lead to major breakthrough is an issue of some importance if a firm is going to undertake basic research it must be prepared to accept certain financial outcomes and commitments longer-term risks with potentially no payout or long payback periods and enough capital to exploit discoveries if and when they are meet of course a firm may need to engage in some basic research if the nature of its business requires it example most forma Surgical firms depend on basic research corporate retrenchment strategy corporate strategies attempt to device an overall plan for greater corporate success strategies evaluate all factors affecting the corporation’s performance from internal components like employees and chain of command take student forces such as competition and customers while corporate strategies prefer finding ways to expand business they often face tough economic times and need a more conservative approach retrenchment strategy provides corporations a chance to regroup preserving resources for the greater good function during corporate retrenchment the corporation reduce the scope of its activities so that it can manage its financial operations in a more tight-knit fashion it is mostly aimed at making the firm utilize its resources more optimally and reduce any kind of wastefulness to a minimum such a reduction usually includes decision like selling the assets of the firm to raise money or to reduce spending money on paying the installments etc discontinuing unsuccessful product lines dismissing employees restructuring depth or even liquidating the firm this strategy is often called downsizing or right sizing ideally retrenchment is only a temporary measure designed to save money and allow the firm to pursue corporate advancement once the financial situation improves divestment a serious form of retrenchment divestment involves a firm selling one or more of the businesses from its corporate portfolio this is to raise money from the sale and to use that money for more urgent business position the firm takes the resulting money and reinvest it into one of its more promising businesses with influx of cash hopefully securing a better future for not only the individual business but the overall corporation as well essentially divestment cuts away the Deadwood so the rest of the corporate tree can grow bankruptcy bankruptcy may also serve as a form of cooperative retrenchment that is when a firm has lost all its money and has no hope for saving the firm anymore during bankruptcy a corporation received protection from creditors allowing the firm to restructure its debt obligation to increase cash flow bankruptcy buys a corporation time providing a chance to engineer a new strategy to reclaim financial success corporations only

consider bankruptcy once divesting and other forms of retrenchment failed liquidation no corporation wants to face liquidation the most drastic form of corporate return shman liquidation involves selling or closing the entire corporation to recover but ever funds for me the firm ceases to exist with all employees fired and all products and services discontinued corporate strategist see liquidation as a last resort and will do what ever possible to try and avoid taking that final step this we have seen here the various scenarios under which a firm may need to take it steps back as a result of unexpected or unfortunate factors these situation may call for a sudden change in the regular functioning of the firm and have changes in its regular strategies and missions turnaround strategy turnaround strategy and able senior managers of underperforming companies to understand the critical causes of whole result in order to stem losses and restore quote a well-crafted turnaround strategy leads firms to quickly achieve their full potential it would generally involve a major change in the company’s behavior towards its work policy its working process structure etc typically this involves removing cost restructuring finances and redefining strategic objections turnarounds often call for building a stronger management team making acquisition are devising and exists strategy what are the objectives for a turnaround strategy the overall goal of turnaround strategy is to return an underperforming or distress company to normalcy that is a cheap acceptable levels of profitability solvency liquidity and cash flow turnaround strategy is described in terms of how the turnaround strategy components of managing stabilizing funding and fixing an underperforming or distressed company are applied over the natural stages of a turnaround to achieve its objectives turnaround strategy must reverse causes of distress resolve the financial crisis achieve a rapid improvement in financial performance regain stakeholder support and overcome internal constraints and unfavorable industry characteristic what are the components of a turnaround strategy the components of turnaround strategy are managing the turnaround in terms of Turner on leadership stakeholder management and turnaround project management stabilizing the district company by ensuring a short-term future of the business through cash management demonstrating control reintroducing predictability and ensuring legal and fidus Theory compliance funding and recapitalizing the district business fixing the district’s company in strategic organizational and operational terms function strategies a functional strategy is the sharp term game plan for a key functional area within the company such strategies clarified grand strategy by providing more specific details about how key function areas are to be managed in the near future functional strategies must be developed in the key areas of marketing finance production or operations R&D and personnel we must be consistent with long term objectives and grant strategy in fact functional strategies are in a sense the sub units of the main company’s strategy because they turn ideas in action that is they are strategies that convert clients into reality to better understand the role of functional strategies within the strategic management process they must be differentiated from grant strategies three basic characteristic differentiate functional and grant strategies x horison covered specificity participation in the development time horizon function strategies cover a shorter period of time then the grant strategy since they are accurate plans action they need to be divided into realistic time periods over which the action must be completed and therefore these strategies also require timely revision to excess the success achieved and the next action to be undertaken this shorter time horizon is critical to successfully implementing a grand strategy for two reasons first it focuses functional managers attention on what needs to be done now to make the grand strategy work second the short time horizon allows functional managers to recognize current conditions and adjust to changing condition in

developing functional strategies we now gone to specificity what does this mean a functional strategy is more specific than a grand strategy functional strategies give specific guidance to managers for accomplishing the grand annual objectives they are learning what should be done in each functional area if their annual and ultimately long term objectives of the company are to be achieved specific functional strategies improved the willingness and ability of operating managers to implement strategic decision particularly when those decision represent major changes in the current strategy of the film these strategies help the firm to stay on track and evaluate if it is reaching its animal long-term goal or not if it is not it can take correctional function strategy decision in order to stay the company towards its actual goals these also any but different functional units ensure that they work properly in association with each other and complete what is expected of them participants to development what does this mean how does this work in functional strategy different people participate in strategy development and the function and business levels development a functional strategy is typically delegated by the business level manager to principal subordinates charged with running the operating areas of the business the business manager must establish long objectives and a strategy that corporate management feels contributes to corporate level goals key operating managers similarly established annual objectives and operating strategies that help accomplish business objectives and strategies just as business strategies and objectives are approved through negotiation between corporate manager and business managers the business managers typically ratifies the annual objectives and functional strategies developed by operating manager this does help ensure that every single person working in the company contributes to the company’s major goals in that sense every employees contribution matters and is essential for the goals of the business business manager must also ensure that the results achieved by different people coordinate well to achieve profitability for the firm a key types of strategy implementation is a line of fit the activities and capabilities of an organization with its strategies strategies operate at different levels and there has to be congruent and coordination among these strategies such congruence is the vertical fit then there has to be congruence and coordination among the different activities taking place and the same level this is a horizontal fit the work of every department and employee must coordinate with the work of other departments and employees and also with the aims of the grand corporate strategy thus following can be different types of functional strategies in an organization strategic marketing management means focusing on the alignment of marketing management within an organization with its corporate and business strategies to gain a strategic advantage strategic financial management means focusing on alignment of financial management within an organization with its corporate and business strategies to gain a strategic advantage strategic operation management implies focusing on the alignment of operations management with an organization with its corporate and business strategies to gain a strategic advantage strategic human resource management means focusing on the alignment of human resource management within an organization with its corporates and business strategies to gain a strategic advantage strategic information management means focusing on the alignment of information management within an organization with us corporate and business strategies to gain a strategic advantage tactics for business strategies tactics are plans of when and where to put the actions of the strategies in place to achieve the best results these can be timing tactus marking location tactics etc now we’ll see how these tactics actually affect the business result timing tectus every business move is as much about the idea of the action as it is about the timing of the action to take the right step at the right time is important if you are introducing a breakthrough product you might want to introduce a new right at the start of the season and create a hive where before it’s released so that the consumer don’t get much time to

consider other products and a dazzle by your new offerings but being the first mover is not always the answer to success you can enter the market late but with good product offerings you can dominate the market and provide a stiff competition to the leader like wood or fourth ends in the market after air to butter has provided stiff competition to it so has reliance market location tectus this refers to the market segments where the firm decides to compete at every price level there are different products available market location could be classified according to the rule that firms pay in the target market and the types of business tactics they adopt a place such a rule on the basis of the rule that firms play in the target market market location tactics could be of four types leader challenger for the wall Nicias generic strategies generic strategies involves a basic ideas of plans that the form embraces in terms of costing differentiation and focus costing by offering a low price product with similar features that other competitors are offering can provide a firm major market leadership in all the steps of a production and marketing process the phone shades of course in order to offer the lowest price products with comparable advantages to the customers differentiation differentiated goods and services satisfy the needs of customers to a sustainable competitive advantage this allows companies to de santé size prices and focus on value that generates a comparatively higher price and a better margin focus the focus strategy is also known as initial strategy where an organization can afford neither a wide scope cost leadership or a wide scope differentiation strategy a niche a strategy could be more sustainable here an organization focuses effort and resources on a narrow define segment of the market summary a marketing strategy is a process that allows an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage operation strategy is the total pattern of decision which shape the long term capabilities of any type of operations and their contribution to the overall strategy through the reconciliation of market requirements with operation resources a financial plan is a statement estimating the amount of capital requirements and determining its composition a strategy used by corporation to reduce the diversity or the overall size of the operation of the company this strategy is often used in order to cut expenses with the goal of becoming a more financial stable business basic approaches to strategy planning that can be adopted by any firm in any market or industry to improve its competitive performance the three fundamental marketing strategies which though different are not mutually exclusive our differentiation strategy focused strategy and low cost strategy

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