Strategy at Different Levels of a Business

Strategy

Strategy is a plan or series of plans for achieving an aim, especially success in business or the best way for an organization to develop in the future

2 [U] the process of skilful planning in general: Com­petitive strategy has two weapons: price and differen­tiation.

In other words, strategy is about:

* Where is the business trying to get to in the long-term (direction)

* Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)

* How can the business perform better than the competition in those markets? (advantage)?

* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?

* What external, environmental factors affect the businesses' ability to compete? (environment)?

* What are the values and expectations of those who have power in and around the business? (stakeholders)

In my opinion, boards of directors and senior managers should be involved in deciding strategy and sometimes shareholders, and maybe trade union representatives.

Strategy at Different Levels of a Business

Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

Strategies, whether military or corporate, are two-a-penny unless formulated in terms of resource allocation. Every organisation exploits particular resources, or assets - physical, technological and human - to achieve its goals.

In many industries, however, these assets are so specialised and have taken so long to develop that it is hard, if not impossible, to duplicate them. A company might have the 'strategy' of entering the market for, say, aircraft engines and becoming a world leader. But even one with massive resources at its disposal would find it impossible to enter a field dominated by Rolls Royce, Pratt and Whitney, and a few other key players. A profitable industry is attractive, but in some cases wishing to enter it may just be wishful thinking, and in practice there are no new entrants because the barriers to entry are so high. The rules of the game were established years ago, and will remain pretty much the same until something new comes along to upset them, like a new technology, which other companies may be better equipped to develop.

In brand-new industries, the rules of the game have not yet emerged. The traditional scenario is for a new industry with high growth to have a large number of competitors in the beginning: barriers to entry are equally low for start-ups (brand new companies), and for established companies also wanting to participate, perhaps by setting up a new subsidiary or business unit. The start-ups have the potential benefit of doing things in new ways. They don't inherit a culture from another industry that may not be suitable for the new one, and that may even be a handicap to competing successfully.

After a time, leaders emerge who are able to spread their costs over a higher level of sales, and who are thus more profitable. As growth in the new market slows, smaller competitors with higher costs drop

out or are bought by the larger companies in a process of consolidation or shakeout, leaving an elite with the resources to dominate the industry, which is now mature.

That is why emerging industries are so attractive. Companies want to get in before the rules of the game become fixed, and be able to influence how they are fixed.

A profitable company may buy firms in unrelated industries, including emerging industries, perhaps hoping that some of their acquisitions will turn out to be leaders in their fields and become money-spinners. But it may just end up as a conglomerate of more or less profitable companies, and some unprofitable ones.

Corporate history is full of examples of takeovers and mergers that did not produce the results that were promised. Even a company buying another in its own industry in the same country faces problems in making the acquisition work. The problems in acquiring a company in a different industry or in another culture are enormous. This may not be the best use of resources.

Recently the trend for groups has been towards selling поп-core assets, using the proceeds to invest in core activities and concentrate, or focus, on them. This is sometimes referred to as sticking to your knitting. The mission statements in the main course unit are attempts by companies to say what their, knitting actually is. Shareholders naturally want the highest possible return on capital. The job of every, company is to allocate that capital in the most judicious way. They should invest in the most profitable activities or products for which they have appropriate resources, or for which they can realistically acquire or develop the resources.

These are the big strategic questions. Which activities are the ones to stay in, invest in and develop? Which are the new ones to get into? Which are the ones to get out of? Answering them is not easy: multi-billion dollar mistakes are easy to make.

How do you develop a strategy for a large company?

There are lots of ways to go about it. I think the way we've done it is to first think about what assets we have - what's unique about those assets, what markets we know about and what markets are growing, and which of those markets can make the best use of our assets. We then put that into a bowl, heat it up, stir it around, and come out with a strategy.

Our first step in our strategy was simply to operate better. To create better profits, and better cash generation, and better long term value for the shareholders. We then... the second step which was not happening in a serial way but happening at the same time, the second step was to look at the assets we had and see which ones we should keep and which ones we should dispose of. Those we disposed of, we did because they would be worth more to other companies than to us because they didn't fit with the rest of our company, or were things we didn't actively control - we had a passive interest in - so those disposals were an important part. And then the third step was to stitch together all our businesses, so that they were able to use each other's assets, to make a greater whole.

‘Small is beautiful’ is a better strategy in business than ‘big is best’

A merger of equals had a lot of appeal. If you combine the Number 1 and Number 2 players in an industry, by definition you re Number 1 in terms of size. By combining two companies with good management teams, you automatically build up the strength of your management and you do it quickly. You can also widen your customer base and, have more distribution channels. In addition, the merger automatically makes your remaining competition second level. As a result, your competition must rethink its strategy. In the end, you, force a period of mergers and acquisitions on your competition. They have no choice but to respond to the changes you initiated.

When we looked more closely, our concerns were raised. For example, 50 percent of large-scale mergers fail. Mergers can fail on a number of levels. They can fail in terms of their benefit to the shareholders, customers, employees and business partners.

And when you are growing that fist, you have a number of key management openings you have

to fill. If you merge two companies that are growing at 80 percent rates, you stand a very good chance of stopping both of them. For a period of time you lose momentum.

Дата добавления: 2015-11-14