Question

a) Explain the THREE (3) levels of strategy in an organization. Support your answer with examples. (21 marks)

please help answer this question in essay form

Answer 1

Strategic management is nothing but the process by which the organization define its strategy and allocate its resources appropriately to proceed with the strategy. Strategic planning is done based on the following:-

• The current status of the organization in terms of profits, success, reputation, etc.
• The long term goals of the organization.
• How to achieve the long term goals.

The major components of strategic management are: -

• Environment scanning - This is the process by which internal and external factors are analyzed that influence the organization so that the information can be gathered for strategy formulation. This is an important component as it helps the organization to identify various factors that affect the organization both positively and negatively so that it can be evaluated and improved on a continuous basis.
• Strategy formulation - Strategy formulation is nothing but the process of taking decisions on actions for accomplishing the objectives and goals of the organization. The managers formulate corporate-level strategies, business-level strategies and functional-level strategies that help the organization to function properly and take appropriate actions to meet the organizational goal. Thus, this is an important component of an organization.
• Strategy implementation - Strategy implementation refers to the means for execution of strategic plan. This involve designing the organizational structure, allocating resources, taking proper decision and managing the human resources effectively. Thus, this component is important for the success of the organization.
• Strategy evaluation - This is the final stage of strategic management process which include appraising both the internal and external factors, performance measurement and taking necessary steps to make corrections. This is an important component of strategic management because the evaluation of strategies and its implementation are effective in meeting the organizational objectives.

The three tiers process of strategic management include: -

Corporate level strategy - Corporate level strategy is nothing but the strategic decisions taken by the business that has direct effect on the entire organization. Example - A toy manufacturer producing only one line of toy is its corporate strategy. The three types of corporate level strategy include: -Value-creating strategy, Value-neutral strategy and Value-reducing strategy.

The main purpose of corporate level strategy include: -

• It guides all the individual business units that belong to the organization as a whole.
• it synchronize various business level strategies and balance them in order to achieve the vision of the entire organization.

Business level strategy - Business strategy defines the path that needs to be taken by the organization for meeting the business goals. So, business-level strategies basically focus on using different methods required for operating the business. Business-level strategy focus on the providing competitive advantage to the firm in an industry. The business-level strategies include: -

• Cost leadership is nothing but following the cheapest pricing strategy for its products which can compete on the price with other companies. Example - Walmart value proposition is offering the same product as other retailers but at less price. Walmart comes up with different pricing strategy like offering discounts to increase the number of customers. Their main target is to attract more number of customers by offering the products at lowest possible price.
• Product differentiation is the process of differentiating its products or services that provide unique features which are valued by the customers. Example- McDonalds.
• Focus is nothing but offering a specialized service in niche market. Example - PepsiCo. Focus is divided into two parts:1. Cost focus firms are those whose lower cost strategy that focus on narrow target market and offer products at lower cost compared to the competitors. 2. Focused differentiation firm are those where they offer unique products to a very narrow target market. They give more importance to service.

Funtional level strategy - Functional strategy is nothing but the strategy or plan that is prepared for the functional area of an organization like human resource plan, marketing plan, etc. This strategy back up the corporate and business strategy. Thus, it guides the use of resources to implement business strategy. Example - Advertising new product is an activity of functional level strategy.