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Levels of

Strategy
Terms
Arrange the following terms in a logical
hierarchy:
Company
Division
Strategic Business Unit (SBU)
Corporation
Industry
Value Chain
Person
Department
Market
Terms
Arrange the following terms in a
logical hierarchy:
Industry Corporation
Value Chain
Division / SBU
Company
Company
Department

Person

A market refers to the place


where goods and services
are exchanged.
Rumelt's Typology of
Diversification

1. Single Product: 95% of revenues from a


single product line
2. Dominant Product: 70-94% of revenue from a
single product line
3. Related Product: Less than 70% of revenue
from a single product line and and the
remainder of revenues from a related product
domain
4. Unrelated Product: Less than 70% of revenue
from a single product and remainder of
revenues from an unrelated product domain
Some Levels of Strategy
The Impact of IT on strategy is
dramatically different depending on
the level of strategy. On what level
is your paper?
Corporate

Business

Functional

Operational
Corporate Level
Strategy
What businesses are we in? What
businesses should we be in?
Four areas of focus
Diversification management (acquisitions
and divestitures)
Synergy between units

Investment priorities

Business level strategy approval (but not

crafting)
Corporate-Level
Strategies
Valuable
strengths Concentric Diversification
Corporate (Economies
growth of Scope)
strategies
Conglomerate Corporate
Firm Diversification stability
Status (Risk Mgt.) strategies

Corporate
retrenchment
strategies
Can still go for business-level
Critical growth (economies of scale)
weaknesses
Abundant Critical
environmental Environmental Status environmental
opportunities threats
The BCG Portfolio
Matrix
Market Share
High Low
Stars Question Marks

High
? ? ?
?
Anticipated
Growth
Rate Cash Cows Dogs

Low
Business Level Strategy
How do we support the corporate strategy?
How do we compete in a specific business arena?
Three types of business level strategies:
Low cost producer
Differentiator
Focus
Four areas of focus
Generate sustainable competitive advantages
Develop and nurture (potentially) valuable capabilities
Respond to environmental changes
Approval of functional level strategies
Functional / Operational Level
Strategy
Functional: How An example.
do we support the Business L.S.: Become
business level the low cost producer
of widgets
strategy?
Functional L.S.
Operational: How (Mfg.): Reduce
do we support the manufacturing costs
functional level by 10%
strategy? Operational (Plant
#1): Increase worker
productivity by 15%
A Simple Organization Chart
(Single Product Business)
Business Business
Level
Strategy

Research and Human


Manufacturing Marketing Finance
Development Resources

Functional
Level
Strategy
A Simple Organization Chart
(Dominant or Related Product
Business)
Corporate Multibusiness
Level Corporation

Business
Level
Business 1 Business 2 Business 3
(Related) (Related) (Related)

Functional
Level
Research and Human
Manufacturing Marketing Finance
Development Resources
An example of an Unrelated Product Business
(Note: By itself, an SBU can be considered a related
product business)

SBU: a single
business or
collection of related
businesses that is A Ex.: G.E. (General
independent and (Multi-business) Electric Corp.)
formulates its own Corporation
strategy

Strategic S.B.U.
Business Unit 1 2

Company 1 Co. 2 Co. 3 Division 1 Div. 2 Div. 3