The document discusses business-level and functional-level strategies. It defines business-level strategy as an integrated set of commitments to gain a competitive advantage through exploiting core competencies. Functional strategies support business strategies through maximizing resources and productivity. The document outlines five generic business strategies: cost leadership, differentiation, focused cost leadership, focused differentiation, and integrated cost leadership/differentiation. It emphasizes the importance of functional strategies being consistent with and supportive of business strategies.

2. Presentation Topic
Business Level
Strategies
&
Functional Level
Strategies

3. Presented by
Arbab Rahim
Ayyaz Mehmood

4. Assigned by
Madam Mehwish Aziz

5. What is strategy?
A plan of action or policy designed
to achieve a major or overall aim.

6. Business-Level Strategy
Business-level strategy: an integrated and
coordinated set of commitments and actions the
firm uses to gain a competitive advantage by
exploiting core competencies in specific product
markets

7. The Central Role of
Customers
In selecting a business-level strategy,
the firm determines
1. who it will serve
2. what needs those target customers
have that it will satisfy
3. how those needs will be satisfied

8. Managing Relationships
With Customers
Customer relationships are strengthened by
offering them superior value

help customers to develop a new competitive
advantage
 enhance the value of existing competitive
advantages

9. Five Generic Strategies
Competitive Advantage
Cost Uniqueness
Cost Differentiation
Leadership
Competitive Scope
Broad
target
Integrated Cost
Leadership/
Differentiation
Narrow
target
Focused Cost Focused
Leadership Differentiation

10. Cost Leadership Strategy
An integrated set of actions designed to
produce or deliver goods or services at the
lowest cost, relative to competitors with features
that are acceptable to customers
 relatively standardized products
 features acceptable to many customers
 lowest competitive price

11. Cost Leadership Strategy
Cost saving actions required by this strategy:

building efficient scale facilities

tightly controlling production costs and
overhead

minimizing costs of sales, R&D and service

building efficient manufacturing facilities

monitoring costs of activities provided by
outsiders

simplifying production processes

12. Differentiation Strategy
An integrated set of actions designed by a firm
to produce or deliver goods or services (at an
acceptable cost) that customers perceive as
being different in ways that are important to
them

price for product can exceed what the firm’s target
customers are willing to pay

nonstandardized products
 customers value differentiated features more than
they value low cost

13. Differentiation Strategy
Value provided by unique features and value
characteristics
Command premium price
High customer service
Superior quality
Prestige or exclusivity
Rapid innovation

14. Differentiation Strategy
Differentiation actions required by this
strategy:
 developing new systems and processes
 shaping perceptions through advertising

quality focus
 capability in R&D
 maximize human resource contributions
through low turnover and high motivation

15. Focused Business-Level
Strategies
A focus strategy must exploit a narrow
target’s differences from the balance of the
industry by:
 isolating a particular buyer group
 isolating a unique segment of a product
line
 concentrating on a particular geographic
market
 finding their “niche”

16. Advantages of Integrated
Strategy
A firm that successfully uses an integrated
cost leadership/differentiation strategy should
be in a better position to:
 adapt quickly to environmental changes
 learn new skills and technologies more
quickly
 effectively leverage its core competencies
while competing against its rivals

17. Benefits of Integrated Strategy
Successful firms using this strategy have
above-average returns
Firm offers two types of values to customers
 some differentiated features (but less than
a true differentiated firm)

relatively low cost (but not as low as the
cost leader’s price)

18. FUNCTIIONAL LEVEL
STRATEGIES:-
Function strategy is the approach a
functional area takes to achieve a
corporate and business unit objectives
and strategies by maximizing resource
and productivity.

19. Importance of functional level
strategy
It is important that an organization
periodically (at least annually, usually as
part of the medium-term planning
process) review all functional strategies
to assure that they are
1. Consistent with the business strategy
2. Supportive of the business strategy
3. Consistent with other functional strategy

20. Formulation:-
Functional strategies are formulated by
specialists in each area. Functional strategies
work as a backbone of the organization. It
provides the basic information on resources and
capabilities on which the higher level strategy is
designed. It involves coordinating the various
functions and operations needed to design,
manufacture, deliver and support the product or
service of each business with in the corporate
portfolio.

21. Basic Task Of Functional
Strategy:-
The task of function unit of any
organization is to formulate higher level
strategies by providing input into business
unit level and corporate level
strategy.processing the available
information and using it for higher level
strategy formulation.

22. Corporate-Level Strategy
What is Corporate Level Strategy?
Definition: Action taken to gain a
competitive advantage through the
selection and management of a mix of
businesses competing in several
industries or product markets.

23. Key Questions of Corporate Strategy
1. What businesses should the corporation
be in?
2. How should the corporate office manage
the array of business units?
Corporate Strategy is what makes the corporate whole
add up to more than the sum of its business unit parts

24. Levels and Types of Diversification
Low Levels of Diversification
Single business > 95% of revenues from a single A
business unit
Dominant business Between 70% and 95% of A
revenues from a single business
B
unit
Moderate to High Levels of Diversification
A
Related constrained < 70% of revenues from dominant
business; all businesses share product, B C
technological and distribution linkages
Related linked (mixed) < 70% of revenues from dominant A
business, and only limited links exist
B C
Very High Levels of Diversification A
Unrelated-Diversified Business units not closely related B C

25. Strategic Leadership
Strategic Leadership involves:
The ability to anticipate, envision, maintain flexibility
and empower others to create strategic change
Multi-functional work that involves working
through others
Consideration of the entire enterprise rather than
just a sub-unit
A managerial frame of reference

26. Strategic Leadership Effective
Effective
and the Strategic Strategic Leadership
Strategic Leadership
Management Process shapes the formulation of
Strategic Intent and Strategic Mission
Strategic Intent Strategic Mission
influence
Successful
Successful
Strategic Actions
Strategic Actions
Formulation
Formulation Implementation
Implementation
of Strategies
of Strategies of Strategies
of Strategies
Strategic Competitiveness
Strategic Competitiveness
Above-Average Returns
Above-Average Returns

27. Factors Affecting Managerial Discretion
External Environment Organizational
Industry Structure Characteristics
Rate of market growth Size and age
# and type of competitors Culture
Political/Legal constraints Resource availability
Product differentiation Employee interaction
Managerial Discretion
Managerial Discretion
Characteristics of the Manager
Tolerance for ambiguity Aspiration level
Commitment to the firm Self-confidence
Interpersonal skills

28. Exercise of Effective Strategic
Leadership
Determining
Establishing strategic Exploiting and
balanced direction maintaining
organizational core
controls competencies
Effective Strategic
Leadership
Emphasizing Developing
ethical Sustaining human
practice an effective capital
organizational
culture

29. Determining Strategic
Direction
Strategic direction means the development of
a long-term vision of a firm’s strategic intent
A charismatic leader can help achieve
strategic intent
It is important not to lose sight of the strengths
of the organization when making changes
required by a new strategic direction
Executives must structure the firm effectively
to help achieve the vision

30. Exploiting and Maintaining
Core Competencies
Core competencies are resources and
capabilities that serve as a source of
competitive advantage for a firm over its
rivals
Strategic leaders must verify that the firm’s
competencies are emphasized in strategy
implementation efforts

31. Exploiting and Maintaining
Core Competencies
In many large firms, and certainly in related-
diversified ones, core competencies are
exploited effectively when they are developed
and applied across different organizational
units
Core competencies cannot be developed or
exploited effectively without developing the
capabilities of human capital

32. Developing Human Capital
Human capital refers to the knowledge and
skills of the firm’s entire workforce
Employees are viewed as a capital resource
that requires investment
No strategy can be effective unless the firm is
able to develop and retain good people to
carry it out
The effective development and management
of the firm’s human capital may be the
primary determinant of a firm’s ability to
formulate and implement strategies
successfully

33. Sustaining an Effective
Organizational Culture
An organizational culture consists of a
complex set of ideologies, symbols, and core
values that is shared throughout the firm and
influences the way it conducts business
Shaping the firm’s culture is a central task of
effective strategic leadership

34. Sustaining an Effective
Organizational Culture
An appropriate organizational culture
encourages the development of an
entrepreneurial orientation among employees
and an ability to change the culture as
necessary
Reengineering can facilitate this process

35. Changing Culture and
Reengineering
The benefits of business reengineering are
maximized when employees believe that:
Every job in the company is essential and
important
All employees must create value through their
work
Constant learning is a vital part of every person’s
job
Teamwork is essential to implementation
success
Problems are solved only when teams accept
the responsibility for the solution.

36. Emphasizing Ethical Practices
Ethical practices increase the effectiveness of
strategy implementation processes
Ethical companies encourage and enable
people at all organizational levels to exercise
ethical judgment

37. Emphasizing Ethical Practices
To properly influence employee judgment and
behavior, ethical practices must shape the
firm’s decision-making process and be an
integral part of an organization’s culture
Leaders set the tone for creating an
environment of mutual respect, honesty and
ethical practices among employees

38. Establishing Balanced
Organizational Controls
Organizational controls provide the
parameters within which strategies are to be
implemented and corrective actions taken
Financial controls are often emphasized in
large corporations and focus on short-term
financial outcomes
Strategic control focuses on the content of
strategic actions, rather than their outcomes

39. Establishing Balanced
Organizational Controls
Successful strategic leaders balance strategic
control and financial control (they do not
eliminate financial control) with the intent of
achieving more positive long-term returns

40. Why do a situation analysis?
Situation analysis concentrates on
generating solid answers to a well-
defined set of strategic questions and
using these answers to:
– Appraise the company’s strategic situation
and business position
– Craft a suitable strategy

41. Situation analysis focuses on:
–EXTERNAL FACTORS – the firm’s
MACRO-environment (industry and
competitive conditions)
–INTERNAL FACTORS – the firm’s
immediate MICRO-environment (its
own internal situation and
competitive position)

42. The Key Questions in
Company Situation Analysis
1. How well is the company’s present strategy
working?
2. What are the company’s strengths,
weaknesses, opportunities, and threats?
3. Are the company’s prices and costs
competitive?
4. How strong is the company’s competitive
position?
5. What strategic issues does the company
face?

43. SWOT Analysis
SWOT represents the first letter in
Strengths, Weaknesses, Opportunities,
and Threats.
SWOT analysis

Involves sizing-up a company’s INTERNAL
strengths and weaknesses and its
EXTERNAL opportunities and threats

Is an easy to use tool for getting a quick
overview of a company’s strategic situation

44. Why SWOT Analysis is Important
It is the basis for matching strategy to
the company’s situation –
 To its internal strengths and weaknesses

To its external threats and opportunities
A winning strategy must always fit the
company’s situation.

45. Strengths
What is a company Strength?

Something a company is good at doing or
a characteristic that gives it an important
capability.

46. Weaknesses
What are company weaknesses?

Something a company lacks or does poorly
(in comparison to others) or a condition
that puts it at a disadvantage.

47. Opportunities
What are company opportunities?

Those that offer important avenues for
profitable growth, those where a company
has the most potential for competitive
advantage, and those which the company
has the financial resources to pursue.

48. Threats
What are company Threats?

Certain factors in a company’s external
environment that pose a threat to its well-
being.

49. Some questions to consider once the
SWOT listings have been compiled
are:
Does the company have internal strengths or
core competencies an attractive strategy can
be built around?
Do company weaknesses make a company
vulnerable and does it disqualify a company
from pursuing industry opportunities?
Which weaknesses does a company need to
correct?

50. Some questions to consider once the
SWOT listings have been compiled
are:
Which opportunities does the company have
the skills and resources to pursue with a real
chance for success? Which opportunities are
the best from the company’s standpoint?
(Remember: Opportunity without the means
to capture is only an illusion.)
What external threats should management be
worried most about and what strategic moves
need to be made to craft a good defense?