BUSINESS AND FUNCTIONAL LEVEL

STRATEGIESESCORIAL, SHEIVA MARIE

MONTILLA, DARLENEPLATON, DIANE

Strategic Business Unit

• Williamson, Jenkins, et al. (2004) defined as a unit that produces products or services for which there is identifiable group of customers.

• Can be also defined geographically or according to the nature of their operations.

Understanding the Business and Its

Environment

The business organization

Indirect competitors

Government

Global/Regional forces

Religious, cultural and other traditions

Direct competitors

Management/Employees

Stakeholder groups

Business and ethical standards

Stakeholders/owners

Other factors and considerations

Understanding Strategy and the Organization

Performance

Products Synergy and fit

Customers Structure

Competitive advantage

Parenting

StakeholdersProcess

EnvironmentsMarkets

Resources and Capabilities

THE ORGANIZATION

Business Level Strategy

• Focused and meant for the single business concern

• Serves as a guide of a single business firm itself as it wades to the competitive world of the business

• Combines the strategies used by the various functional units of the business organization to make itself competitive in the industry it belongs

Business Level Strategy

• Operational plan of action of a single and independent business that uses the company’s resources and competencies to gain a competitive advantage over its rivals in the market or industry

Difference

• Business Level Strategy– Orchestrates the various functional units to make

itself competitive and profitable on-going concern. – Occurs at the business unit emphasizing the

improvement of the competitive position of the firm’s products or services in the specific industry or market segment served by the business unit

Difference

• Business Level Strategy– Seeks to synchronize various functional units and

their respective functional strategies into a consistent and well coordinated efforts to achieve the vision of the business organization

– Concerns with the question of how should the company compete in the chosen business

Difference

• Corporate Level Strategy– Orchestrates how the other members of the

business group would conduct their business– Synchronize various business units comprising of

individual or chartered organizations– Concerns with the question as to what business or

business areas do we want to be in.

Hierarchy of Strategy

FUNCTIONAL STRATEGY

BUSINESS (DIVISION LEVEL STRAATEGY)

CORPORATE STRATEGY

Level of Strategy-making in a Diversified Company

Corporate strategy

Two-way Influence

Business Strategies

Two-way Influence

Functional Strategies

Two-way Influence

Operating Strategies

Corporate-level Managers

Business-level Managers

Functional Managers

Operating Managers

In developing a business level strategy and in order to stay competitive or outdo the firm’s competitors, substantial efforts should be made to develop strategies taking note of the following areas of concern:

a. specific responses to changing conditionsb. scope of geographic coverage of the business

strategyc. explore collaborative alliance or partnerships as

necessaryd. the financial strategy to support the overall

business strategye. the specific functional strategies to be undertakenf. concern for research and development strategyg. conscious efforts to build competitive advantage

8 Risks of Single Business Concerns

• Putting all the “eggs” in one industry basket• Missing profitable business opportunities on account of

lack resources and skills to do so• Unforeseen changes can undermine a single firm’s

prospects• Changing customer needs• Technological innovation• If market becomes unattractive, the firm’s prospects can

quickly dim• Options to grab other opportunities are limited• Entry of substitutes

9 Competitive Strengths of Business Level Strategy

• Less ambiguity about ‘who we are”• Energies of firm can be directed to a single

business path and keeping strategy responsive to industry change

• Less chance resources will be stretched thinly over too many competing activities

• Resources can be focused on building competencies and capabilities that make the firm better at what it does

• Higher probability innovative ideas will emerge• Top executives can maintain hands-on contact

with core business• Important competencies more likely to emerge• Ability to parlay experience and reputation into

sustainable competitive advantage• Prominent leadership position

9 Competitive Strengths of Business Level Strategy

Example of a Functional Organization ChartPRESIDENT

EXECUTIVE VICE-PRESIDENT

VICE-PRESIDENT-MARKETING

VICE-PRESIDENT-

FINANCE

VICE-PRESIDENT-MANUFACTURING

VICE-PRESIDENT-ADMINISTRATION

MARKETING MANAGER

MANUFACTURING MANAGER

ADMINISTRATIVE MANAGER

FINANCE MAANGER

Functional Responsibilities VS Functional Strategies

• Functional Responsibilities– Refers to those task, function or activities that a

given operating unit is duty-bound to do by the very nature of its functional category

• Functional Strategies– Approach taken by a functional area or unit to

achieve its objectives and duties by way of maximizing the use of its resources and in light of strategic direction as well as prevailing market competitions

Role of Functional Strategies

• Must provide support activities considered strategically important to the stated corporate or business level objectives

• Must harmonized the strategies of the various departments into a cohesive and consistent set of strategies running in series or parallel activities

Interrelationship among FunctionsProduction/ Operations

Management Finance

Human Resource Management

Purchasing and Materials

Management

Research and Development

Management Information System

Marketing

All Functional Strategy must contribute to a shared vision

Production

FinanceMarketing

VisionMision

Functional Strategies Characteristics:

• It is a game plan for a strategically-relevant function, activity, or business process

• It provides details how key activities will be managed

• Its provides a supportive role to the business level strategy

• It specifies how functional objectives are to be achieved

• Functional Strategies highlight the role of every department or unit in terms of:–Role and scope of activities of each

department or unit–It provides the direction which

department needs to pursue–It defines the contribution to firm’s

overall mission

Operating Strategies• More specific and operational compared to

functional strategies as the tasks are usually done at ground level with more precise details

Concerns of Operating Strategies:a. narrower strategies for managing

grassroots activities and strategically-relevant operating units

b. add detail to business and functional strategies

Strategic Business-Level Options

1. Product Development Optiona research and development option

that seeks to develop new product or service resulting to a variety of products or services the company can offer thereby accessing other market segments or sectors

Strategic Business-Level Options

2. Market DevelopmentSeeks to explore additional market

share by developing other markets in other geographical areas using the same line of products or services.

Strategic Business-Level Options3. Market Penetration

Pursuing concentrated and vigorous efforts to push a product or service using a variety of marketing strategies or tools generally focused on promotional efforts. It concerns with dealing with existing products or services but it requires substantial marketing efforts to push harder the product to expand sales in the same market segment or to serve and penetrate other markets in the same location.

Situations favoring product development:• When an organization has successful products that

are in the maturity stage of the product life cycle• When an organization competes in an industry that

is characterized by rapid technological developments• When major competitors offer better quality

products at comparable prices• When an organization competes in a high growth

industry• When an organization has especially strong research

and development capabilities

Situations favoring market development:

• When new channels of distribution are available that are reliable, inexpensive, and of good quality

• When an organization is very successful at what it does

• When new untapped or unsaturated markets exist• When an organization has the needed capital and

human resources to manage expanded operations• When an organization has excess production capacity• When an organization’s basic industry rapidly is

becoming global in scope

Situations favoring market penetration:

• When current markets are not saturated with a particular product or service

• When the usage rate of present customers could be increased significantly

• When the market shares of major competitors have been declining while total industry sales have been increasing

• When the correlation between dollar sales and dollar marketing expenditures historically has been high

• When increased economies of scale provide major competitive advantages