BUSINESS and CORPORATE

LEVEL STRATEGY
FORMULATION
EXPECTED LEARNING OUTCOMES

 establish the relationship between functional strategies

and business and corporate strategies
 CONCEPT AND NATURE OF A STRATEGY
 A strategy is a long-term plan of action designed to achieve a particular
goal or set of objectives. It involves making decisions about resource
allocation and positioning the organization to gain competitive
advantage.

Nature of a Strategy
o Goal-Oriented: Designed to meet the long-term goals of the company.
o Dynamic: Strategy evolves in response to external and internal factors.
o Integrated and Coherent: Aligns all aspects of the business to ensure
synergy and a focused effort towards common goals.
o Resource Allocation: Involves managing and utilizing resources
(financial, human, technological) effectively.
FORCES THAT SHAPE BUSINESS
STRATEGY
Relevance of the past
Leadership matters
Technology
Competition
Globalization
Environment
ESSENCE OF SUCCESSFUL STRATEGY
 Are flexible
 Guide the way people work and make decisions. A strategy has a
trajectory; its future is linked to its past.
 Constantly guide the development of the business. A business
without a strategy (or with a flawed one) is like a traveler without a
map.
 Focus on customers.
 Recognize that the journey is as important as the destination.
Strategy is not simply the structure of a company’s products and
markets but also the way it works and the decisions it makes.
BUSINESS STRATEGIES FOR GROWTH

Organic growth
Mergers and acquisitions
Strategic alliances, partnering
and joint ventures
Diversification
specialization
 ORGANIC GROWTH
This occurs when a business grows by using its
existing resources.

Organic growth depends on the firm’s

1. Available resources and capabilities
2. Planning
3. Time
4. Cash
MERGERS AND ACQUISITIONS

One of the fastest routes to growth. Mergers

occur when two companies of roughly equal
size combine to form a new entity. An example
is the merger of Daimler-Benz and Chrysler to
create DaimlerChrysler.
Acquisition occurs when one company
purchases another. The acquired company may
be absorbed into the purchasing company or
continue to operate as a subsidiary
 STRATEGIC ALLIANCES, PARTNERING AND
JOINT VENTURES (INTEGRATION ACTIVITIES)
 A strategic alliance is an arrangement between two or more companies to pursue
a set of agreed-upon objectives while remaining independent organizations. These
alliances allow companies to share resources, knowledge, and capabilities to
achieve mutual benefits. For example, a tech company might partner with a
manufacturing firm to develop new products.
 Partnering involves two or more companies working together on a specific project
or business activity. This can include sharing resources, expertise, and risks. Partnering
can be less formal than a strategic alliance and might not involve long-term
commitments.
 A joint venture is a more formal type of partnership where two or more companies
create a new, separate legal entity to undertake a specific project or business
activity. Each parent company owns a share of the new entity and contributes
resources and expertise. An example is the joint venture between Microsoft and
General Electric Healthcare to create Caradigm.
 Integration activities refer to the processes and actions taken to combine the
operations, resources, and cultures of the partnering companies. This can include
aligning business processes, integrating technology systems, and harmonizing
organizational cultures to ensure the success of the alliance or joint venture.
 DIVERSIFICATION
Diversification is a business strategy where a company
expands its operations by adding new products,
services, or markets that are different from its existing
ones. This strategy aims to reduce risk and increase
profitability by spreading out the company’s
investments and revenue streams.
TYPES:
1. Horizontal
2. Vertical
3. Conglomerate
 SPECIALIZATION
 Specialization involves concentrating on a specific area of
production or service to become more proficient and efficient in
that domain. This can apply to individuals, companies, or even
entire economies.
Example:
1. Individual Level: A software developer specializing in
cybersecurity.
2. Company Level: A bakery that focuses solely on gluten-free
products.
3. Economic Level: A country specializing in the production of
coffee due to its favorable climate and soil conditions.
 STRATEGIC TYPES OF BUSINESS
1. Defenders – businesses with few product lines and intend to
defend from new products entering the market. They are cost-
and-efficiency-oriented.
2. Prospectors – companies with broad lines of products. Product
development, innovation, and new markets are essences of their
strategy.
3. Analyzers – multi-divisional companies that compete in at least
two types of industries, one stable and one variable, while
maintaining stability and flexibility.
4. Reactors – businesses that do not have firm or consistent
strategic orientations. They adopt piecemeal or quick-response
strategies
 LEVELS OF STRATEGY-MAKING
 Corporate Level Strategy - This strategy focuses on the overall
scope and direction of the organization, addressing what industries
or markets the firm should compete in.
 Business Level Strategy - This relates to how the organization will
compete in specific industries or markets (e.g., differentiation, cost
leadership).
 Functional Level Strategy - Involves specific departments
(marketing, operations, HR) supporting the broader business and
corporate strategies.
 Operational Strategy – formulated at the operating units of an
organization example. Factory, sales territory or small sections within
the department.
CORPORATE LEVEL STRATEGY
 I. GROWTH STRATEGY
1. Concentration Strategy
A. Horizontal growth strategy
a. Entering into other geographic locations
1) Exporting – ships goods to other countries
2) Licensing – enters agreement with another company to
produce or sell the product/s or the former
3) Franchising – enters into agreement with a franchiser to
use the name and system of the latter.
4) Joint venture – company combines its resources with other
companies from foreign countries to produce new
products
 HORIZONTAL STRATEGY (contn)
5) Acquisition – a company purchases a foreign company
6) green-field development – a company constructs its
own plant and invests with other assets in foreign country
7) Turnkey operations – a company constructs operating
facilities and transfers the same to the host country when
completed.
8) BOT (build, operate, transfer) scheme – constructs
facilities, operates them when completed, and turns them
over to the host country.
 B. Vertical GROWTH STRATEGY
1. Full integration – company takes 100% control of the
value chain
2. Taper integration (backward integration) – company
acquires not more than 50% of its requirements from
outsiders.
3. Quasi-integration (forward integration) – a company
purchases most of its requirements from outsiders
4. Long-term contracts – a company enters into an
agreement with other companies to provide goods to
each other over a specified period of time.
2. DIVERSIFICATION STRATEGY

a. Concentric diversification strategy – the concentric

diversification growth strategy is more appropriate
in a less attractive industry and for a company with
a strong competitive position.
b. Conglomerate diversification strategy – happens
when a company enters another industry which is
not related to the industry where it presently
belongs. This is an option when the present industry
is no longer attractive.
II. STABILITY STRATEGY

1. Pause or proceed-with-caution strategy – a

company takes a temporary timeout from its
major activities while observing changes in its
external environment.
2. No-change strategy – if the company has a
dominant position in the market, it tend to
continue implementing its current activities.
3. Profit strategy – a cost-cutting mechanism to
address decline in profit because of decrease
in sales.
III. RETRENCHMENT STRATEGY
1. Turnaround strategy
a. Contraction – cost reduction in the entire company
b. Consolidation – resources consolidated, program are
developed, best and qualified employees are
motivated to establish competitive advantage.
2. Captive company strategy – majority of the sales of
weak company is dependent on the strong company
3. Sell-out or divestment strategy – a company which
has a weak competitive position in an industry cannot
look for a strong partner
4. Bankruptcy or liquidation strategy – a company
suffering heavy losses
BUSINESS LEVEL STRATEGIES – A middle-level
management – provide the plan on how a
company should compete in and industry and
gain and sustain competitive advantage
CLASSIFICATION OF BUSINESS STRATEGY

1.Competitive Strategy
2.Cooperative Strategy
COMPETITIVE STRATEGY
 Types of COOPERATION STRATEGY

1. Collusion – when competitors expressly or

impliedly agree to reduce their production
(supply) so that the prices of goods
produced will increase or remain high.
2. Strategic alliances – entering into a long-
term arrangement for benefits. Types of
alliances: mutual service consortium, joint
ventures, licensing, and value chain
partnership.
FUNCTIONAL LEVEL STRATEGY

1.Marketing
2.Finance
3.Human resources
4.Production and operation
MARKETING STRATEGIES

1. Competitive position
strategy
2. Market strategy
3. Pricing strategy
4. Promotion and distribution
strategy
FINANCIAL STRATEGY

1.Financing Strategy
2.Investing Strategy
HUMAN RESOURCE STRATEGY
 CLASSIFICATION OF HR STRATEGY

Overarching human resource strategy

Specific human resource strategy
PRODUCTION AND OPERATION STRATEGY
CLASSIFICATION OF PRODUCTION AND
OPERATIONS STRATEGY

1.Infrastructural operation
strategy
2.Structural operation
strategy
 RESEARCH AND DEVELOPMENT STRATEGY –
aims to introduce improvement and
innovation to business procedures and
products which ultimately lead to new process
and products.
 VARIATIONS OF R&D STRATEGIES
1. Basic research strategy – gain deeper
understanding and build a body of knowledge
regarding the subject matter of inquiry for the
future use of a company.
2. Applied research strategy – determine a
particular method or approach to address a
specific need of the customers relative to a
product.
3. Development research strategy – addresses the
need to develop or innovate a new product or
process
TECHNOLOGY STRATEGY

Aims to create value to a company through the use

of technology in the production and operation
processes including the development of products. This
can be achieved to the following measures:
1. Maintain the present technology capabilities in the
production and delivery of products and in different
functional areas with minimal improvement
2. Adopt product or process innovation as the
company expands its market
3. Source out technological capabilities to gain
technological distinctiveness.
CRAFTING A FUNCTIONAL LEVEL
STRATEGY

The functional level strategy

supports the business level strategy,
while the business level strategy
supports the corporate level
strategy.
THANK YOU