Strategic Management

1. 2-Level Strategy
A Discussion about Strategy in
Business Environment
By
ALVIN PAUL T. RIEL

2. Definition of Strategy: An Overview
• Logical course of actions at the organizational
level
• carried by all members through specific
division of labor
• Actions guided by operationalgoals and
objectives
…for the attainment of organizational set goals
and objectives, short and long-term (VMGO)
(Agustin, 2015).

3. Levels of Strategy
GOAL SETTING BUSINESS NGO/NPO/GOVERNMENT
SUPERORDINATE CORPORATE-LEVEL ORGANIZATIONAL-LEVEL
SUBORDINATE
BUSINESS-LEVEL OPERATIONAL-LEVEL
FUNCTIONAL/OPERATIONAL-LEVEL FUNCTIONAL-LEVEL

4. Levels of Strategy
Hierarchy of Strategies & Responsible Persons
Chairmen, Presidents, CEO’s,
Executives
Board
Managers, Division
Heads,
Supervisors,
Team Leaders,
Business-level
Functional-/Operational-
level
Corporate-
level

5. Business-level
Strategy
Corporate-level Strategy
Organizational Structure & Hierarchy of Strategies
Levels of Strategy
Assembly/
Finishing
Trng
Mgr
Acctnt Purchaser
Board of Directors
CEO/President/Managing
Director /General Manager
VP-
Sales/
Mktg
Branch
Mgr
VP-
Prodn
VP-HR VP-Fin
VP-
Admin
Chairman
Vision, Mission, Goals, Policies

6. Corporate-Level Strategy: Defined
…outlines and describes a company’s overall
direction and actions towards the realization of
Vision, Mission, Goals and objectives (Agustin,
2017).
…determines (plans and actions) how to create
value (synergy) through entering (and or creating)
new markets, introducing new products, or
developing new technologies, central to returns to
shareholders (Dess, et al., 2016).

7. Corporate-Level Strategy
Examples of overall direction & commitments:
Vision Statement
• To be the leading company in the industry;
Mission Statement
• of commitment to provide quality products and services to consumers
that create unforgettable experience;
• to deliver profit to Stockholders
• to improve quality of life and economic well-being of employees
• to maintain a good relationship with suppliers and creditors

8. Corporate-Level Strategy
Examples of set of actions:
• To offer the products at highest level of quality
and most affordable price to the consumers
• To pay the stockholders the dividends due to
their investments in cash or stocks
• To compensate and provide benefits and
programs for employees
• To pay ahead of due date the suppliers and
creditors the exact amount;

9. Corporate-Level Strategy(Dess, et al.)
• plans and action
Related Diversification (horizontal)
Unrelated Diversification (vertical)
IPO, Split stocks,
Structured Loans, Bonds
Etc.
• value creation (synergy)
Restructuring
Corporate Parenting
Portfolio Analysis
Enabling-environment: e.g. Corporate culture (selfless interest
that ensure shareholders’ interests, well-being of human
resources including self) (Agustin, 2017).

10. Business-Level Strategy: Defined
Plans and actions to realize and achieve Corporate-
level strategy (goals, objectives, actions,
commitment) (Agustin, 2017).
more specific and provide a more direct means as
the organization moves towards broader, overall
goals (Vision, Mission) to meet the strategic
objectives (Corporate-level) (Dess, et, al., 2004).

11. Business-Level Strategy
Examples of more specific actions:
• What are the highest level of quality and most affordable price?
Product features, functions, consumers’ benefits (compare to other
same and or similar products)?
• How much? Compare to other products’ price.
• How much dividends to pay the stockholders? Percentage of profit?
• How much compensation for next 2 years? Increase annually? What
benefits and programs? Health, dental, paternal/maternal holidays
with pay? Housing? Car? Family Vacation with pay?
• How many days or weeks earlier than due date should the
suppliers/creditors be paid?

12. Business-Level Strategy
Examples of Selecting and Managing Groups
• Division of labor. Who will who? Who will what? Who will when? When will
what? How will what?
Strategy (overview)….is a course of Actions guided by operational(business)
goals and objectives.
The divisions, groups, people are tasked to do the job in carrying the
Business-level strategy
(the ff mustbe defined clearly and specifically):
• the business goals and objectives (sales/revenue target, production volume,
waste/reject max percentage limit, profit optimization
• employees’ safety and productivity, benefits & pay, increases, zero turn-over
• customers (inventory) turn-over
• zero complaint/return/refund/exchange

13. Business-level Strategy
In achieving the Corporate-level Strategy of setting
target sales, market power increase, etc.
Customers: Their Relationship with
Business-Level Strategies
The firm determines:
(1)who will be served
(2) what needs the target customers are
needing; and
(3) how such needs will be satisfied.

14. Business-level Strategy
Customers: Their Relationship with Business-Level Strategies
The aim to outperform the competitors,
strong relationship with the customers is a must.
• To know the “enemies” (rivals) is a must.
• To know the battlefield (market) is a must.
• To know the “enemy’s” arms (product) and
own arms is a must.
• To know oneself is a must.

15. Business-level Strategy
Customers: Their Relationship with Business-Level Strategies
• Who will be served?
1. Target Market--- who are in need of the
products in general point of view
2. Market Segmentation--- clustering the
people or subdividing the market by
similar needs into individual and
identifiable groups

16. • Market Segmentation
Consumer Markets
1. Demographic factors (age, income, sex, etc.)
2. Socioeconomic factors (social class, stage in the family life
cycle)
3. Geographic factors (cultural, regional, and national
differences)
4. Psychological factors (lifestyle, personality traits)
5. Consumption patterns (heavy, moderate, and light users)
6. Perceptual factors (benefit segmentation, perceptual
mapping)
Business-level Strategy
Customers: Their Relationship with Business-Level Strategies

17. • Market Segmentation
Industrial Markets
1. End-use segments
2. Product segments (based on technological differences
or production economics)
3. Geographic segments (defined by boundaries between
countries or by regional differences within them)
4. Common buying factor segments (cut across product
market and geographic segments)
5. Customers size segment
Business-level Strategy
Customers: Their Relationship with Business-Level Strategies

18. • What will be served?
1. Benefits
2. Features
3. Price
all must be based from the (targeted/segmented)
customers’ wants and desired values and
experiences.
Business-level Strategy
Customers: Their Relationship with Business-Level Strategies

19. • How the product will be served?
1. Core Competencies (Hitt) or Resources
and Functional Capabilities (Dess)
2. Value-creating activities (Dess)
Business-level Strategy
Customers: Their Relationship with Business-Level Strategies

20. Business-level Strategy
Different Types of Strategies
Michael Porter’s Framework
• Cost Leadership
• Differentiation
• Focus
Michael Hitt’s Framework
• Cost Leadership
• Differentiation
• Focus Cost Leadership
• Focus Differentiation
• Integrated cost leadership/differentiation

21. Business-level Strategy
Different Types of Strategies
.

22. • Cost Leadership Tactics
1. Aggressive construction of efficient-
scale facilities
2. Vigorous pursuit of cost reduction from
experience
3. Tight cost and overhead control
4. Avoidance of marginal customer accounts
5. Cost minimization in all activities, e,g. R&D,
service, technical support, sales force,
advertising, etc.
Business-level Strategy
Different Types of Strategies

23. • Differentiation
1. Unique
2. Value
Business-level Strategy
Different Types of Strategies

24. • Focus
• Focused Cost Leadership
• Focused Differentiation
Business-level Strategy
Different Types of Strategies

25. Five forces Affecting Business-level Strategy

26. Risks Involved in Business-Level
Strategy
• Cost Leadership
– Competition in material resources
– Piracy, infringement of production process
• Differentiation
-- Customers’ sudden change of preference
-- Piracy, infringement of design, features
-- Dilution of brand identification and image
• Focus
-- Rivals’ similar strategies may come in over time
-- Piracy, infringement of design, features
-- Tendency to be too narrow

27. Resources, Capabilities and Value
Creation
• Business-Level Strategy is for the realization of
Corporate –Level Strategy-
• Business-Level Strategy includes plans and
actions---

28. • Plans and Actions in Business-Level Strategists,
managers and executors are not always sufficient
• Resources, Capabilities and Value-creating
activities may be available to and may be:
1. Delegated to Functional-Level officers
for Functional-Level Strategies; or
2. Returned the undertakings to the
Corporate executives for Corporate-
Level strategies.
Resources, Capabilities and Value
Creation

29. • Resources
1. Financial Capitalization
2. Human Resources
3. Technological know-how
4. Fixed Assets, idle for use or sale
Resources, Capabilities and Value
Creation

30. • Capabilities
1. Acquisition/Constructionof facilities
2. Technology Development
3. Product Development
4. Cost Efficiency
5. Market Development
6. Service Development
7. etc.
Resources, Capabilities and Value
Creation

31. • Value-Creating Activities
1. Capital build-up/growth
2. HR Development and Satisfaction
3. Information Management System
4. Product Development
5. Policy-making
6. Policy implementation
7. Cost efficient raw-materials
8. Accessible Market/Strategic Positioning and
value chain
9. Acquisition/Construction of facilities
10. Cost-efficient production
Resources, Capabilities and Value Creation

32. • Business-Level Authority
A. Resources
1. Human Resources
2. Technological know-how
B. Capabilities
1. Technology Development
2. Product Development
3. Cost Efficiency
4.. Market Development
5. Service Development
C. Value-Creating Activities
1. Product Development
2. Policy Implementation
3. Accessible Market/Strategic Positioning and
value chain
4. Cost-efficient production
Resources, Capabilities and Value Creation

33. • Functional-Level Authority (delegated by Business-level Authority)
A. Resources
1. Human Resources
2. Technological know-how
B. Capabilities
1. Technology Development
2. Product Development
3. Cost Efficiency
4.. Market Development
5. Service Development
C. Value-Creating Activities
1. Product Development
2. Policy Implementation
3. Accessible Market/Strategic Positioning and
value chain
4. Cost-efficient production
Resources, Capabilities and Value Creation

34. • Corporate-LevelAuthority (part of Business-Level Strategy butbeyond its
authority)
A. Resources
1. Financial Capitalization
2. Fixed Assets, idle for use or sale
B. Capabilities
. 1. Acquisition/Construction of facilities
2. Market Development (by diversification)
C. Value-creating Activities
1. Capital build-up/growth (IPO, Split stock, Bonds, Borrowings,
Merger, Acquisition)
2. Policy-making
3. Policy implementation
4. Cost efficient raw-materials ( by diversification)
5. Accessible Market/Strategic Positioning and value chain (by
diversification, Merger, Acquisition)
6. Acquisition/Construction of facilities
Resources, Capabilities and Value Creation

35. Corporate-Level Authority (part of Business-Level Strategy but
beyond its authority)
C. Value-creating Activities
1. Capital build-up/growth (IPO, Split stock,
Bonds, Borrowings, Merger, Acquisition)
2. Policy-making
3. Policy implementation
4. Cost efficient raw-materials ( by diversification)
5. Accessible Market/Strategic Positioning and
value chain (by diversification, Merger,
Acquisition)
6. Acquisition/Construction of facilities
Resources, Capabilities and Value Creation

36. The Business – Level Strategy Implementation
mentioned as part of Resources, Capabilities and Value-
creating activities are originally part of Corporate-level
strategy which include:
1. Restructuring
2. Corporate Parenting
3. Portfolio Analysis
4. Enabling-environment
Resources, Capabilities and Value Creation

37. • Diversification is the company process of
expansion by entering new business.
-- Mergers
-- Acquisition
-- Strategic alliance, sub-contracting
-- Joint-venture
-- Reengineering, downsizing
Corporate-Level Strategy
Different Diversifications

38. Corporate-Level Strategy
Different Diversifications
• Related diversification--- entering a different
business with a lot of horizontal interaction.
---comes from horizontal relationship
among business units.
• Unrelated diversification--- entering a different
business with a lot of horizontal interaction
---comes from vertical relationship between
corporate office and business units.

39. • Related Diversification--- horizontal
relationship
– Leveraging Core Competencies
– Different Business---unique, trade secrets,
planning & developing ahead of rivals
– Sharing Activities and resources (commonly used
in reengineering, downsizing)
Corporate-Level Strategy
Different Diversifications

40. • Horizontal Relationship
• These are not limited to internal dynamics but can be done
through Mergers or Acquisition.
Corporate-Level Strategy
Different Diversifications
Production AdministrationMarketing
Marketing Sales
Sales &
Marketing
Food Chain
Production
Purchasing Meat Shops

41. • Unrelated Diversification- vertical relationship
-- Parenting
-- Restructuring
-- Portfolio analysis
Corporate-Level Strategy
Different Diversifications

42. • Vertical Relationship
Corporate-Level Strategy
Different Diversifications
Chair/Board/
CEO/Pres./GM/VP-
Admin
Admin-
Purchasing
Sales &
Marketing
DistributorsDealers
Suppliers
Chair/Board/
CEO/Pres./GM/VP-
Admin
Sales &
Mktg
Admin-
Purchasing
Supplies
Production
Distributors
DealersDealers

43. Corporate-Level Strategy
Primary Reasons of Diversifications
• Value-Creation
• Value-Neutralization
• Value-Reduction (Hitts, 2009)
The primary reasons of diversifications are the
competition, constraints, threats caused by external
factors in political-legal, economic, socio-cultural,
and technological environments (PEST as
neoliberals named them, Agustin, 2017).

44. Corporate-Level strategy
Value-creation using Diversification
• Parenting—positive contribution of the corporate office to
the new businesses as a result of expertise and supports.
• Restructuring---intervention of the corporate office in new
businesses that substantially changes the assets (idle to
useful, disposal, etc), capital structure (loans, bonds to
stocks, etc), and/or management (dissolution of redundant
and overlapping department and job positions)---all for
expenses reduction in security, depreciation, interests and
patroll.
• Portfolio Analysis---to absorb some risks in business by
other businesses with lower risks. Seasonal or occasional
businesses are complementing each other during off and
peak seasons. (Agustin, 2017).

45. Corporate-Level Strategy
2-way Value-creation in Unrelated Diversification
• Backward and ForwardValue-Creation
Through Unrelated Diversification
--the Vertical Relationship
• These are not limited to internal dynamics but can be done through
Mergers or Acquisition.
Raw Materials
Manufacturing
of Goods
Distributor/Dealer
Backward Integration Forward Integration

46. • Vertical Relationship
Corporate-Level Strategy
Different Diversifications
Chair/Board/
CEO/Pres./GM/VP-
Admin
Admin-
Purchasing
Sales &
Marketing
DistributorsDealers
Suppliers
Chair/Board/
CEO/Pres./GM/VP-
Admin
Sales &
Mktg
Admin-
Purchasing
Supplies
Production
Distributors
DealersDealers

47. Corporate-Level Strategy
Motives that can encourage managers to over-diversify
a firm
• Growth is the common Motive of companies in Merger
and Acquisition---creation of supply-based and holds,
and market expansion and dominance in a market ---
domestic of global, full of PEST (Agustin, 2017).
• Expected benefits
1. Obtain valuable resources---supplies and
market
2. Opportunities to attain synergy
3. Industry consolidation; and
4. Enter new market segments

48. THE END