LINKING STRATEGIC CONTROL TO BUSINESS-LEVEL AND CORPORATE-LEVEL STRATEGY

Ameya Kaple(P41008) Amit Jagtap(P41009) Gopal Khandelwal(P41020)

STRATEGIC MANAGEMENT
What is Strategic control? it is the process by which managers monitor the ongoing activities of an organization and it s members to evaluate whether activities are being performed efficiently and effectively and to take corrective action to improve performance if they are not

STRATEGIC MANAGEMENT
Purpose of Strategic Controls:  To provide managers with a means to motivate employees towards organizational performance;  Solicit data on how well the organization is performing

STRATEGIC MANAGEMENT
The importance of Strategic Control  The success of a chosen strategy  The implementation compass  Organizational performance  Ensuring competitive advantage

STRATEGIC MANAGEMENT
Strategic Control:  Requires more than re-acting on past performance  Keeps the organization on track  Anticipating events that might occur in future  Allows the organization to respond to new opportunities that may present itself

STRATEGIC MANAGEMENT
The importance of Strategic Control Control & Innovation:  Managers must create an environment in which people feel free to experiment and take risks  Managers are challenged to build control systems that encourage risk taking  Measures cost reduction, process improvement and improved quality measures.

Business Level Strategy

 Actions taken to provide value to customers

and gain a competitive advantage by exploiting core competencies in specific, individual product markets.  It is concerned primarily with answering the question: How to compete in a particular industry or product/market segment. Distinctive competences and competitive advantage are the most important components of business level strategy.  The major policy decisions are product/market segmentation and evolution.

Generic Business Level Strategies

Source of Competitive Advantage
Cost Uniqueness

Breadth of Competitive Scope

Broad Target Market

Cost Leadership

Differentiation

Narrow Target Market

Focused Low Cost

Focused Differentiation

Cost Leadership
Relatively standardized products Features acceptable to many customers Lowest competitive price

Requirements
Constant effort to reduce costs through: Building efficient scale facilities

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Monitoring costs of activities provided by outsiders

Tight control of production costs and overhead Minimizing costs of sales, R&D and service State of the Art manufacturing facilities

Simplification of processes

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Choices that Drive Costs

Economies of scale Asset utilization Capacity utilization pattern - Seasonal, cyclical Interrelationships - Order processing and distribution Value chain linkages - Advertising & Sales - Logistics & Operations Product features Product Performance Mix & variety of products Service levels Small vs. large buyers Process technology Wage levels Product features Hiring, training, motivation

Differentiation Requirements
Value provided by unique features and value characteristics Command premium price High customer service Superior quality Constant effort to differentiate products through: Developing new systems and processes

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Shaping perceptions through advertising

Quality focus Capability in R&D Maximize Human Resource contributions through low turnover and high motivation

Prestige or exclusivity Rapid innovation

Drivers of Differentiation
Some Examples:
Unique product features Unique product performance Exceptional services New technologies Quality of inputs Exceptional skill or experience Detailed information

Relationships between Rewards & Evaluation Systems and Business-level and Corporate-level Strategies

Corporate Level Strategy

 An action taken to gain a competitive advantage

through the selection & management of a mix of businesses competing in several industries or product markets  Corporate Strategy: is concerned primarily with answering the question: What set of businesses should we be in? Scope and resource deployments among businesses are the primary components of corporate level strategy.  The major policy decisions are financial structure and organizational structure.

Diversification
It is a strategy adopted by the firms to acquire new firms to expand its product base and to maximize its revenue. There are two types of diversifications Related Diversification & Unrelated Diversification

Motivating factors for Diversification

 Increase the firm s stock value  Increase the growth rate of the firm  Better utilization of firm s resources  Improve the stability of the firm  Balance or fill out the product line  Diversify the product line  Acquired the needed reasons

Reasons for Diversification

Value-Creating Diversification Economies of scope (related diversification) Sharing activities Transferring core competencies Market power (related diversification) Blocking competitors through multipoint competition Vertical integration Financial economies (unrelated diversification) Efficient internal capital allocation Business restructuring Value-Neutral Diversification Antitrust regulation Tax laws Low performance Uncertain future cash flows Risk reduction for firm Tangible resources Intangible resources Value-Reducing Diversification Diversifying managerial employment risk Increasing managerial compensation

Related vs. Unrelated Diversification

Related Diversification
Involves diversifying into businesses whose value chains possess competitively valuable strategic fits with value chain(s) of firm s present business(es)

Unrelated Diversification
Involves diversifying into businesses with no deliberate effort to seek out businesses having strategic fit with firm s present business(es)

Levels of Diversification

Related Diversification
 Firm creates value by building upon or

extending:

Resources Capabilities Core competencies

 Achieved by:
Transfer expertise/capabilities/technology Combine related activities into a single operation and reduce costs Leverage use of firm s brand name reputation Conduct related value chain activities in a collaborative fashion to create valuable competitive capabilities

Unrelated Diversification
 Involves diversifying into businesses with
No strategic fit No meaningful value chain relationships No unifying strategic theme

 Achieved by:
Financial indicators: Unit Costs, Profits And Revenues Value Chain Analysis

CASE
 Nucor Steel Plant

THANK YOU