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CHAPTER 2
STRATEGY ARCHITECTURE
LESSON 6:
LEVELS OF STRATEGY
Learning Objective
On completion of this chapter you should be able to:
You should be able to understand the various levels of
business strategy
You should be able to understand that strategic management
is not a single, simple action but a series of related decisions
and actions.
You should be able to understand strategies at the
operational level.
You should be able to understand the characteristics of
strategic decision
Finally you should be able to the role played by strategic
management
Levels of Strategies
You can see the various levels of strategies at the Corporate,
SBU and Functional level. The levels of strategy offer you a
glimpse of the complexity about different levels at which
strategy is formulated. The business strategy must contain
wellcoordinated action programs aimed at securing a longterm
competitive edge and which the company should sustain.
Lets take an example of Hindustan Levers, a multina-
tional subsidiary, is in several businesses such as animal
seeds, beverages, oils and dairy fat , soaps and deter-
gents.
Similarly Sundaram Clayton and its associate companies
operate in technology areas as diverse as brake and signal
systems for railways, two wheelers and electrical appliance
Three types of level are depicted in the exhibit.
The first level is the corporate strategy which is an
overarching plan of action covering the various functions
performed by different SBUS
Corporate Level
Take an example of any organization, there are basically three
levels. The top level of the organization consists of chief
executive office of the company, the board of directors, and
administrative officers. The responsibility of the top manage-
ment is to keep the organization healthy. You see that their
responsibility is to achieve the planned financial performance of
the company in addition to meeting the nonfinancial goals viz.
social responsibility and the organizational image. The issues
pertaining to business ethics, integrity, and social commitment
are dealt with, at this level of strategic decisions. The corporate
level strategies translates the orientation of the stakeholders and
the society into the forms of strategies for functional or
business levels.
In the given exhibit you will find that business strategy is a
comprehensive plan providing objectives for SBUS, allocation
of resources among functional areas, coordination between
them for optimal contribution to the achievement to the
achievement of corporate level objectives.
Corporate Level Strategies
This is the level where vision
statement of the companies emerges.
Exhibit shows typical levels of
strategymaking in an organization.
In the given exhibit you will see that
various companies are organized on
the basis of operating divisions.
These divisions are known as profit
centers or strategic business units.
Generally SBUs are involved in a
single line of business
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Levels of Strategy Making
Business Level
This level consists of primarily the business managers or
managers of Strategic Business units. Here strategies are about
how to meet the competition in a particular product market and
strategies have to be related to a unit within an organization.
The managers at this level translate the general statements of
direction and intent churned out at corporate level. The
managers identify the most profitable market segment, where
they can excel, keeping in focus the vision of the company. The
corporate values, managerial capabilities, organizational
responsibilities, and administrative systems that link strategic
and operational decisionmaking level at all the levels of
hierarchy, encompassing all business and functional lines of
authority in a company are dealt with at this level of strategy
formulation. The managerial style, beliefs, values, ethics, and
accepted forms of behaviour must be congruent with the
organizational culture and at this level, these aspects are
diligently taken care of by strategic managers.
Just think for a while how does business strategy make the
study and practice of management more meaningful?
Operational Level
Planning alone cannot create massive mobilization of resources
and people and can never generate high quality of strategic
thinking required in complex organizational context. For this to
happen, the planning should be carefully dovetailed and
integrated with significant administrative systems viz. manage-
ment control, communication, information management,
motivation, rewards etc. It is also vital that all these systems are
supported by organizational structure that defines various
authority and responsibility relationships, among various
members of the company and specifically at operational level.
The culture of the organization should be accounted for, and
these systems should find adaptability with the culture of the
organization.
Further, put down at least five reasons how business strategy
serves the need of
a. Management students
b. Middle-level executives.
Now look at this diagram and see how various functions are
interrelated
Interaction of Various Functions
The managers at this level of product, geographic, and func-
tional areas develop annual objective and shortterm strategies.
The strategies are designed in each area of research and develop-
ment, finance and accounting, marketing and human relations
etc. The responsibilities also include integrating among
administrative systems and organizational structure and
strategic and operational modes and seek for congruency
between managerial infrastructure and the corporate culture.
Thus Exhibit shows the interaction of various functions for
deciding strategies at the operational level.
Notes