Amity School of Business

Business Strategy
STRA 303
Levels of Strategic Decision Making

Course Instructor: Prof. Ruchi Khandelwal

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Issues in Strategic Decision-Making

• Criteria for Decision-making
– Concept of Maximization – Achieve highest level of objective while
maximizing the returns
– Concept of Satisfaction – setting objectives such that firm can achieve
them realistically, through a process of optimization.
– Concept of Incrementalism- small, logical and incremental steps
• Rationality in Decision-making
– Economists consider a decision to be rational if it leads to profit
maximization.
– Behaviorists believe rationality takes into account the constraints
under which decision maker operates.
– Incrementalists believe objective achievement depends upon
bargaining process between different interested coalition groups.
• Creativity in Decision-making
• Variability in Decision-making
• Person-related factors in Decision-making
– Attributes like age, education, knowledge, intelligence, personal
values, risk-taking ability, etc. affect strategic decision-making.
• Individual Vs Group Decision-making
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Company’s Strategy Making Hierarchy

• Overall strategy
A collection of strategic initiatives and actions devised by the
managers and key employees up and down the whole
organizational hierarchy

• Crafting a strategy involves answers to the following hows:

– How to out compete rivals
– How to respond to changing market conditions
– How to develop needed competencies
– How to achieve strategic and financial objectives

• In a diversified multi-business companies strategy making

involves levels of strategy involving different facets of
company’s overall strategy
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Levels of Strategy
Level of Definition Example
• Corporate-level strategy is strategy
concerned with the overall
purpose and scope of an Corporate- Market Diversification into new
level definition product or geographic
organization and how value strategy markets
will be added to the different
parts (business units ) of the
organization. Business Market Attempts to secure
unit navigation competitive advantage
• Business unit strategy is about strategy in existing product or
how to compete successfully geographic markets
in particular markets.
• Operational / Functional Functional Support of Information systems,
strategy corporate human resource
strategy is concerned with strategy and practices, and
how the component parts of business production processes
an organization deliver strategy that facilitate
achievement of
effectively the corporate and corporate and business
business level strategies in strategy
terms of resources, processes
and people.
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Corporate Strategy
Same, in single
Company wide game
business company
Plan for a set of
By CEO & Senior businesses
Executives Two way influence
By GMs of each Business Strategy
business with (one for each business)
inputs from 1.Strengthening market position
Functional 2.Building competitive capabilities
heads Two way influence

By heads of Functional areas strategy

functional 1.Relevant details to the hows of overall
activities with business strategy
key people 2.Game plans for managing an activity

Two way influence

Operating Strategies
By Operating within each business
Managers Completeness to above two
Game plan for lower echelon
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Levels of Strategy
• Critical questions answered by corporate-level strategists
include:
– What should be the scope of operations; i.e.; what businesses
should the firm be in?
– How should the firm allocate its resources among existing
businesses?
– What level of diversification should the firm pursue
– How diversified should the corporation's business be? In other
words, how will adding new product or service businesses benefit
the existing product/service line-up?
– How should the firm be structured? Do the organizational
components such as research and development, finance, marketing,
customer service, etc. fit together?
– Are the responsibilities or each business unit clearly identified and is
accountability established?
– Should the firm enter into strategic alliances—cooperative,
mutually-beneficial relationships with other firms? If so, for what
reasons? If not, what impact might this have on future profitability?
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Strategic Decision Making at Corporate level

• Astral Poly Technik Ltd., based out of Ahemdabad, manufacturer

and provider of chlorinated poly vinyl chloride (CPVC) piping and
plumbing systems, entered into a agreement with global specialty
chemical company, Lubrizol, to manufacture specific pipes for
BlazeMaster Fire sprinkler system.
• For this purpose, Astral entered into a techno-financial JV with
Specialty Process LLC of USA which provided it with requisite
expertise for manufacturing CPVC pipes and fittings.
• Recently the company’s decision to begin local compounding of
material and launch house branded lines of chlorinated polyvinyl
chloride (CPVC) is in conflict with Lubrizol’s long established and
successful CPVC branded business model and hence the partnership
is terminated.

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Levels of Strategy
• Business-level strategies are primarily concerned
with:
– Coordinating and integrating unit activities so they
conform to organizational strategies (achieving synergy).
– Developing distinctive competencies and competitive
advantage in each unit.
– Identifying product or service-market niches and
developing strategies for competing in each.
– Monitoring product or service markets so that strategies
conform to the needs of the markets at the current stage
of evolution.

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Strategic Decision Making at Business level

• Pantaloons and Big Bazaar, use competitive strategy to differentiate

its hypermarkets from its competitors. Big Bazaar’s mantra is to
ensure value for money, by providing variety of stuff under single
roof, at everyday low prices.
• Kingfisher Airlines followed a cooperative strategy in 2007. It
introduced Indians to a new way to book flight tickets
FlyBuySmsTM. The company entered into a strategic alliance with
PayMate, a leading wireless transaction company.

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Levels of Strategy

• Functional strategies are primarily concerned with:

– Efficiently utilizing specialists within the functional area.
– Integrating activities within the functional area (e.g.,
coordinating advertising, promotion, and marketing
research in marketing; or purchasing, inventory control,
and shipping in production/operations).
– Assuring that functional strategies mesh with business-
level strategies and the overall corporate-level strategy.

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Strategic Decision Making at Functional level

• Magic Chef, a successful appliance maker company spends
little on R&D but by quickly imitating the innovations of other
competittors. This allows the company to keep its costs lower
than those of its competitors and compete with lower prices.
• P&G is a master of marketing “pull” – the process of spending
huge amounts of advertising in order to create customer
demand. This supports P&G’s competitive strategy of
differentiating its products from those of its competitors.

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