UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN
College of Business
Department of Business Administration
BADM449 Strategic Management/Business Policy
Levels of Strategy
Functional Level Strategy is directed at improving the effectiveness of functional operations within a company: manufacturing, marketing, materials' management, research and development, and human resources. Topics can include TQM (total quality management); flexible manufacturing systems; just-in-time (JIT) inventory systems; and techniques for reducing the cycle time in new product development in operations management.
Business Level Strategy includes the strategic choice of a generic strategy: (cost leadership, differentiation, focus) and the benefits and costs of first-mover advantages. Often an enterprise can have different businesses with different business-level strategies. This variety is hardly surprising since a company, like General Electric for example, can have more than 100 business-level divisions, one for each business that the company is in.
Corporate level Strategy typically involves decision-making by the top management team that includes the CEO, senior executives, the board of directors, and the corporate staff. Decisions include vertical integration, diversification, strategic alliances, acquisitions, new ventures, and restructuring.
Global Strategies. Consider four types of global strategies in international business:
- MULTI-DOMESTIC: Firms transfer differentiated product offerings developed at home and customize the product in international markets (e.g., Philips).
- INTERNATIONAL: Firms transfer differentiated product offerings developed at home to new markets. (e.g., IBM and Proctor & Gamble).
- GLOBAL: Firms pursue a low-cost strategy by producing (parts of) the product in foreign markets (e.g., Intel, Motorola).
- TRANSNATIONAL: Firms strive for a low-cost strategy by pursuing low cost via knowledge transfer both from home country to foreign subsidiaries and from foreign subsidiaries to the home company (e.g., Caterpillar). (Note: there are high pressures here to achieve both low cost and local responsiveness).