Business Policy

The text states that strategic decisions are (1) rare, (2) consequential, and (3) directive. These deal with the long-term future of the entire organization. To aid in the decision making, the authors suggest an eight step decision-making process. Found on page 25 in the text, these include: (1) evaluating current performance results; (2) reviewing corporate governance; (3) scanning and assessing the external environment; (4) scanning and assessing the internal corporate environment; (5) analyzing the strategic factors; (6) generating and selecting the best alternative strategy; (7) implementing selected strategies; and (8) evaluating implemented strategies. These guidelines for making and evaluating decisions at a strategic level can be important for leaders.

Open today’s issue of The Wall Street Journal and look for an article about new moves being made by a corporation, specifically the decisions that are strategic. At what level is each of the decisions that you identified? Functional/Business/Corporate? Why do you believe this to be the case? What is your assessment of these decisions? Will they be effective? Why? How have you decided this?

Below is an excerpt straight from the textbook:

The typical larger business addresses three types of strategy: corporate, business, and functional. Corporate strategy describes a company’s overall direction in terms of growth and the management of its various businesses. Corporate strategies generally fit within the three main categories of stability, growth, and retrenchment. Business strategy usually occurs at the business unit or product level, and it empha-sizes improvement of the competitive position of a corporation’s products or services in the specific industry or market segment served by that business unit. Business strat-egies may fit within the two overall categories: competitive and cooperative strategies. For example, Staples, the U.S. office supply store chain, has used a competitive strategy to differentiate its retail stores from its competitors by adding services to its stores, such as copying, UPS shipping, and hiring mobile technicians who can fix computers and install networks. British Airways has followed a cooperative strategy by forming an alliance with American Airlines in order to provide global service. Cooperative strategy may be used to provide a competitive advantage in situations where the cooperating entities are not in direct competition for customers. Intel, a manufacturer of computer microprocessors, uses its alliance (cooperative strategy) with Microsoft to differentiate itself (competitive strategy) from AMD, its primary competitor.

Functional strategy is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a com-pany or business unit with a competitive advantage. Examples of research and devel-opment (R&D) functional strategies are technological followership (imitation of the products of other companies) and technological leadership (pioneering an innova-tion). For years, Magic Chef had been a successful appliance maker by spending little on R&D but by quickly imitating the innovations of other competitors. This helped the company keep its costs lower than those of its competitors and consequently to compete with lower prices. In terms of marketing functional strategies, Procter & Gamble (P&G) is a master of marketing “pull”—the process of spending huge amounts on 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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