Strategy formulation for your business: Lead all the way or be the follower

Strategic planning will apply to all levels of your business. For large multi-product organizations there are at least 3 levels of strategy.

The corporate level strategy

This strategy is the responsibility of the top level management of your business. For large businesses with multiple business units the emphasis of the corporate strategy involves decisions about resource allocation across its SBUs.

Therefore the top management of your business needs to constantly monitor the business environment to determine what proportion of your businesses resources should be allocated to each of the strategic business units to meet the desired objectives of your business.

The management of the business will also have to decide on the other essential business functions like IT and HR.

At this level the corporate objectives of the business leaders are usually concerned with the overall sales, performance, profitability, return on investment (ROI), earnings per share etc.

The top management of your business will be accountable to the board and the shareholders of the business.

 

At the corporate level strategy some questions that need to be addressed could be:

1) What business are we in?

2) Why?

3) What business should we be in?

4) How much of resources should we allocate into each of these SBUs for the business to meet its corporate goals?

 

SBU Level Strategy

An SBU of a business is created every time a corporation starts a new market. Basically SBUs can consist of a group of related businesses or products at different levels.

For example the various types of solutions sold by a company can come under an SBU.

An SBU is ideally a single business or a group of highly related businesses that is strategically functioning independently. The strategic business unit (SBU) should be a profit centre to the business with its managers having control and responsibility over sales, profits and market share.

At this SBU level of analysis we are looking at a business within a marketplace. This is the heart of the company. At the end of the day it’s the success of these strategic business units in their respective market that will determine the success of the organization.

For example the number of visitors to this content will determine the success of my blog.

The strategic business unit strategy emphasizes the development and the maintenance of the business’s sustainable competitive advantage. This concerns the identification of business strength to compete and to satisfy the needs of your customer.

In a way SBU strategies are much richer and diverse than the corporate level strategy.

Let’s assume an SBU of your business has multiple products-markets, which they may usually do have. In this case the resource allocation will be concerned with the appointment of resources to each of the product markets and to each of the strategic business unit level departments. Then again as you are aware that each of your product market will have its own strength and competencies and therefore face unique set environmental factors, you will have to make resource allocations to your strategic business units based on these criteria.

 

The product-market level strategy

To all intent and purposes this is a marketing strategy. The marketing strategy is a marketing plan which involves the allocation of resources and coordination of marketing activities like the elements of the marketing mix.

The marketing objectives of your company should usually be stated in terms of sales, profits, market share and the level of customer satisfaction. Your target market needs to be identified and the marketing mix strategies or tactics developed. Proper resources need to be allocated across the marketing mix to ensure that the overall marketing strategy effectiveness in your specific service.

This 3 level strategy concept only applies to an organization with multiple businesses and multiple products.

Consider the case your company is actually just a start up or small business entity with just one product or service aimed at a single target market the 3 levels of strategy are actually considered to be one. Therefore there is no difference between the 3 strategies and it highly unrealistic to pursue all 3 levels of strategy for a business and it all depends on where you are working for.

 

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