Four Levels of Strategy

Functional-level strategy: a plan to strengthen an

organization’s functional and organizational resources, as
well as its coordination abilities, in order to create core
competences
Business-level strategy: a plan to combine functional core
competences to position the organization so that it has a
competitive advantage in its domain
Corporate-level strategy: a plan to use and develop core
competences so that the organization not only can protect
and enlarge its existing domain but can also expand into
new domains
Global expansion strategy: a plan that involves choosing
the best strategy to expand into overseas markets to obtain
scarce resources and develop core competences
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 Functional-Level Strategy
• The strategic goal of each function is to create a
core competence that gives the organization a
competitive advantage
• To gain a competitive advantage, an organization
must be able to do at least one of the following:
− Perform functional activities at a cost lower
than that of its rivals, or
− Perform functional activities in a way that
clearly differentiates its goods and services
from those of its rivals
• Strategies to lower costs or differentiate products

2
Table 8.1: Low-Cost and Differentiation Advantages
Resulting From Functional-Level Strategy

3
Figure 8.3: Structural Characteristics

What should be the structure of support

functions like HR & Finance? Same or Different?
4
Business-Level Strategy
• The business-level strategy involves:
− Selecting and managing the domain the organization will
compete in
− Positioning the organization so that it can use its resources and
abilities to manage its specific and general environments to
protect and enlarge that domain
• Strategies to lower costs or differentiate products
− Low-cost business-level strategy:
− Differentiation business-level strategy:
− Focus business-level strategy

5
Figure 8.5: Organizational Structure &
Business-Level Strategies

What about Multidivisional Structure?

6
Figure 8.6: Corporate-Level Strategies
for Entering New Domains

7
 Corporate-Level Strategy and Structure
• For organizations operating in more than one domain, a
multidivisional structure is appropriate
• Conglomerate structure and unrelated diversification
− Conglomerate structure: a structure in which each business is
placed in a self-contained division and there is no contact between
divisions
− Exception for thumb rule related to design challenge III

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Implementing Strategy Across Countries
Four principal strategies
− Multidomestic strategy: oriented toward local
responsiveness by decentralizing control to subsidiaries
and divisions in each country
− International strategy: decentralization of all value-
creation functions except for R&D and marketing
− Global strategy: oriented toward cost reduction, with all
the principal value-creation functions centralized at the
lowest-cost global location
− Transnational strategy: some functions are centralized,
while others are decentralized at the global location best
suited to achieving these objectives to achieve both local
responsiveness and cost savings

9
Table 8.2: Strategy-Structure
Relationships in the International Arena

10
 Class Activity 8A
• You are recent MBBS
graduate and in the process
of setting the first hospital in
the rural village you hail
from. The village is so remote
that there is no other medical
facility including a pharmacy
for next 50 KMs. You have
just enough resource to start
a hospital with 10 staff.
• You own a pharmacy in
Jamshedpur. Due to increased
competition, the sales has gone
down in pharmacy and you have
decided to start a hospital in
unused first floor. First floor can
accommodate total of 20 people
(including staff and patients) and
you expect the hospital to
increase the sales of pharmacy.

Complete the structure based on “Star Model”

and explain how different components are aligned
 Class Activity 9 A: Market Leader in VUCA World (B)
Individual Submission before session 11

• Go through the article uploaded in AIS

• Assume that all outlets other than Nexa are Arena outlets
• Consider the strategic differences between Nexa & Arena
Outlets and explain the differences in STAR model
implementation across both this outlets

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 Organizational Culture
Set of shared values and norms that control
organizational members interaction with each
other and with people outside the
organization.

It controls the way

- the members make decisions
- they interpret the environment
- they process the information
- they behave

September 13, 2021 Organizational Structure, Design and Change 13

 Organizational Culture

•Physical Structures
Artifacts of •Language
Organizational
•Rituals and Ceremonies
Culture
•Stories and Legends

Organizational
•Values/Norms
Culture
•Assumptions

September 13, 2021 Organizational Structure, Design and Change 14

 Organizational Culture
Organizational Values
Organizational Values

Terminal Values Instrumental Values

Desired end states Desired modes of

or outcomes behavior

Specific norms, rules

and SOP’s
September 13, 2021 Organizational Structure, Design and Change 15
 Competing value framework
FLEXIBILITY
Human Relations Model Open Systems Model
Clan Culture Adaptability Culture
Human Resource
Development
(M) Flexibility, Readiness

(M) Cohesion (E) Growth,

Morale Resource acquisition

INTERNAL EXTERNAL

(M) Communication (E) Productivity,

Information Mgmt. Efficiency

(E) Stability (M) Planning, Evaluation

Control Goal setting

Internal Process Model Rational Goal Model

Bureaucratic Culture STABILITY Mission Culture
September 13, 2021 Organizational Structure, Design and Change 16
 Organizational Culture
Transmitting Organizational Culture
Socialization: Process of learning and internalizing the
values and norms of the organization (members)

Collective Individual
Formal Informal
Sequential Random
Fixed Variable
Serial Disjunctive
Divestiture Investiture
Group Activity: Suggest the right combination for newly recruited
employees in Accenture for Consulting, IT & BPO Business
September 13, 2021 Organizational Structure, Design and Change 25
 Organizational Culture
Source of Organizational Culture
Property rights
system

Organizational Organizational Organizational

ethics Culture structure

Characteristics
of the
people within

September 13, 2021 Organizational Structure, Design and Change 26