9780199216468_046_099_CH02.qxd
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ONE: CORE CONCEPTS
HQ Corporate strategy — where to invest — adding value by linking units Business strategy — what we sell to whom — competitive advantage
Business Unit 1
Business Unit 2
Business Unit 3
Functional strategies R&D
Marketing
Service
IT, etc.
Figure 2.2 The three levels of strategy
Over time, businesses often diversify into different areas; perhaps they develop a new type of product or move into a number of different geographical areas, each of which may have the need for a slightly different type of management. Sometimes these businesses are related to one another, sometimes they are not. Sometimes they are separate legal entities, sometimes not. But when an organization has a range of different types of business within its portfolio, its managers have to take decisions about how these businesses work together, and how many and what sort of businesses should be in its portfolio. These are corporatelevel strategic decisions.
2.3.1 ‹ Functional strategies have an important influence on the organization’s value chain, which we discuss in Chapter 6.
Functional-level strategy
Each of an organization’s individual functions will have its own functional strategy. For example, British Airways might have a marketing strategy to increase customer recognition of its Club World brand with specific targets to be achieved over the next two years, or to increase direct mail activity to certain market segments. A maintenance strategy might be to reduce the frequency of unplanned aircraft breakdowns, again with specific targets to be achieved in a given time period. Because functional strategies are not of particularly great magnitude, and are likely to be short-term, we do not discuss them in great detail in this book.
2.3.2
Business-level strategy
A modern airline such as British Airways has all the functions outlined in Section 2.3, and more. The crucial task of its managers is to knit these disparate groups of specialists together into a coherent whole that delivers an all-round service to its customers. The planes must be ready to fly at the scheduled time, with motivated, helpful, and well-trained staff on board, serving palatable food in planes which are as full as possible of fare-paying passengers. A failure by any one function, however remote from the user, can lead to poor service and customer dissatisfaction: for example, an IT failure can lead to long check-in queues. This linking together of different activities to add value to users is the essence of businesslevel strategy. Business-level strategies relate to: