Strategic management defined as consisting of the analysis and decisions
Strategic management can be defined as consisting of the analysis, decisions and actions an organization undertakes in order to create and sustain competitive advantages.
Key attributes of Strategic Management
- Directs the organization toward overall goals and objectives.
- Includes multiple stakeholders in decision making.
- Needs to incorporate short-term and long-term perspectives.
- Recognizes trade-offs between efficiency and effectiveness.
Strategy can be developed at many levels in a multi-layered organisation there may be:
- Corporate level strategy
- Business level strategy
- Functional level strategy
Corporate level strategy describes a corporation’s overall direction in terms of its general philosophy towards growth and the management of its various business units. Such strategies determine the type of a business a corporation wants to be in and what business units should acquired, modified and sold. This strategy addresses the question what business are we in? Devising a strategy for a multidivisional company like Sony involves at least four types of initiatives.
- Establishing investment priorities and steering corporate resources into the most attractive business units.
- Initiating actions to improve the combined performance of those business units that the corporation first got into.
- Finding ways to improve the synergy among related business units in order to increase performance.
- Decisions dealing with diversification.
Business level strategy deals with decisions and actions pertaining to each business unit. The main objective of a business level strategy is to make the unit more competitive in market place. This level strategy addresses the question how do we compete? Although business level strategy is guided by upstream corporate level strategy business unit management must craft a strategy that is appropriate for its own operating situation. Miles and Snow(1984) identified four modes of strategic orientation: Defenders, Prospectors, Analysers and Reactors. These strategies can help explain why companies facing similar environmental threats or opportunities behave differently and why they continue to do so over a long period of time. In turn the different competitive or business strategies influence the down stream functional strategies.
Functional level strategy pertains to the major functional operations within the business unit, including research and development, marketing, manufacturing, finance, and human resource productivity and addresses the question how do we support the business level competitive strategy? The three levels of strategy corporate, business and functional form a hierarchy of strategy within in a large multidivisional corporation.
Different levels of strategy of Sony
Sony Corporation was founded by Masaru Ibuka and Akio Morita in 1946, now having head quarters at Minato, Tokyo, Japan. Sony is one of the biggest electronics in the world with revenue 7.7 trillion yen. Sony are making products like Consumer & professional electronic equipments, Communication &information-related equipments, Semiconductor, Electronic devices & components, Battery, Chemicals, Sony Pictures Entertainment, Sony Music, PlayStation and Blu-Ray devices.
Sony Corporation as a giant organization has divided its organization into five main business units as Sony Pictures Entertainment, Sony Computer Entertainment, Sony Music Entertainment, Sony Ericsson, and Sony Financial. Sony Corporation has its own corporate strategy, and the each of its five business units having their own business strategy.
Business level strategy
Functional level strategy
In Sony Group Corporate Strategy Update FY2008 – FY2010 Sony has set out some goals and revealed about its corporate strategy. In particular, the company will focus on strengthening core businesses, enhancing network initiatives and leveraging international growth opportunities to build for the future and drive further growth and profits. Main considerations in the strategy of Sony are,
- Further strengthening the core business
- Network initiatives
- Capitalize on Growth in BRIC Countries and Other Emerging Markets
- Environmental Initiatives
- Financial Strategies for the Mid-Term
A good strategy always leads an organization towards success and improvement, in the other way a bad or inefficient strategy always takes that organization into losses and bad reputation. As we know that Japanese are good at management and most of other countries are try to implement Japanese management techniques. The term is a Japanese word adopted into English referring to a philosophy or practices focusing on continuous improvement in manufacturing activities, business activities in general, and even life in general, depending on interpretation and usage. Sony Corporation was good at strategic plans by applying these management strategies. As we discussed earlier a bad or inefficient strategy leads the organization into bad reputation, in the case of Sony they are failed to implement an efficient strategy which Sony’s net profit for the July-September quarter for 2006 falling 94% to 1.7 billion Yen, compared to 28.5 billion Yen for the same period last year. From there they are trying to implement better strategies and to regain their reputation and brand value and to regain their number one position in electronics industry.
Portfolio approach to strategy
Portfolio approach was one of the early approaches to chart strategy and allocate resources in multi-business organizations. As corporate strategists jumped on the diversification bandwagon they soon found a challenge in managing the resource needs diverse businesses and their strategic missions, particularly in times of limited resources. Responding to that challenge the Boston Consulting Group pioneered an approach called portfolio techniques that attempted to help managers balance the flow of cash resources among their various businesses while also identifying their basic strategic purpose within the overall portfolio. The top managers at larger farms need a method for spotting product lines that deserve more investment as well as lines that aren’t living up to expectations. So they conduct a portfolio analysis, in which they evaluate they evaluate their company’s products and divisions to determine which are strongest and which are weakest. Much as securities analysts review their portfolios of stocks and bonds, deciding which to retain and which to discard.
Strategic business unit (SBU)
Strategic business units are the key business units within diversified firms. Each SBU has its own managers, resources, objectives, and competitors. A division, product line or a single product may define the boundaries of an SBU. Each SBU pursues its own distinct mission and often develops its own plans independently of other units in the organization.
To evaluate each of their organization’s SBUs, marketers need some type of portfolio performance framework. A widely used framework was developed by Boston Consulting Group. This market share/ market growth matrix places SBUs in a four quadrant chart that plots market share against market growth potential. The position of an SBU along the horizontal axis indicates its market share relative to those of competitors in the industry. Its position along the vertical axis indicates the annual growth rate of the market. After plotting all of a firm’s business units, planners divide them according to the matrix’s four quadrants as shown in the figure.
Stars represent High market share and High growth rate. These products or SBUs are high growth market leaders. Although they generate considerable income, they need inflows of even more cash to finance further growth.
Cash cows command High market share in Low growth markets. Marketers for such an SBU want to maintain this status for as long as possible. The business produces string cash flows, but instead of investing heavily in the unit’s own promotions and production capacity, the firm can use this cash to finance the growth of other SBUs with higher growth potentials.
Question marks achieve Low market share in higher growth markets. Marketers must decide weather to continue supporting these products or SBUs, because question marks typically require considerably more cash than they generate. If a question mark cannot become a star, the firm should pull out of the market and target other markets with greater potential.
Dogs manage only Low market share in Low growth markets. SBUs in this category promise poor future prospects, and marketers should withdraw from these businesses or SBUs as quickly as possible. In some cases these products can be sold to other firms where they are better fit.