UNIT III
After studying the environment, the next step for any organization is to identify an appropriate
strategy.
There are different levels in every organization, and leaders / managers at various levels are
responsible for strategizing at their particular level.
Strategy formulation in an organization is done at three levels:
1. Corporate
2. Business (SBU – Strategic Business Unit)
3. Functional
What is an SBU?
Multi-business organizations that have presence in different industries and cater to various
different needs of their customers are called conglomerate companies. Two examples of Indian
conglomerates are: Tata (Tata Motors, Tata Steel, Tata Consultancy Services, Tata Power and
many more), Reliance Industries Limited (Reliance Petroleum, Reliance Infrastructure,
Reliance Retail, Reliance Entertainment and many more).
Now each of these businesses within the Tata or Reliance group of industries works and
behaves as a separate business entity. Business decisions for one company, say Tata motors,
will not be relevant for another, say Tata Communications. Therefore, each business has its
own leaders and policy makers. Thus, each business works on its own “Strategies”, and hence,
is referred to as a Strategic Business Unit (SBU). This is a common term you will come across
when you go to the corporate world and work for MNCs.
,The three levels of strategies are indicative of who the decision makers are, as well as who the
strategy is intended for.
Example: At RIL, Mukesh Ambani with his team of top management will make strategies that
will impact the entire conglomerate firm, as a whole. These decisions can be things like adding
a new SBU to the business line, removing a particular loss incurring SBU from the business
line, renaming certain business etc. These are called Corporate Strategies.
The next level of strategies will be those made by the heads of Reliance Jio, Reliance Retail,
Reliance Petroleum etc, i.e. the MD of each SBU. Such strategies will impact only that
particular SBU. The decisions can be things like adding a new product line, entering a new
market, changing the advertising and promotional methods etc. Such strategies are called
Business level strategies.
Finally, the third level of strategy, which is called Functional strategy comes into picture. Each
SBU in the organization will have its own departments like Marketing, Finance, HR, Public
Relations, Operations etc. Each department will have its own strategies that will be made by
the department heads. They are referred to as Functional strategies.
(Your syllabus covers only corporate level strategies)
, FORMULATION OF CORPORATE STRATEGIES
Approach to strategy formulation
As per Business Definition of any business within an organization, it can be identified
i. which customer groups the business serves
ii. which customer functionality is fulfilled
iii. what alternative technologies are used to attain the same
All corporate strategies are defined based on these three factors, keeping in mind the demands
of internal and external environment of the organization.
The strategies defined at corporate level may pertain to existing SBUs or to a new SBU
altogether, and have a huge impact on the internal functioning of the SBU as well as its
Business Definition.
Types of Corporate Strategies
I. Growth aka Expansion aka Intensification – This strategy is aimed at high growth,
substantially broadening the scope of existing business or entering into new business to
improve overall performance.
There are 6 types of growth strategies, namely:
a. Concentration
b. Integration
c. Diversification
d. Internationalization
e. Cooperation
f. Digitalization
After studying the environment, the next step for any organization is to identify an appropriate
strategy.
There are different levels in every organization, and leaders / managers at various levels are
responsible for strategizing at their particular level.
Strategy formulation in an organization is done at three levels:
1. Corporate
2. Business (SBU – Strategic Business Unit)
3. Functional
What is an SBU?
Multi-business organizations that have presence in different industries and cater to various
different needs of their customers are called conglomerate companies. Two examples of Indian
conglomerates are: Tata (Tata Motors, Tata Steel, Tata Consultancy Services, Tata Power and
many more), Reliance Industries Limited (Reliance Petroleum, Reliance Infrastructure,
Reliance Retail, Reliance Entertainment and many more).
Now each of these businesses within the Tata or Reliance group of industries works and
behaves as a separate business entity. Business decisions for one company, say Tata motors,
will not be relevant for another, say Tata Communications. Therefore, each business has its
own leaders and policy makers. Thus, each business works on its own “Strategies”, and hence,
is referred to as a Strategic Business Unit (SBU). This is a common term you will come across
when you go to the corporate world and work for MNCs.
,The three levels of strategies are indicative of who the decision makers are, as well as who the
strategy is intended for.
Example: At RIL, Mukesh Ambani with his team of top management will make strategies that
will impact the entire conglomerate firm, as a whole. These decisions can be things like adding
a new SBU to the business line, removing a particular loss incurring SBU from the business
line, renaming certain business etc. These are called Corporate Strategies.
The next level of strategies will be those made by the heads of Reliance Jio, Reliance Retail,
Reliance Petroleum etc, i.e. the MD of each SBU. Such strategies will impact only that
particular SBU. The decisions can be things like adding a new product line, entering a new
market, changing the advertising and promotional methods etc. Such strategies are called
Business level strategies.
Finally, the third level of strategy, which is called Functional strategy comes into picture. Each
SBU in the organization will have its own departments like Marketing, Finance, HR, Public
Relations, Operations etc. Each department will have its own strategies that will be made by
the department heads. They are referred to as Functional strategies.
(Your syllabus covers only corporate level strategies)
, FORMULATION OF CORPORATE STRATEGIES
Approach to strategy formulation
As per Business Definition of any business within an organization, it can be identified
i. which customer groups the business serves
ii. which customer functionality is fulfilled
iii. what alternative technologies are used to attain the same
All corporate strategies are defined based on these three factors, keeping in mind the demands
of internal and external environment of the organization.
The strategies defined at corporate level may pertain to existing SBUs or to a new SBU
altogether, and have a huge impact on the internal functioning of the SBU as well as its
Business Definition.
Types of Corporate Strategies
I. Growth aka Expansion aka Intensification – This strategy is aimed at high growth,
substantially broadening the scope of existing business or entering into new business to
improve overall performance.
There are 6 types of growth strategies, namely:
a. Concentration
b. Integration
c. Diversification
d. Internationalization
e. Cooperation
f. Digitalization
