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General approaches[ edit ] In general terms, there are two main approaches, which are opposite but complement each other in some ways, to strategic management: The Industrial Organizational Approach based on economic theory — deals with issues like competitive rivalry, resource allocation, economies of scale assumptions — rationality, self discipline behaviour, profit maximization The Sociological Approach deals primarily with human interactions assumptions — bounded rationality, satisfying behaviour, profit sub-optimality.
An example of a company that currently operates this way is Google Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes. In the bottom-up approach, employees submit proposals to their managers who, in turn, funnel the best ideas further up the organization.
This is often accomplished by a capital budgeting process. Proposals are assessed using financial criteria such as return on investment or cost-benefit analysis. Cost underestimation and benefit overestimation are major sources of error. The proposals that are approved form the substance of a new strategy, all of which is done without a grand strategic design or a strategic architect.
The top-down approach is the most common by far. In it, the CEO, possibly with the assistance of a strategic planning team, decides on the overall direction the company should take. Some organizations are starting to experiment with collaborative strategic planning techniques that recognize the emergent nature of strategic decisions.
This article is an excerpt from: Recognized as One of the Best Business Books for by CIO Magazine. Based on interviews with more than CIOs, IT/business executives, and academic thought leaders, The Strategic CIO: Changing the Dynamics of the Business Enterprise provides insight, success stories, and a step-by-step methodology to transform your IT organization into a strategic . Bain's strategy experts help clients with their most complex strategic challenges. We build tailored solutions to help clients achieve sustained growth and emphasize mobilization from day one. We begin by helping clients choose where to focus so they can outexecute and outinvest their competitors―and ultimately generate higher returns. A strategic business unit, popularly known as SBU, is a fully-functional unit of a business that has its own vision and direction. Typically, a strategic business unit operates as a separate unit, but it is also an important part of the company.
The strategy hierarchy[ edit ] In most corporations there are several levels of management. Strategic management is the highest of these levels in the sense that it is the broadest - applying to all parts of the firm - while also incorporating the longest time horizon.
It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are typically business-level competitive strategies and functional unit strategies.
Corporate strategy refers to the overarching strategy of the diversified firm. Such a corporate strategy answers the questions of "in which businesses should we compete?
According to Michael Porter, a firm must formulate a business strategy that incorporates either cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long-term success in its chosen arenas or industries.
Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information technology management strategies.
Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies.
Many companies feel that a functional organizational structure is not an efficient way to organize activities so they are reengineering reengineered according to processes or SBUs.
A strategic business unit is a semi-autonomous unit that is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters.
An additional level of strategy called operational strategy was encouraged by Peter Drucker in his theory of management by objectives MBO.
It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies.
Since the turn of the millennium, some firms have reverted to a simpler strategic structure driven by advances in information technology.
It is felt that knowledge management systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. This notion of strategy has been captured under the rubric of dynamic strategy, popularized by Carpenter and Sanders's textbook . This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation.
Such change and implementation are usually built into the strategy through the staging and pacing facets.A strategic business unit, popularly known as SBU, is a fully-functional unit of a business that has its own vision and direction. Typically, a strategic business unit operates as a separate unit, but it is also an important part of the company.
Large, diversified companies organize themselves into divisions to break the management of the company into smaller, organizationally cohesive parts. The company headquarters still gives the.
“Strategic” may be one of the most over-used words in business today. This observation is especially valid in the world of alliances, where managers must distinguish between those alliances that are merely conventional and those that are truly strategic. Strategic Business Unit (SBU) Definition: Strategic Business Unit (SBU) implies an independently managed division of a large company, having its own vision, mission and objectives, whose planning is done separately from other businesses of the timberdesignmag.com vision, mission and objectives of the division are both distinct from the parent enterprise and elemental to the long-term performance of.
The SBU Concept. A distinguishing characteristic of Phase III planning in diversified companies is the formal grouping of related businesses into strategic business units (SBUs) or organizational. A strong business community is a top priority for Westminster City Council and we are committed to investing in our services to you.
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