Content of a corporate level strategy

With a corporate strategy managers stake a claim for their organization’s place in the future. You can think of a corporate strategy as an idea about how people at an organization will interact with people at other organizations over time. So it is very important to understand that a corporate strategy says something of substance that guides people in their day-to-day work over an extended period of time. In this article, we are writing about a sense of different things that a corporate strategy can say. Such statements of course will vary from organization to organization, because each organization is different.

Quality as part of corporate strategy:

Quality has become a unifying theme of many organizations, from Xerox to GE. Important to the success of total quality management, however, is linking the quality programs to a few clear strategic goals. As Fortune magazine points out, obsessing about quality is no replacement for a well thought out corporate strategy.

At Johnson & Johnson, the quality program was redesigned with three targets in mind: boosting customer satisfaction, cutting costs, and reducing product introduction time. At J&J a very entrepreneurial company where individual units are run like small businesses, each of the 168 units develops its own training program in keeping with these three unifying strategic goals.

At Motorola, the quality program has two targets: defect prevention (with a goal of two defects per billion by the year 2000) and cycle time reduction decreasing the amount if time it takes to complete a job. This quality goal does not just apply to manufacturing, but to department such as finance as well. For instance in 1988 it took Motorola 11 days to close its books each month but by 1993 it took two days. This time difference translates to a considerable cost savings.

Quality efforts should be clearly focused. In deciding how to tie quality to strategic plans, companies may want to listen to the advice of Motorola Vice President. Identify three or four critical issues. You can not work on two dozen.

The corporate Portfolio approach:

In this approach, top management evaluates each of the corporation’s various business units with respect to the marketplace and the corporation’s internal make up. When all business units have been evaluated, an appropriate strategic role is developed for each it with the goal of improving the overall performance of the organization. The corporate portfolio approach is rational and analytical is guided primarily by market opportunities and tends to be initiated and controlled by top management only.

One of the best known examples of the corporate portfolio approach is the portfolio framework advocated by the Boston Consulting Group. This framework is also known as the BCG Matrix.

The BCG approach to analyzing a corporate portfolio of businesses focuses on three aspects of each particular business unit: its sales, the growth of its market, and whether it absorbs or produces cash in its operations. Its goal is to develop a balance among business units that use up cash and those that supply cash.

A four square BCG matrix in which business units can be plotted according to the rate of growth of their market segment and their relative market share. A business unit in the question mark category, a business with a relatively small market share in a rapidly growing market can be an uncertain and expensive venture. The rapid growth of the market may force it to invest heavily simply to maintain its low share, even though that low market is yielding low or perhaps negative profits and cash flow. Increasing the questions mark’s share of the market relative to the market leader would require still larger investments. Yet the rapid growth of the market segment offers exciting opportunities if the proper business strategy and the funds to implement it can be found.