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1) Overall Objective
2) Nature of Business
3) External Environment
4) Management style
5) Size of Enterprise
6) Technology
7) Mode of Entry
Advantages
1)Centralization leads to coherent policies and decisions thereby increasing
efficiency
2)There is specialization leading to economies of scale
3)Duplication of efforts is avoided
Disadvantages
1)The standardized and undifferentiated approach leads to inflexibility
2)Centralization may foster bureaucracy
Corporate
Headquarter
Global
Global R & D Global
Marketing
Operations
Advantages
1) The company can effectively manage multiple or diverse products
2) Decisions can be taken faster so as to compete in rapidly changing environment
3) Responsibility of market share can be easily fixed.
Disadvantages
1) Unnecessary duplication of facilities
2 )Conflict between division may arise on sharing common resources.
Global Area Structure
Under global are structure , regional headquarter are established in different parts
of the world. Each regional headquarter is responsible for all products sold and
distributed in the region. Each regional division is further segmented into operating
departments.
Advantages
1)The firm can better cater to the local needs and preference of specific regions
2)Responsibility of sales and profit can be easily fixed.
Disadvantages
Corporate Staff
Finance and Accounting Personnel/
Legal Marketing, R & D
Advantages
1)The managerial burden of the corporate headquarter is reduced as the chief
executive has to control a few heads of strategic business units
2)There is between coordination between division with similar products , markets
and technologies with SBUs
Disadvantages
Chief Executive
Officer
Project A
AVP AVP AVP AVP
Manager
Project B
AVP AVP AVP AVP
Manager
Project C
AVP AVP AVP AVP
Manager
Project D
AVP AVP AVP AVP
Manager
Advantages
Advantages
1)Helps to achieve global competiveness.
2)Administrative overhead cost can be minimized.
Disadvantages
1)Overall Cost Leadership A firm that can produce the product or service
at a low cost and operate with lower cost than competitors can earn above
average returns. Its cost position gives the firm a defence against rivalry
from competitors. In order to acquire cost leadership, the firm must have
high market share and or favourable access to raw material .Product
simplification , a wide line of related products , building sales volume ,
efficient facilities and tight cost control are other means of gaining cost
leadership.
Examples
Tata steel emerged globally as the lowest cost producer of steel .Its vision
statement included the intention of becoming cheapest steel producers
For example ,
Maruti Suzuki is well know not only for its dealer network and excellent
availability of spare parts but also for its high quality products and after sales
services. Differentiation is viable strategy for earning above average returns
in the industry.
3)Focus- Under this strategy , the firms selects a segment within the industry
and tailors its products /service to serve that segment exclusively. It is not
sufficient merely to target certain customers. The product must provide an
added value through cost or differentiation that rivals can not offer.
In focused differentiation strategy the firm concentrates on one special
market segment and tries to offer customers in that segment a unique
product.
Production Consumption
Benefits Benefits
Acquisition
Direct investment to purchase an existing company or facility.
Merger
A special type of acquisition in which two firms join to form a new larger firm.
In case of cross border mergers or acquisitions two firms belong to two different
countries.
Advantages
4) Resource Sharing
8) Inter-partner learning