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138 PART 2 • STRATEGY FORMULATION

strategy to go north and then take a step east, south, or west “just to be on the safe side.”
Firms spend resources and focus on a finite number of opportunities in pursuing strategies
to achieve an uncertain outcome in the future. Strategic planning is much more than a roll
of the dice; it is a wager based on predictions and hypotheses that are continually tested
and refined by knowledge, research, experience, and learning. Survival of the firm itself
may hinge on your strategic plan. 4
Organizations cannot do too many things well because resources and talents get
spread thin and competitors gain advantage. In large diversified companies, a combination
strategy is commonly employed when different divisions pursue different strategies. Also,
organizations struggling to survive may simultaneously employ a combination of several
defensive strategies, such as divestiture, liquidation, and retrenchment.

Levels of Strategies
Strategy making is not just a task for top executives. As discussed in Chapter 1, middle-
and lower-level managers too must be involved in the strategic-planning process to the
extent possible. In large firms, there are actually four levels of strategies: corporate, divi-
sional, functional, and operational—as illustrated in Figure 5-2. However, in small firms,
there are actually three levels of strategies: company, functional, and operational.
In large firms, the persons primarily responsible for having effective strategies at the
various levels include the CEO at the corporate level; the president or executive vice
president at the divisional level; the respective chief finance officer (CFO), chief infor-
mation officer (CIO), human resource manager (HRM), chief marketing officer (CMO),
and so on, at the functional level; and the plant manager, regional sales manager, and so
on, at the operational level. In small firms, the persons primarily responsible for having
effective strategies at the various levels include the business owner or president at the
company level and then the same range of persons at the lower two levels, as with a large
firm.
It is important to note that all persons responsible for strategic planning at the various
levels ideally participate and understand the strategies at the other organizational levels to
help ensure coordination, facilitation, and commitment while avoiding inconsistency, inef-
ficiency, and miscommunication. Plant managers, for example, need to understand and be
supportive of the overall corporate strategic plan (game plan) while the president and the
CEO need to be knowledgeable of strategies being employed in various sales territories
and manufacturing plants.

FIGURE 5-2
Levels of Strategies with Persons Most Responsible

Corporate
Level—chief
executive officer
Company
Division Level—division Level—owner
president or executive or president
vice president Functional Level—
finance, marketing, R&D,
Functional Level—finance, marketing, manufacturing, information
R&D, manufacturing, information systems, systems, and human
and human resource managers
resource managers
Operational Level—plant managers, sales managers, Operational Level—plant managers, sales
production and department managers managers, production and department managers

Large Company Small Company