Hierarchical Strategies

There are different strategies at different hierarchy levels such as corporate, business and functional. Two-way interaction is required between two levels of strategy. Functional unit provides inputs (resources and capabilities information) to the business level, which in turn escalate the summarised information to corporate level. Based on the information, higher-level strategies can be based. Once the corporate strategy is developed, the business level and functional units translate it into more discrete action plans that each business segment or department must accomplish.

Corporate strategy concerns with the selection of business in which the company should compete and the way cross-business activities will be integrated and managed. The strategy establishes investment priorities and steer resources into the most attractive business unit. (Thompson, A.A. and Strickland, A.J. 2003) In 2002, Tyco had an annual lost of US$9 billion and faced a staggering US$11 billion of debts maturing the following year. Tyco most crucial corporate strategy is to preserve its existence. Couple with that, Tyco also faced lost of confidence from investors, customers, suppliers and its employees.

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Tyco stops all merger and acquisition activities to preserve cash. It pulls cash from all segments to repay loans. Renegotiate repayment term of certain loans is also Tyco top corporate strategy. This is to gain breathing time for Tyco leadership to formulate and implement strategic management. Tyco also shift strategy to organic growth. Tyco strategise to build upon the operation foundation and grow from within. In addition, business units that do not align with the core businesses are also divested.

Restoring confidence is the important corporate strategic for Tyco till today. To give Tyco a fresh and clean start, the entire board of directors and all 300 top managers were replaced. Many high profile and experienced corporate figures from other world-class companies like Motorola, GE, Honeywell, International Paper etc were brought in to lead the leaderships of Tyco. Intense marketing campaigns were carried out to build corporate image. The campaigns promote Tyco solid operation fundamental and attempts to alienate Tyco from other scandals. The marketing helps to restore employee morale and prevented lost of operational staff. Sample of Tyco print ads listed in Appendix 3 and 4.

Integration of the decentralised business units is also a Tyco corporate strategy. Historically, Tyco business units were left alone with minimum interference. Such strategy created inefficiency and exposed Tyco to risks of inappropriate conduct. Tyco strategise to build the corporate office to provide controls and centralised support like governance, treasury, legal, and etc. Promoting the highest standard of corporate governance and ethical conducts in Tyco is one of the corporate strategies. Tyco roll out ethical conduct programs across all segments and set up a Forensic Audit team to investigate fraud cases.

New strategic components like mission statement, goals, value and code of conduct are roll out to change the corporate culture. Tyco also change the remuneration packages from that driven by the number of acquisition and pure accounting figures to overall performance based compensation. Tyco set a corporate strategy to focus on enhancing efficiency. Various initiatives are taken in the entire company across business segments to eradicate waste, improve efficiency and leverage of company resources. Refer to “Enhancement Practice” in next section for more detail.

Business strategy refers to managerial game plan for a strategic business unit, a division, product line, or other profit centres that can be planned independently from the other business units of the firm. At this level, the strategic issues are less about the coordination of operating units and more about developing and sustaining a competitive advantage. (Thompson, A.A. and Strickland, A.J. 2003) All Tyco business segments develop its own business strategies to achieve sustainable competitive edge. TFS revamp its business model to eliminate low cash flows sales. It streamlines operations globally and continues to develop its well-established brand name like ADT.

The business strategy of TE is to further increase efficiency and improves customer service. TE set up an e-commerce system that offers around-the-clock access to pricing, product availability and technical information. TE also continue expand its operation organically in growing markets such as China, Eastern Europe and Southeast Asia THC business strategies are to improve product innovation and product mix. THC implements various programs to reduce operating expenses. THC plans to enhance customer service and product quality. TEPS business strategies are to reduce its inventory holding worldwide so as to free up working capital. Finally, TPA is focusing on service innovation to identify customer needs and preference with plan to expand market share.