Transcript Slide 1

CHAPTER 8 Strategy Formulation: Functional Strategy & Strategic Choice
Functional Strategy:
The approach a functional area takes to
achieve corporate and business unit
objectives and strategies by maximizing
resource productivity
8-1
Functional Strategy
Marketing Strategy
–Pricing
–Selling
–Distribution
8-2
Functional Strategy
Marketing Strategy –
–Product development
•Line extension
–Using a successful brand name to market other
products
–It is a good way to appeal to a company’s current
customers
8-3
Functional Strategy
Marketing Strategy –
–Advertising and promotion
•Push strategy
–Spending a large amount of money on trade
promotion in order to gain or hold shelf space in retail
outlets
•Pull strategy
–Advertising pulls the products through the
distribution channels
–A company will spend more money on consumer
advertising designed to build brand awareness so
that shoppers will ask for the product
8-4
Functional Strategy
Marketing Strategy –
–Pricing
•Skim pricing
•Penetration pricing
•Dynamic pricing
8-5
Functional Strategy
R&D Strategy – Deals with product and
process innovation and improvement
–Technological leader
–Technological follower
–Open innovation
•A new approach in which a firm uses alliances
and connections with corporate, government
and academic labs to learn about new
developments
8-6
Functional Strategy
Purchasing Strategy – Deals with obtaining
the raw materials, parts, and supplies
needed to perform the operations function
–Multiple sourcing
•A purchasing company orders a particular part from
several vendors
–Sole sourcing
•Relies on only one supplier for a particular part
–Just-in-time (JIT)
•Having the purchased parts arrive at the plant just
when they are needed rather than keeping
inventories.
8-7
Functional Strategy
Logistics Strategy – Deals with the flow of
products into and out of the manufacturing
process
–Centralization
–Outsourcing
–Internet
8-8
Functional Strategy
HRM Strategy – Addresses the issue of
whether a company or business unit
should hire a large number of low-skilled
employees who receive low pay, perform
repetitive jobs, and most likely quit after a
short time or hire skilled employees who
receive relatively high pay and are crosstrained to participate in self-managing work
teams
–360 degree appraisal
8-9
Functional Strategy
Operations Strategy – Determines how and
where a product or service is to be
manufactured
–Job shop
–Connected line batch flow
–Flexible manufacturing systems
–Dedicated transfer lines
–Mass production
–Continuous improvement system
–Modular manufacturing
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Functional Strategy
Outsourcing errors –
–Activities that should not be outsourced
–Wrong vendor selection
–Writing poor contract
–Overlooking personnel issues
–Hidden costs of outsourcing
–Failing to plan exit strategy
8-11
Proposed Outsourcing Matrix
8-12
Functional Strategy
Strategies to Avoid –
–3 Follow the leader
–Hit another home run
–Arms race
–Do everything
–Losing hand
8-13
Corporate Strategy
Growth Strategies -–External mechanisms
•Mergers
•Acquisitions
•Strategic alliances
8-14
Constructing Corporate Scenarios
8-15
Functional Strategy
Subjective Factors Affecting Decisions -–Management’s attitude toward risk
–Pressures from stakeholders
–Pressures from corporate culture
–Needs and desires of key managers
8-16
Stakeholder Priority Matrix
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Strategic Choice
Avoiding the Consensus Trap -–Devil’s Advocate
–Dialectical Inquiry
8-18
Strategic Choice
Evaluation of Strategic Alternatives -–Mutual exclusivity
–Success
–Completeness
–Internal consistency
8-19