Strategy Formulation: Functional Strategy and Strategic Choice

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Chapter 7

• Strategy Formulation Functional Strategy and
  Strategic Choice

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Functional Strategy

• Functional Strategy
• The approach a functional area takes to achieve
  corporate and business unit objectives and
  strategies by maximizing resource productivity.

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Functional Strategy

• Sourcing Decision
• Outsourcing
• Purchasing from someone else a product or service
  that had been previously provided internally.

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Functional Strategy

• Determining Functional Strategy
• Identify business units core competencies
• Ensure that competencies are continually
  strengthened
• Manage competencies so that competitive advantage
  is preserved

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Marketing Strategy

• Marketing strategy
• Involved with pricing, selling, and distributing
  a product.

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Marketing Strategy

• Market development strategy
• Capture a larger share of existing market through
  market saturation and market penetration
• Develop new markets for current products

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Marketing Strategy

• Product development strategy
• Develop new products for existing markets
• Develop new products for new markets

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Marketing Strategy

• Advertising or Promotion strategy
• Push marketing strategy
• Investing in trade promotion to gain or hold
  share
• Pull marketing strategy
• Investing in consumer advertising to build brand
  awareness

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Financial Strategy

• Financial strategy
• Examines the financial implications of corporate
  and business-level strategic options and
  identifies the best financial course of action.
• Maximizes financial value of the firm
• Example
• Leveraged buy out (LBO)
• Company is acquired and financed largely by debt

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RD Strategy

• RD Strategy
• Deals with product and process innovation and
  improvement
• Choice
• Technological leader
• Technological follower

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Operations Strategy

• Operations strategy
• Determines
• How and where product is manufactured
• Level of vertical integration in process
• Deployment of physical resources
• Relationships with suppliers

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Operations Strategy

• Manufacturing strategy
• Affected by product life cycle
• Job shop
• Connected line batch flow
• Flexible manufacturing system
• Example - movement from mass production to mass
  customization

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Purchasing Strategy

• Purchasing strategy
• Obtaining raw materials, parts and supplies
• Basic Purchasing Choices
• Example - Multiple sourcing vs Sole sourcing

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Logistics Strategy

• Logistics strategy
• Flow of products into and out of the process
• Three current trends
• Centralization
• Outsourcing
• Use of the Internet

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HRM Strategy

• HRM strategy
• Addresses issues of
• Low-skilled employees
• Low pay
• Repetitive tasks
• High turnover
• Skilled employees
• High pay
• Cross trained
• Self-managing teams
• Meaningful and mindful workplaces

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Information Systems Strategy

• Information systems strategy
• Technology to provide business units with
  competitive advantage

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Strategic Choice

• Selecting the Best Strategy
• Constructing Corporate Scenarios
• Corporate Scenarios
• Pro forma balance sheets and income statements
  that forecast effects of alternatives on return
  on investment

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Strategic Choice

• Attitude Toward Risk
• Risk is composed of
• Probability of effective strategy
• Amount of assets committed
• Length of time of asset commitment

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Strategic Choice

• Process of Strategic Choice
• The evaluation of alternative strategies and
  selection of the best alternative
• Not based on consensus
• Discussion, disagreement
• Programmed conflict

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Strategic Choice

• Process of Strategic Choice
• Devils Advocate
• Identify potential pitfalls and problems with a
  proposed alternative strategy in a formal
  presentation.

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Strategic Choice

• Process of Strategic Choice
• Dialectical Inquiry
• Two proposals are generated using different
  assumptions for each alternative strategy

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Strategic Choice

• Evaluating strategic alternatives
• Ability to meet four criteria
• Mutual exclusivity
• Success
• Completeness
• Internal consistency