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
Marketing strategy Financial strategy R&D strategy Operations strategy Purchasing strategy Logistics strategy HRM strategy IT strategy

Marketing Strategy
Pricing Selling Distribution 4P

Pro!uct Price Place Pro"otion

Marketing Strategy
#sing a $"arket !e%elop"ent strategy& Capture a larger share of an existing market for current products (through market saturation and market penetration by advertising and promotion) Develop new markets for current products #sing a $pro!uct !e%elop"ent strategy& Develop new products for existing markets (Using a successful brand name to other products is called line e!tension") Develop new products for new markets

Marketing Strategy
#here are numerous other marketing strategies$ For e!ample%

' Push strategy ( Pull strategy

PUSH : Spending a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets PULL : Spending more money on consumer advertising so that shoppers will ask for the product Use distri utors and dealers Use mass merchandisers Use internet to sell directly to consumers Skim pricing Penetration pricing Dynamic Pricing

' Distribution strategy

' Pricing strategy

Financial Strategy
#he trade&off bet'een achieving the desired debt&to&e(uity ratio and relying on internal long&term financing via cash flo' is a key issue )
For e!ample % && *(uity financing is preferred for related diversification && +ebt financing is preferred for unrelated diversification

Le%erage! buyout

Financial Strategy
#he management of dividends and stock price is an important part of a corporation,s financial strategy% && Fast gro'th- no dividends && Stable- support the value of stock by offering consistent dividend (even go into debt to finance dividends)

Re%erse! stock split Tracking stock

.&+ Strategy
Technological lea!er ( Technological )ollo*er
+ ,I-./ +Dean Foo!s/

0n increasing nu"ber o) co"panies are *orking *ith their suppliers to help the" keep up *ith changing technology +P&1 institute! the use o) $technology scouts& to search beyon! the co"pany )or pro"ising inno%ations/

Open inno%ation !lliances and connections with government and academic la s" etc# $ree outside sources %customers etc#&
/ slightly different approach: to purchase minority stakes in relatively ne' high 0 tech ventures that need capital

1perations Strategy
2ob shop
One o) a kin! pro!uction using skille! labor

3onnecte! line batch )lo*

3o"ponents are stan!ar!i4e!5 each "achine )unctions like a 6ob'shop but is positione! in the sa"e or!er as the parts are processe!

Fle7ible "anu)acturing syste"s

Parts are groupe! into "anu)acturing )a"ilies to pro!uce a *i!e %ariety o) "ass'pro!uce ite"s

De!icate! trans)er lines

Highly auto"ate! asse"bly lines that "ake one "ass'pro!uce! pro!uct using little hu"an labor Mass pro!uction 3ontinuous i"pro%e"ent syste" Mo!ular "anu)acturing Mass custo"i4ation

2urchasing Strategy
Multiple sourcing Sole sourcing + #sing 2IT an! 2IT II / Parallel sourcing

3ogistics Strategy
3entrali4ation Outsourcing Internet

4.M Strategy
Lo* skille!8 lo* pay or High skille!8 high pay9

/s 'ork increases in comple!ity and innovation- choices shifts to % teamscross trained self managing 'ork teamshigh skilled employees
:;< !egree appraisal +%ery popular tool in !e%eloping ne* "anagers/ Di%erse *ork)orce can be a co"petiti%e a!%antage Ol!er *orkers per)or" as *ell as 'i) not better' than young e"ployees

5nformation #echnology Strategy

Internet Intranet Follo*'the'sun "anage"ent Spontaneous translation tools

(5n average going on the 'eb reduces processing time by one&third)

1utsourcing& purchasing )ro" so"eone else a

pro!uct or ser%ice that ha! been pre%iously pro%i!e! internally 0%oi! outsourcing !istincti%e co"petencies

1ffshoring& the outsourcing o) an acti%ity or a

)unction to a *holly'o*ne! co"pany or an in!epen!ent pro%i!er in another country

+isadvantages of outsourcing and offshoring

' ' ' ' ' ' 3usto"er co"plaints Long'ter" contracts 0bility to learn ne* skills an! !e%elop ne* core co"petencies Lack o) cost sa%ings Poor pro!uct =uality Increase! transportation costs

1utsourcing errors
0cti%ities that shoul! not be outsource! >rong %en!or selection >riting poor contract O%erlooking personnel issues Hi!!en costs o) outsourcing Failing to plan e7it strategy

2roposed 1utsourcing Matri!