1 Chapter 7 Strategy Formulation: Functional Strategy and Strategic Choice.
-
Upload
cornelius-gregory -
Category
Documents
-
view
229 -
download
5
Transcript of 1 Chapter 7 Strategy Formulation: Functional Strategy and Strategic Choice.
1
Chapter 7
Strategy Formulation: Functional Strategy and
Strategic Choice
2
Functional Strategy
Functional Strategy:
– The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity.
3
Functional Strategy
• Core competency:
– Something that a corporation can do exceedingly well – a key strength
• Distinctive competencies:
– When core competencies or core capabilities are superior to those of the competition
4
Functional Strategy
Distinctive competencies:
Must meet 3 tests:• Customer value• Competitor unique• Extendibility
Firm can gain access to distinctive competencies in 4 ways:• Asset endowment• Acquired• Shared with another business unit• Built and accumulated
5
Functional Strategy
Determining Functional Strategy:
– Identify business unit’s core competencies
– Ensure that competencies are continually strengthened
– Manage competencies so that competitive advantage is preserved
6
Functional Strategy
Marketing Finance R&D Operations Purchasing Logistics HRM Information Systems
7
Marketing Strategy
Involved with pricing, selling, and distributing a product.
8
Marketing Strategy
Market development strategy –
– Capture a larger share of existing market through market saturation and market penetration
– Develop new markets for current products
9
Marketing Strategy
Product development strategy –
– Develop new products for existing markets
– Develop new products for new markets
10
Marketing Strategy
• Promotional Strategy– Push strategy
– Pull strategy
• Pricing Strategy– Skim pricing
– Penetration pricing
11
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
12
R&D Strategy
Deals with product and process innovation and improvement
Choice:– Technological leader– Technological follower
13
Research and Development Strategy and Competitive Advantage
Technological Leadership Technological Followership
Cost Advantage
Differentiation
Pioneer the lowest cost product design.
Be the first firm down the learning curve.
Create low-cost ways of performing value activities.
Pioneer a unique product that increases buyer value.
Innovate in other activities to increase buyer value.
Lower the cost of the product or value activities by learning from the leader’s experience.
Avoid R&D costs through imitation.
Adapt the product or delivery system more closely to buyer needs by learning from the leader’s experience.
14
Operations Strategy
Determines:• How and where product is manufactured• Level of vertical integration in process• Deployment of physical resources• Relationships with suppliers
15
Operations Strategy
– Affected by product life cycle• Job shop• Connected line batch flow• Flexible manufacturing system• Dedicated transfer lines
– Movement from mass production to:• Continuous improvement• Modular manufacturing• Mass customization
16
Purchasing Strategy
– Obtaining raw materials, parts and supplies• Basic Purchasing Choices:
– Multiple sourcing– Sole sourcing– Parallel sourcing
17
Logistics Strategy
– Flow of products into and out of the process• Three current trends:
– Centralization– Outsourcing– Use of the Internet
18
HRM Strategy
– Addresses issues of:• Low-skilled employees
– Low pay– Repetitive tasks– High turnover
• Skilled employees– High pay– Cross trained– Self-managing teams
19
Information Systems Strategy
– Technology to provide business units with competitive advantage
20
Strategic Choice
Constructing Corporate Scenarios:
– Corporate Scenarios • Pro forma balance sheets and income statements
that forecast effects of alternatives on return on investment
– Steps in constructing scenarios –• Use industry scenarios• Develop common-size financial statements• Construct detailed pro forma financial statements
for each alternative
21
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
22
Strategic Choice
Process of Strategic Choice:
– Devil’s Advocate• Identify potential pitfalls and problems with a
proposed alternative strategy in a formal presentation.
– Dialectical Inquiry• Two proposals are generated using different
assumptions for each alternative strategy
23
Strategic Choice
Evaluating strategic alternatives:
Ability to meet four criteria:– Mutual exclusivity– Success– Completeness– Internal consistency