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Strategy

Formulation:Functional Strategy

& Strategic Choice

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Functional Strategy :

The approach a functional area takes toachieve corporate and business unitobjectives and strategies by maximizingresource productivity

- Marketing strategy - Financial strategy - R&D strategy -

Operations strategy - Purchasing strategy - Logistics strategy - HRM strategy -

IT strategy

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Marketing Strategy

Pricing Selling Distribution

4P

Pro!uct Price

Place Pro"otion

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#sing a $"arket !e%elop"ent strategy

Capture a larger share of an existing marketfor current products

(through market saturation andmarket

penetration by advertising andpromotion)

Develop new markets for current products

#sing a $pro!uct !e%elop"ent strategy Develop new products for existing markets

(Using a successful brand nameto other products is called linee!tension")

Develop new products for new markets

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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 retailoutlets

PULL : Spending more money on consumeradvertising so that shoppers will ask for the product

' Distribution strategy Use distri utors and dealers Use mass merchandisers Use internet to sell directly to consumers

' Pricing strategy Skim pricing Penetration pricing Dynamic Pricing

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Financial Strategy#he trade off bet'een achieving the desireddebt to e uity ratio and relying on internallong 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

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.&+ Strategy Technological lea!er ( Technological )ollo*er

+ ,I-./ +Dean Foo!s/

0n increasing nu"ber o) co"panies are *orking *ith theirsuppliers 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 academicla s" etc#$ree outside sources %customers etc#&

/ slightly different approach: to purchase minority stakes inrelatively ne' high 0 tech ventures that need capital

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1perations Strategy 2ob shop

One o) a kin! pro!uction using skille! labor 3onnecte! line batch )lo*

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

Fle7ible "anu)acturing syste"sParts 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"i ation

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2urchasing Strategy

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

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3ogistics Strategy

3entrali ation Outsourcing Internet

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

/s 'ork increases in comple!ity andinnovation- choices shifts to % teams-

cross trained self managing 'ork teams-high skilled employees :;< !egree appraisal +%ery popular tool in

!e%eloping ne* "anagers/

Di%erse *ork)orce can be a co"petiti%ea!%antage Ol!er *orkers per)or"

as *ell as 'i) not better' than young e"ployees

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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)

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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 anin!epen!ent pro%i!er in another country

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+isadvantages of outsourcing andoffshoring

' 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

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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

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2roposed 1utsourcing Matri!