CHAPTER 8 Strategy Formulation Functional Strategy Strategic Choice

Functional Strategy The approach a functional area takes to achieve corporate and business unit

Functional Strategy Marketing Strategy – • Pricing –Selling –Distribution • Product development –Line extension

Functional Strategy Financial Strategy – –Leveraged buyout –Reversed stock split –Tracking stock R&D Strategy

Functional Strategy Operations Strategy – –Job shop –Connected line batch flow –Flexible manufacturing systems

Functional Strategy Purchasing Strategy – –Multiple sourcing –Sole sourcing –Just-in-time (JIT) –Parallel sourcing Logistics

Functional Strategy Outsourcing errors – –Activities that should not be outsourced –Wrong vendor selection

Functional Strategy Strategies to Avoid – – 3 Follow the leader –Hit another home

Corporate Strategy Growth Strategies -–External mechanisms • Mergers • Acquisitions • Strategic alliances 10

Functional Strategy Subjective Factors Affecting Decisions -–Management’s attitude toward risk –Pressures from stakeholders –Pressures

Strategic Choice Avoiding the Consensus Trap -–Devil’s Advocate –Dialectical Inquiry 14

Strategic Choice Evaluation of Strategic Alternatives -–Mutual exclusivity –Success –Completeness –Internal consistency 15

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CHAPTER 8 Strategy Formulation: Functional Strategy & Strategic Choice STRATEGIC MANAGEMENT & BUSINESS POLICY 11 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER 1

Functional Strategy The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity 2

Functional Strategy Marketing Strategy – • Pricing –Selling –Distribution • Product development –Line extension • Advertising and promotion –Push strategy –Pull strategy • Pricing –Skim pricing –Penetration pricing –Dynamic pricing 3

Functional Strategy Financial Strategy – –Leveraged buyout –Reversed stock split –Tracking stock R&D Strategy – –Technological leader –Technological follower –Open innovation 4

Functional Strategy Operations Strategy – –Job shop –Connected line batch flow –Flexible manufacturing systems –Dedicated transfer lines –Mass production –Continuous improvement system –Modular manufacturing 5

Functional Strategy Purchasing Strategy – –Multiple sourcing –Sole sourcing –Just-in-time (JIT) –Parallel sourcing Logistics Strategy – –Centralization –Outsourcing –Internet HRM Strategy – – 360 degree appraisal 6

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 7

Proposed Outsourcing Matrix 8

Functional Strategy Strategies to Avoid – – 3 Follow the leader –Hit another home run –Arms race –Do everything –Losing hand 9

Corporate Strategy Growth Strategies -–External mechanisms • Mergers • Acquisitions • Strategic alliances 10

Constructing Corporate Scenarios 11

Functional Strategy Subjective Factors Affecting Decisions -–Management’s attitude toward risk –Pressures from stakeholders –Pressures from corporate culture –Needs and desires of key managers 12

Stakeholder Priority Matrix 13

Strategic Choice Avoiding the Consensus Trap -–Devil’s Advocate –Dialectical Inquiry 14

Strategic Choice Evaluation of Strategic Alternatives -–Mutual exclusivity –Success –Completeness –Internal consistency 15