Chap. 7
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Chap. 7






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    Chap. 7 Chap. 7 Presentation Transcript

    • Chapter 7 Strategy Formulation: Functional Strategy and Strategic Choice
    • Functional Strategy
      • Functional Strategy:
        • The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity.
    • 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
    • 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
    • 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
    • Functional Strategy
        • Marketing
        • Finance
        • R&D
        • Operations
        • Purchasing
        • Logistics
        • HRM
        • Information Systems
    • Marketing Strategy
      • Involved with pricing, selling, and distributing a product.
    • Marketing Strategy
      • Market development strategy –
        • Capture a larger share of existing market through market saturation and market penetration
        • Develop new markets for current products
    • Marketing Strategy
      • Product development strategy –
        • Develop new products for existing markets
        • Develop new products for new markets
    • Marketing Strategy
      • Promotional Strategy
        • Push strategy
        • Pull strategy
      • Pricing Strategy
        • Skim pricing
        • Penetration pricing
    • 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
    • R&D Strategy
      • Deals with product and process innovation and improvement
      • Choice:
        • Technological leader
        • Technological follower
    • 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.
    • Operations Strategy
      • Determines:
          • How and where product is manufactured
          • Level of vertical integration in process
          • Deployment of physical resources
          • Relationships with suppliers
    • 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
    • Purchasing Strategy
        • Obtaining raw materials, parts and supplies
          • Basic Purchasing Choices:
            • Multiple sourcing
            • Sole sourcing
            • Parallel sourcing
    • Logistics Strategy
        • Flow of products into and out of the process
          • Three current trends:
            • Centralization
            • Outsourcing
            • Use of the Internet
    • HRM Strategy
        • Addresses issues of:
          • Low-skilled employees
            • Low pay
            • Repetitive tasks
            • High turnover
          • Skilled employees
            • High pay
            • Cross trained
            • Self-managing teams
    • Information Systems Strategy
        • Technology to provide business units with competitive advantage
    • 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
    • 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
    • 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
    • Strategic Choice
      • Evaluating strategic alternatives:
        • Ability to meet four criteria:
          • Mutual exclusivity
          • Success
          • Completeness
          • Internal consistency