Strategic management

1. Functional strategies

2. 8-2
Functional strategy- the approach a functional area takes
to achieve corporate and business unit objectives and
strategies by maximizing resource productivity

3. 8-3
Marketing strategy deals with pricing, selling and
distributing a product
Marketing strategy

4. Marketing strategy
• a company or business unit can choose between “push” and “pull”
marketing strategies.
• Many large food and consumer products companies in the United States
and Canada follow a push strategy by spending a large amount of money
on trade promotion in order to gain or hold shelf space in retail outlets.
Trade promotion includes discounts, in-store special offers, and advertising
allowances designed to “push” products through the distribution system.
• The Kellogg Company decided a few years ago to change its emphasis from
a push to a pull strategy, in which advertising “pulls” the products through
the distribution channels.
• The company now spends more money on consumer advertising designed
to build brand awareness so that shoppers will ask for the products.
Research has found that a high level of advertising (a key part of a pull
strategy) is beneficial to leading brands in a market.
• Strong brands provide a competitive advantage to a firm because they act
as entry barriers and usually generate high market share.

5. Market development strategy- provides the ability to:
• Capture a larger market share
– Market saturation
– Market penetration
• Develop new uses and/or markets for current
products

6. 8-6
Product development strategy- provides the ability to:
• Develop new products for existing markets
• Develop new products for new markets

7. 8-7
• Line extension- using a successful brand name to
market other products
• Push strategy- promotions to gain or hold shelf
space in retail outlets
• Pull strategy- advertising to “pull” products through
the distribution channels

8. 8-8
• Skim pricing- offers the opportunity to “skim the
cream” from the top of the demand curve with a
high price while the product is novel and
competitors are few
• Penetration pricing- attempts to hasten market
development and offers the pioneer the opportunity
to use the experience curve to gain market share
with low price and then dominate the industry

9. 8-9
Financial Strategy- examines the financial
implications of corporate and business-level
strategic options and identifies the best financial
course of action
Financial strategy includes the management of:
• Dividends
• Stock price
• Sales of company patents

10. 8-10
Research and Development Strategy- deals with
product and process innovation and improvement
• Technological leader- pioneers innovation
• Technological follower- imitates the products of
competitors
• Open innovation- use of alliances and connections
with corporate, government, academic labs and
consumers to develop new products and processes

11. Research and Development Strategy
• One example of an effective use of the leader R&D
functional strategy to achieve a differentiation competitive
advantage is Nike, Inc.
• Nike spends more than most in the industry on R&D to
differentiate the performance of its athletic shoes from that
of its competitors.
• As a result, its products have become the favorite of
serious athletes

12. Operations Strategy

13. Functions of operations
The seven main functions of operations
are:
•Product management
•Supply chain
•Inventory
•Forecasting
•Scheduling
•Quality
•Facilities planning and management

14. 8-14
Operations Strategy- determines how and where a
product or service is to be manufactured, the level
of vertical integration in the production process, the
deployment of physical resources and relationships
with suppliers
Manufacturing Types include
• Job shops
• Connected line batch flow
• Flexible manufacturing systems
• Dedicated transfer lines
•Mass production systems
•Continuous improvement
•Modular manufacturing
•Mass customization
Operations Strategy

15. Job shops
Job shops are typically small manufacturing systems that
handle job production, that is, custom/bespoke or semi-
custom/bespoke manufacturing processes such as small to
medium-size customer orders or batch jobs
Examples include :a paint shop, a machine tool shop, a
commercial printing shop

16. Flexible manufacturing system (FMS)
A flexible manufacturing system (FMS) is a production method
that is designed to easily adapt to changes in the type and
quantity of the product being manufactured.
Machines and computerized systems can be configured to
manufacture a variety of parts and handle changing levels of
production.
Levels include: Product flexibility, process flexibility, and program
flexibility.

17. Dedicated transfer lines
In this strategy, it is based on fixed automation and produce
a company’s core products or parts at high-volume.
Where it has highly automated assembly lines that are
typically designed to produce a single part or single-mass
produced product using little human labor.
It is designed to create products at a high production rate

18. Mass production .. Mass customization….. Customization

19. 8-19
It deals with obtaining raw materials, parts and supplies
needed to perform the operations function
Options include:
• Sole suppliers (Deming)
• Multiple
• Parallel sourcing
Purchasing Strategy

20. Purchasing Strategy
• Under multiple sourcing, the purchasing company orders a
particular part from several vendors.
• Multiple sourcing has traditionally been considered superior
to other purchasing approaches because it forces suppliers to
compete for the business of an important buyer, thus reducing
purchasing costs, and if one supplier cannot deliver, another
usually can, thus guaranteeing that parts and supplies are
always on hand when needed.
• So long as suppliers can provide evidence that they can meet
the product specifications, they are kept on the purchaser’s
list of acceptable vendors for specific parts and supplies.
• Unfortunately, the common practice of accepting the lowest
bid often compromises quality.

21. Parallel sourcing
• In parallel sourcing, two suppliers are the sole
suppliers of two different parts, but they are also
backup suppliers for each other’s parts.
• If one vendor cannot supply all of its parts on time,
the other vendor is asked to make up the
difference.

22. 8-22
Logistics Strategy- deals with the flow of products
into and out of the manufacturing process
Trends include:
• Centralization
• Outsourcing
• Internet

23. Outsourcing- purchasing from someone else a
product or service that had been previously
provided internally
• Avoid outsourcing distinctive competencies
Offshoring- the outsourcing of an activity or a function
to a wholly-owned company or an independent
provider in another country

24. Inventory management

27. Techniques of Inventory Management
Just-in-Time ( JIT ) Inventory Management

28. Forecasting / demand planning

29. Trend
Seasonal
Cyclical
Random
Time Series Components

30. Demand Behaviors
• Trend
– a gradual, long-term up or down movement of demand
• Seasonal pattern
– an up-and-down repetitive movement in demand occurring
periodically (short term: often annually)
• Cycle
– an up-and-down repetitive movement in demand (long term)
• Random variations
– movements in demand that do not follow a pattern

31. Forecast accuracy
2 commonly used measures for summarizing
historical errors are
• The mean absolute deviation (MAD)
• The mean squared error (MSE)

32. Survey M ethods
E xecutive
O pinion
U ser’s
E xpectation
Sales Force
Com posite
Build-to-
O rder
M athem atical M ethods
Test M arket Regression
N aive Trend
M oving
Average
E xponential
Sm oothing
Forecasting methods

33. Trends include:
• Self-managed teams
• 360-degree appraisal
• Diverse workforce
Human Resource Strategy

34. Human Resource Strategy
• Diversity in terms of age and national origin also offers
benefits. DuPont’s use of multinational teams has helped
the company develop and market products internationally.
• McDonald’s has discovered that older workers perform as
well as, if not better than, younger employees. According
to Edward Rensi,CEO of McDonald’s USA, “We find these
people to be particularly well motivated, with a sort of
discipline and work habits hard to find in younger
employees.”

35. Recruitment strategy
• KSA
• Assessment centers
• Panel interview
• Semi-structured interviews

36. 8-36
Trends include:
• Follow the sun management
• Internet
• Extranet
• Intranet
• EDI versus APIs
Information Technology Strategy

37. What is the follow the sun model?
• Multinational corporations are finding that having a
sophisticated intranet allows employees to practice follow-
the-sun management, in which project team members living
in one country can pass their work to team members in
another country in which the work day is just beginning.
• Thus, night shifts are no longer needed.

38. EDI versus APIs
• Although EDI has been the standard document
exchange method for decades, application
programming interfaces (APIs) have been growing in
popularity as an alternative to EDI.

39. Selection among different strategies

40. QSPM
Technique designed to determine the relative
attractiveness of feasible alternative actions
Quantitative Strategic Planning Matrix

41. Key Factors
Market Development Product Development
Brand equity (S)
ROI (S)
Design (S)
Distribution (W)
Liquidity (O)
Technology (T)
Interest rate (O)
Market growth (O)
Substitutes (T)
Total

42. Key Factors Weight
Market Development Product Development
Brand equity (S) 0.07
ROI (S) 0.11
Design (S) 0.05
Distribution (W) 0.065
Liquidity (O) 0.17
Technology (T) 0.12
Interest rate (O) 0.19
Market growth
(O) 0.14
Substitutes (T) 0.085
Total 1

43. Key Factors Weight
Market Development Product Development
AS TAS AS TAS
Brand equity (S) 0.07 4 0.28 3 0.21
ROI (S) 0.11 4 0.44 4 0.44
Design (S) 0.05 4
0.2
3
0.15
Distribution (W) 0.065 3
0.195
3
0.195
Liquidity (O) 0.17 3
0.51
3
0.51
Technology (T) 0.12 4
0.48
3
0.36
Interest rate (O) 0.19 4
0.76
2
0.38
Market growth
(O) 0.14 3
0.42
3
0.42
Substitutes (T) 0.085 3
0.255
3
0.255
Total 1 3.54 2.92

44. Steps to Develop a QSPM
1. Make a list of the firm’s key external
opportunities/threats and internal
strengths/weaknesses in the left column.
2. Assign weights to each key external and
internal factor.
3. Examine the Stage 2 (matching) matrices,
and identify alternative strategies that the
organization should consider implementing.

45. Steps to Develop a QSPM
4. Determine the Attractiveness Scores.
5. Compare the Total Attractiveness Scores.
6. Compute the Sum Total Attractiveness Score.

46. QSPM
Requires intuitive judgments & educated
assumptions
Limitations

47. QSPM
Sets of strategies considered simultaneously or
sequentially
Integration of pertinent external & internal factors
in the decision-making process
Advantages

48. Strategy implementation

49. Implementation 5 M
• Money
• Manpower
• Minute
• Machines
• Materials

50. • Shift in responsibility
Nature of Strategy Implementation
Management Perspectives
Divisional or
Functional
Managers
Strategists

51. – Strategy implementation means change
The Nature of Strategy
Implementation

52. – Less than 10% of strategies formulated are
successfully implemented!
The Nature of Strategy
Implementation

53. • Market goods & services well
• Raise needed working capital
• Produce technologically sound goods
• Sound information systems
The Nature of Strategy
Implementation
Successful Strategy Implementation

54. Management Issues
Management
Issues
Resources
Organizational Structure
Restructuring
Rewards/Incentives
Annual Objectives
Policies

55. Management Issues (cont’d)
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Resistance to Change
Natural Environment

56. Management Issues
Purpose of Annual Objectives –
Basis for resource allocation
Mechanism for management evaluation
Metric for gauging progress on long-term objectives
Establish priorities (organizational, divisional, and
departmental)

57. Management Issues
1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources
Four Types of Resources

58. Management Issues
 Conflict not always “bad”
 No conflict may signal apathy
 Can energize opposing groups to action
 May help managers identify problems
Managing Conflict

60. Management Issues
Restructuring
Downsizing
Rightsizing
Delayering

61. Delayering
• Delayering involves removing a layer of
management. Within hierarchical structures a
method that can be used to reduce costs is to
remove a layer of management, while expecting
staff to produce the same level of output.
• This can: save the company money on managerial
wages.

62. Rightsizing
• Rightsizing is the process of restructuring a company so it
can make a profit more efficiently and meet updated
business objectives.
• Organizations will usually rightsize their business by reducing
their workforce, reorganizing upper management, cutting
costs, and changing job roles.

63. Management Issues
Reengineering
Process management
Process innovation
Process redesign

64. Creating a Strategy-Supportive Culture

66. WBS

68. Tactics(action plan)
No. Action Date Budget Responsible Accountable Consulted Informed Status Outcome KPIs Notes
Status Planned
On progress
Completed
Pending
Cancelled
Postponed

70. Strategy evaluation and control

71. Strategic Management Model
Performance
Actual
Results
Evaluation
&
Control
Programs
Budget
Procedures
Activities
needed
to
accomplish
a plan
Cost of the
programs
Sequences
of steps
needed to
do the job
Objectives
Strategies
What
results to
accomplish
when
Plan to
achieve
mission &
objectives
Broad
guidelines
for
decision
making
Mission
Reasons
for
existence
Environmental
Scanning
Policies
Country
Analysis:
PEST Forces
Industry
Analysis:
Porter 5 Forces
Internal
Company
Analysis:
Value Chain
External
Strategy Formulation Strategy Implementation
Feedback Learning
VISON
71

72. 11-72

73. 11-73
Primary Measures of Corporate Performance
• Return on Investment (ROI)
• Earnings per share (EPS)
• Return on equity (ROE)
• Operating cash flow
– Free cash flow

74. The Management Cycle
Needs
Assessment
Operating plans
and budgets
Project
management
Performance
Measurement

75. 75
EXAMPLES OF “KEY RESULT” AREAS
• Customer
• Product/service
• Public/society/natural environment
• Marketing
• Human Resources
• Production
• Maintenance
• Operations
• Finance
• Good measurement systems don’t just measure things
done according to the organizational chart. Good
systems measure things done to satisfy stakeholders.

76. Definition of an Indicator
Specific information that provides evidence
about the achievement of planned
impacts, results and activities
Ideally indicators should be reported
quantitatively but this will not always be
possible - don’t limit M&E to
only what can be measured

77. What is a Key Performance Indicator
• Gives a good indication of performance
• Commonly used in business
• Metrics to define and measure business goals
• Examples:
– GNP (Gross National Product)
– ARPU (Average Revenue Per User)
– Dow Jones Index

78. Lead or lag KPIs

79. Types of indicators
• Indicators are either qualitative or quantitative
criteria used to check whether planned changes have
taken place as intended.
• They (indicators) are designed to provide a standard
against which to measure or assess or even show the
success or progress of a programme against stated
targets

80. Types of indicators
• Quantitative indicators
– Should be reported in terms of a specific number
(number, mean, or median) or percentage.
– Assessing the significance of an outcome requires data
on both number and percent.
• Qualitative indicators
– Qualitative statements
– Measure perceptions
– Measure attitude, behavior

81. Quantitative indicators
Examples
• Number of
• Proportion of
• Percentage of
• Amount of
• The ratio of
• Length of distance
• Weight of
• Size of
• Areas of/spread of
• Value of
• etc.

82. Qualitative Indicators
Examples
• Level of
• Presence of
• Evidence of
• Availability of
• Quality of
• Accessibility of
• Existence of
• Sustainability of
• Improvement of
• Ability to (e.g. skills)
• Potential of
• etc.

83. Responsibility Centers
1. Cost center
2. Revenue center
3. Profit center
4. Investment center

84. Balanced scorecard

89. Resources / financial
• Top down
• Bottom up
• Iterative

90. Thank You