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STRATEGIC MANAGEMENT & BUSINESS POLICY11TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

CHAPTER 8 Strategy Formulation: Functional Strategy & Strategic Choice

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Functional Strategy

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

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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

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Functional Strategy

Financial Strategy –

–Leveraged buyout–Reversed stock split–Tracking stock

R&D Strategy –

–Technological leader–Technological follower–Open innovation

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Functional Strategy

Operations Strategy –

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

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Functional Strategy

Purchasing Strategy –

–Multiple sourcing–Sole sourcing–Just-in-time (JIT)–Parallel sourcing

Logistics Strategy –

–Centralization–Outsourcing–Internet

HRM Strategy –

–360 degree appraisal

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Proposed Outsourcing Matrix

Should a company outsource

a function?

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Functional Strategy

Maybe Not: 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

Should a company outsource a function?

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Functional Strategy

Strategies to Avoid –

–Follow the leader–Hit another home run–Arms race–Do everything–Losing hand

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Corporate Strategy

Growth Strategies --

–External mechanisms

•Mergers

•Acquisitions

•Strategic alliances

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Functional Strategy

Subjective Factors Affecting Decisions --

–Management’s attitude toward risk–Pressures from stakeholders–Pressures from corporate culture–Needs and desires of key managers

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Strategic Choice

Avoiding the Consensus Trap --

–Devil’s Advocate

–Dialectical Inquiry

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Strategic Choice

Evaluation of Strategic Alternatives --

–Mutual exclusivity–Success–Completeness–Internal consistency