SOM497 Business Policy

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SOM497 Business Policy Strategy
CHAPTER 8 Strategy Formulation Functional
Strategy Strategic Choice
STRATEGIC MANAGEMENT BUSINESS POLICY 10TH
EDITION THOMAS L. WHEELEN J. DAVID HUNGER
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Strategy Making Pyramid
Strategy for the firm and all its business as a
whole Responsibility corporate level managers
Corporate Strategy
Strategy for each separate business the company
has diversified to Responsibility business level
general managers
Business Strategy
Strategy for each specific functional unit
within a business Responsibility heads of major
functional activities within a business
unit/division
Functional Strategy (RD, manufacturing,
marketing, finance, human resources, etc.)
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Functional Structure Strategy

• Structure grouped by function
• Production
• Marketing
• Finance
• Accounting
• Etc
• Strategy
• Textbook 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

• Marketing strategy deals with pricing, selling,
  distributing a product/service
• Strategies
• Market development
• Product development
• Marketing Mix
• Product
• Price
• Promotion
• Place

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Functional Strategy Marketing

• Strategies continued
• Push vs. Pull
• Push -
• Pull -
• Skimming vs. Penetration
• Skim pricing-
• Penetration-

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Functional Strategy Finance

• Tries to maximize the financial value of the firm
• Strategy Leveraged buyout (LBO)
• A company is acquired in a transaction that is
  financed largely by debt from a third party like
  investment bankers

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Functional Strategy RD

• Deals with product process innovation and
  improvement
• Strategies
• Open innovation
• Technological leader versus follower?
• Leader
• Follower

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Functional Strategy Operations

• How Where a product/service is to be
  manufactured and the deployment of physical
  resources
• Strategies
• JIT
• Modular manufacturing Supplier Relations
• Batch vs. Mass vs. Continuous
• Mass customization

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Functional Strategy Purchasing

• Deals with getting raw materials, parts, and
  supplies needed for the operations function
• Choices
• Multiple sourcing
• Sole sourcing
• Parallel sourcing

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Functional Strategy Logistics

• Deals with the flow of products into and out of
  the manufacturing process
• Strategy trends
• Centralization
• Outsourcing
• the Internet

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Functional Strategy Human Resource Management

• Addresses the issue of Low Skilled Labor versus
  Skilled Labor
• 360 Degree Appraisal
• Diverse workforce (age, gender, race, national
  origin)

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Functional Strategy Info Technology

• Technology provides business units with
  competitive advantage
• Follow the sun-management

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Sourcing Decision

• Outsourcing -
• Advantages
• Disadvantages

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Sourcing Errors

• Activities that should not be outsourced
• Dont outsource activities that are key to the
  companys distinctive competencies!
• Wrong vendor selection
• Writing poor contract
• Personnel issues
• Hidden costs of outsourcing

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Strategies to Avoid

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

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Strategic Choice Choosing the Best Strategy

• Looking at the pros/cons of potential strategic
  alternatives identified, how is the best strategy
  selected?

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Subjective Factors Affecting Decisions

• Managements attitude toward risk
• Pressures from stakeholders
• Pressures from corporate culture
• Needs and desires of key managers

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Strategy Choice

• Meet four criteria
• Mutual exclusivity
• Success
• Completeness
• Internal consistency

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Next Class Case 16 Maytag