Prentice Hall, Inc. © STRATEGIC MANAGEMENT & BUSINESS POLICY 10 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER CHAPTER 8 Strategy Formulation: Functional Strategy & Strategic Choice

Prentice Hall, Inc. © Functional Strategy The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity

Prentice Hall, Inc. © Functional Strategy Marketing Strategy – –Pricing –Selling –Distribution

Prentice Hall, Inc. © Functional Strategy Marketing Strategy – –Product development Line extension

Prentice Hall, Inc. © Functional Strategy Marketing Strategy – –Advertising and promotion Push strategy Pull strategy

Prentice Hall, Inc. © Functional Strategy Marketing Strategy – –Pricing Skim pricing Penetration pricing Dynamic pricing

Prentice Hall, Inc. © Functional Strategy Financial Strategy – –Leveraged buyout –Reversed stock split –Tracking stock

Prentice Hall, Inc. © Functional Strategy R&D Strategy – –Technological leader –Technological follower –Open innovation

Prentice Hall, Inc. © Functional Strategy Operations Strategy – –Job shop –Connected line batch flow –Flexible manufacturing systems –Dedicated transfer lines –Mass production –Continuous improvement system –Modular manufacturing

Prentice Hall, Inc. © Functional Strategy Purchasing Strategy – –Multiple sourcing –Sole sourcing –Just-in-time (JIT) –Parallel sourcing

Prentice Hall, Inc. © Functional Strategy Logistics Strategy – –Centralization –Outsourcing –Internet

Prentice Hall, Inc. © Functional Strategy HRM Strategy – –360 degree appraisal

Prentice Hall, Inc. © 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

Prentice Hall, Inc. © Proposed Outsourcing Matrix

Prentice Hall, Inc. © Functional Strategy Strategies to Avoid – –3 Follow the leader –Hit another home run –Arms race –Do everything –Losing hand

Prentice Hall, Inc. © Corporate Strategy Growth Strategies -- –External mechanisms Mergers Acquisitions Strategic alliances

Prentice Hall, Inc. © Constructing Corporate Scenarios

Prentice Hall, Inc. © Functional Strategy Subjective Factors Affecting Decisions -- –Management’s attitude toward risk –Pressures from stakeholders –Pressures from corporate culture –Needs and desires of key managers

Prentice Hall, Inc. © Stakeholder Priority Matrix

Prentice Hall, Inc. © Strategic Choice Avoiding the Consensus Trap -- –Devil’s Advocate –Dialectical Inquiry

Prentice Hall, Inc. © Strategic Choice Evaluation of Strategic Alternatives -- –Mutual exclusivity –Success –Completeness –Internal consistency