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08 Strategy Formulation - Functional Strategies

The document discusses various functional strategies that businesses use, including marketing strategy, research and development strategy, operations strategy, purchasing strategy, logistics strategy, human resources strategy, information technology strategy, and sourcing strategy. Some key points covered include how these strategies address objectives, product development, pricing approaches, sourcing methods, types of research and development, and considerations for outsourcing and offshoring.

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Anuska Jayswal
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57 views27 pages

08 Strategy Formulation - Functional Strategies

The document discusses various functional strategies that businesses use, including marketing strategy, research and development strategy, operations strategy, purchasing strategy, logistics strategy, human resources strategy, information technology strategy, and sourcing strategy. Some key points covered include how these strategies address objectives, product development, pricing approaches, sourcing methods, types of research and development, and considerations for outsourcing and offshoring.

Uploaded by

Anuska Jayswal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Functional Strategies

Functional Strategy

Functional strategy
 the approach a functional area takes to achieve
corporate and business unit objectives and
strategies by maximizing resource productivity
Marketing Strategy

Marketing strategy
 deals with pricing, selling and distributing a
product
Marketing Strategy

Market development strategy


 a company or business unit can (1) capture a
larger share of an existing market for current
products through market penetration or (2)
develop new uses and/or markets for current
products.
Marketing Strategy

Product development strategy


 a company or unit can (1) develop new products
for existing markets or (2) develop new products
for new markets.
Marketing Strategy

Brand extension
 using a successful brand name to market other
products
Push strategy
 trade promotions to gain or hold shelf space in retail
outlets
Pull strategy
 advertising to “pull” products through the
distribution channels
Marketing Strategy

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.
 Price skimming is often used when a new type of
product enters the market. The goal is to gather as
much revenue as possible while consumer
demand is high and competition has not entered
the market.
Marketing Strategy

Penetration pricing
 strategy used by businesses to attract customers
to a new product or service by offering a lower
price during its initial offering. The lower
price helps a new product or service penetrate
the market and attract customers away from
competitors. Market penetration pricing relies on
the strategy of using low prices initially to make a
wide number of customers aware of a new
product.
Financial Strategy

Financial Strategy
 examines the financial implications of corporate-
and business-level strategic options and identifies
the best financial course of action
 The management of dividends and stock price is
an important part of a corporation’s financial
strategy.
Strategic Financial Issues

• Analysis of financial leverage


• Companies maintain some DE ratio in their
capital employed and DE ratio has to be
analyzed on the basis of context
• DE ratio can be high at times of growth, but
low at times of declining growth
• Capital budgeting
• Analyzing the possibility of investment
Does the organization deploy capital budgeting
techniques to analyze investment?
• Understand the cost of capital and NPV of
investment.
Research and
Development Strategy

Research and Development Strategy


 deals with product and process innovation and
improvement
 also deals with the appropriate mix of different
types of R&D and question of how new
technology should be accessed
Research and
Development Strategy

Technological leader
 pioneering an innovation
Technological follower
 imitating the products of competitors
Open innovation
 firm uses alliances and connections with
corporate, government, academic labs and
consumers to develop new products and
processes
Analysis of Research and Development Mix

• Basic R&D: Well equipped laboratories


• Product R&D: new products
• Process R&D: quality control and other
improvements
Operations Strategy

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
Purchasing Strategy

Purchasing Strategy
 deals with obtaining raw materials, parts and
supplies needed to perform the operations
function
 multiple, sole and parallel sourcing
Purchasing Strategy

 Multiple sourcing
 the purchasing company orders a particular part
from several vendors
 Sole sourcing
 relies on only one supplier for a particular part
 Parallel sourcing
 two suppliers are the sole suppliers of two different
parts, but they are also backup suppliers for each
other’s parts
Logistics Strategy

Logistics Strategy
 deals with the flow of products into and out of
the manufacturing process

Trends include:
 Centralization
 Outsourcing
 Internet
HRM Strategy

HRM strategy
 addresses the issue of whether a company or
business unit should hire a large number of low-
skilled employees who receive low pay, perform
repetitive jobs and will most likely quit after a
short time (the fast-food restaurant strategy) or
hire skilled employees who receive relatively high
pay and are cross-trained to participate in self-
managing work teams
• Team spirit is always a strength.
• Types of team:
Self managing teams
Cross functional teams
Concurrent engineering
• Quality of work life can increase satisfaction and
productivity
• Hence good work life balance is always a strength of
organization
Information Technology

Basic use of IT:-


• IT for office automation
• IT for data analysis
• IT for operation and logistics
• IT for Competitive Advantage:-
• IT for alliance
• IT for customer service
• IT for Direct Marketing
Information Technology

Follow-the-sun management
 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.
The Sourcing Decision:
Location of Functions

Outsourcing
 purchasing from someone else a product or
service that had been previously provided
internally
 the reverse of vertical integration
Offshoring
 the outsourcing of an activity or a function to a
wholly owned company or an independent
provider in another country.
Disadvantages of Outsourcing

Customer complaints

Locked in to long-term contracts

Lack of ability to learn new skills and develop


new core competencies

Lack of cost savings

Poor product quality


Errors in Outsourcing to Avoid

Outsourcing the wrong activities


Selecting the wrong vendor
Writing a poor contracts
Overlooking personnel issues
Lack of control
Overlooking hidden costs
Lack of an exit strategy
Thank You!!

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