bpsm-functionalstrat.pptx

7/29/2019 BPSM-FunctionalStrat.pptx

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BPSM-Functional Strat

Strategy Formulation:

Functional Strategy and

Strategic Choice

MPRBA-302

20th February 2013

Adapted from: Thomas L Wheelen & J. David Hunger

Leben Johnson


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Functional Strategy

Functional Strategy:

The approach a functional area takesto achieve corporate and business

unit objectives and strategies bymaximizing resource productivity.


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Functional Strategy

Core competency:

Something that a corporation can doexceedingly well a key strength

Can be a core capability Includes a number of constituent skills


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Functional Strategy

Distinctive competencies:

When core competencies or core

capabilities are superior to those ofthe competition.


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Functional Strategy


Must meet 3 tests:

Customer value

Competitor unique

Extendibility


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Functional Strategy


Firm can gain access to distinctive

competencies in 4 ways:

Asset endowment

Acquired

Shared with another business unit

Built and accumulated


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Functional Strategy

Sourcing Decision:

Outsourcing Purchasing from someone else a

product or service that had beenpreviously provided internally.


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Functional Strategy

Determining Functional Strategy:

Identify business units core

competencies Ensure that competencies are

continually strengthened

Manage competencies so that

competitive advantage is preserved


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Proposed Outsourcing Matrix


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Marketing Strategy

Marketing strategy

Involved with pricing, selling, anddistributing a product.


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Marketing Strategy

Market development strategy

Capture a larger share of existingmarket through market saturation andmarket penetration

Develop new markets for currentproducts


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Marketing Strategy

Product development strategy

Develop new products for existingmarkets

Develop new products for new

markets


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Marketing Strategy

Advertising or Promotion strategy

Push marketing strategy Investing in trade promotion to gain or

hold share

Pull marketing strategy

Investing in consumer advertising to buildbrand awareness


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Financial Strategy

Financial strategy

Examines the financial implications ofcorporate and business-level strategicoptions and identifies the best

financial course of action.Maximizes financial value of the firm


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Financial Strategy

Leveraged buy out (LBO)

Company is acquired financed largelyby debt (from a third party).

Debt paid by acquired companysoperations or sale of assets


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Financial Strategy

Tracking stock

Highlighting a high-growth businessunit in a popular sector of the stockmarket.

Keeping subsidiarys common stock

separately identified


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R&D Strategy

R&D Strategy

Deals with product and process

innovation and improvement

Choice:

Technological leader

Technological follower


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Research and Development Strategy

and Competitive Advantage

Technological Leadership Technological Followership

Cost Advantage

Differentiation

Pioneer the lowest cost product

design.

Be the first firm down the learning

curve.Create low-cost ways of

performing value activities.

Pioneer a unique product that

increases buyer value.

Innovate in other activities to

increase buyer value.

Lower the cost of the product or

value activities by learning from

the leaders experience.

Avoid R&D costs throughimitation.

Adapt the product or delivery

system more closely to buyer

needs by learning from theleaders experience.


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Operations Strategy

Operations strategy

Determines:

How and where product is manufactured

Level of vertical integration in process

Deployment of physical resources

Relationships with suppliers


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Operations Strategy

Manufacturing strategy

Affected by product life cycle

Job shop

Connected line batch flow

Flexible manufacturing system

Dedicated transfer lines


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Operations Strategy

Manufacturing strategy

Movement from mass production to:

Continuous improvement

Modular manufacturing Mass customization


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Purchasing Strategy

Purchasing strategy

Obtaining raw materials, parts andsupplies

Basic Purchasing Choices:

Multiple sourcing

Sole sourcing Parallel sourcing


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Logistics Strategy

Logistics strategy

Flow of products into and out of theprocess

Three current trends:

Centralization Outsourcing

Use of the Internet


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Information Systems Strategy

Information systems strategy

Technology to provide business unitswith competitive advantage


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Strategies to Avoid

Corporate, Business or Functional

Levels Avoid the following:

Follow the Leader

Hit Another Home Run

Arms Race

Do Everything

Losing Hand


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Strategic Choice

Selecting the Best Strategy:

Constructing Corporate Scenarios:

Corporate Scenarios

Pro forma balance sheets and incomestatements that forecast effects of

alternatives on return on investment


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Strategic ChoiceSelecting the Best Strategy:

Constructing Corporate Scenarios:

Steps in constructing scenarios Use industry scenarios

Develop common-size financialstatements

Construct detailed pro forma financialstatements for each alternative


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Scenario Box to Generate Pro Forma Statements

Pr objections

1

Last Historical Tr end 19 19 19

Factor Year Average Analysis O P ML O P ML O P ML Comments

GDP

CPI

Other

Sales units

Dollars

COGS

Adver tising and marketing

Inter est expense

Plant expansion

Dividends

Net pr ofits

EPS

ROI

ROE

Other


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Strategic Choice

Attitude Toward Risk:

Risk is composed of: Probability of effective strategy

Amount of assets committed

Length of time of asset commitment


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Strategic Choice

Process of Strategic Choice:

The evaluation of alternative strategiesand selection of the best alternative

Not based on consensus

Discussion, disagreement

Programmed conflict


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Strategic Choice


Devils Advocate

Identify potential pitfalls and problemswith a proposed alternative strategy in a

formal presentation.


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Strategic Choice


Dialectical Inquiry

Two proposals are generated usingdifferent assumptions for each alternative

strategy


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BPSM Functional Strat

Strategic Choice

Evaluating strategic alternatives:

Ability to meet four criteria: Mutual exclusivity

Success

Completeness

Internal consistency

bpsm-functionalstrat.pptx

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