OXO GET A greed

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STRATEGIC MANAGEMENT & BUSINESS POLICY
12TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

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

Marketing strategy deals with pricing, selling and distributing a product

Market development strategy- provides the ability to:

Capture a larger market share
Market saturation
Market penetration
Develop new uses and/or markets for current products

Product development strategy- provides the ability to:

Develop new products for existing markets
Develop new products for new markets

Line extension- using a successful brand name to market other products

Push strategy- promotions to gain or hold shelf space in retail outlets

Pull strategy- advertising to “pull” products through the distribution channels

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

Penetration pricing- attempts to hasten market development and offers the pioneer the opportunity to use the experience curve to gain market share with low price and then dominate the industry

Financial Strategy- examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action

Financial strategy includes the management of:

Dividends
Stock price
Sales of company patents

Leveraged buyout- company is acquired in a transaction financed largely by debt usually obtained from a third party

Reverse stock split- investor’s shares are split in half for the same total amount of money

Research and Development Strategy- deals with product and process innovation and improvement

Technological leader- pioneers innovation
Technological follower- imitates the products of competitors
Open innovation- use of alliances and connections with corporate, government, academic labs and consumers to develop new products and processes

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

Manufacturing Types include

Job shops
Connected line batch flow
Flexible manufacturing systems
Dedicated transfer lines

Mass production systems
Continuous improvement
Modular manufacturing
Mass customization

Purchasing Strategy- deals with obtaining raw materials, parts and supplies needed to perform the operations function

Options include:

Sole suppliers (Deming)
Just-in-time
Parallel sourcing

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

Trends include:

Centralization
Outsourcing
Internet

Human Resource Strategy

Trends include:

Self-managed teams
360-degree appraisal
Diverse workforce

Information Technology Strategy

Trends include:

Follow the sun management
Internet
Extranet
Intranet

Outsourcing- purchasing from someone else a product or service that had been previously provided internally

Avoid outsourcing distinctive competencies

Offshoring- the outsourcing of an activity or a function to a wholly-owned company or an independent provider in another country

Disadvantages of outsourcing and offshoring

Customer complaints
Long-term contracts
Ability to learn new skills and develop new core competencies
Lack of cost savings
Poor product quality
Increased transportation costs

Errors in Outsourcing Efforts

Outsourcing the wrong activities
Selecting the wrong vendor
Poor contracts
Personnel issues
Lack of control
Hidden costs
Lack of an exit strategy

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

Constructing Corporate Scenarios- pro forma balance sheets and income statements that forecast the effect of each alternative strategy/its various programs will have on division and corporate return on investment

Steps include

Use industry scenarios to develop assumptions about the task environment

Develop common size financial statements for prior years

Construct detailed pro forma financial statements for each strategic alternative

Management’s Attitude Toward Risk

Risk- composed not only of the probability that the strategy will be effective but also of the amount of assets the corporation must allocate to the strategy and the length of time the assets will be unavailable for other uses

Real options approach- a broad range of options used in environments of high uncertainty

Net present value- calculates the value of a project by predicting its payouts, adjusting them for risk and subtracting the amount invested

How to Access the importance of stakeholder concerns

How will this decision affect each stakeholder?

How much of what stakeholders want are they likely to get under the alternative?

What are the stakeholders likely to do if they don’t get what they want?

What is the probability that they will do it?

Corporate Culture Options

Take a chance on ignoring the culture

Manage around the culture and change the implementation plan

Try to change the culture to fit the strategy

Change the strategy to fit the culture

Needs and Desires of Key Managers

Personnel characteristics and experience
Industry and cultural backgrounds
Tendency to maintain the status quo

Process of Strategic Choice

Strategic choice- the evaluation of alternative strategies and selection of the best alternative

Consensus
Devil’s advocate
Dialectical inquiry

Process of Strategic Choice

Criteria for evaluating alternatives includes:

Mutual exclusivity
Success
Completeness
Internal Consistency

Effective Policies Accomplish

Forces trade-offs between competing resource demands

Tests the strategic soundness of a particular action

Sets clear boundaries within which employees must operate while granting them freedom to experiment within those constraints

Are the functional strategies interdependent, or can they

be formulated independently of other functions?

Why is penetration pricing more likely than skim pricing

to raise a company’s or a business unit’s operating

profit in the long run?

How does mass customization support a business unit’s

competitive strategy?

When should a corporation or business unit outsource a

function or an activity?

What is the relationship of policies to strategies?

PowerPoint created by:

Ronald Heimler

Dowling College- MBA
Georgetown University- BS Business Administration
Adjunct Professor- LIM College, NY
Adjunct Professor- Long Island University, NY
Lecturer- California State Polytechnic University, Pomona, CA
President- Walter Heimler, Inc.

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