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Strategy Formulation:: Functional Strategy AND Strategic Choice
Strategy Formulation:: Functional Strategy AND Strategic Choice
STRATEGY
FORMULATION:
FUNCTIONAL STRATEGY
AND
STRATEGIC CHOICE
Presented by : Tayyab Hameed
Learning Objectives
Identify a variety of functional strategies.
Understand Outsourcing & Off-shoring.
Recognize strategies to avoid.
Construct corporate scenarios to evaluate strategic
options.
Develop policies to implement strategies.
8.0 - What is Strategy?
A strategy is a comprehensive master plan stating HOW
the organization will achieve its mission and objectives.
8.0 - Hierarchy of Strategy
8.0 - Strategic Management
Model
8.0 - Strategy Formulation
Development of long-range plans for the effective
management with the help of SWOT analysis.
It is composed of
Mission.
Objectives.
Strategies.
Policy.
8.1 - Functional Strategy
Function the intended role or purpose of person or thing.
Strategy Generalship
Functional Strategy is an approach, a functional area takes
to achieve corporate and business unit objectives and
strategies by maximizing resource productivity.
The orientation of a functional strategy is dictated by its
parent business units strategy.
Functional Strategy may need to vary from region to region.
Suzuki Pickup, Pakistan
Mr. Donut, Japan
8.1 Objectives of Functional
Strategy
Market share- Gain and sustain share of a product
market.
Human talent- Recruit high- quality workforce.
Cost efficiency- Use resources well to operate at low
cost.
Product quality- Produce high-quality goods or
services.
Innovation- Develop new products and /or processes.
Profitability- Earn net profit in business.
8.1 Types of Functional
Strategy
Marketing Strategy
Financial Strategy
R&D Strategy
Operations Strategy
Purchasing Strategy
Logistics Strategy
HRM Strategy
Information Management Strategy
8.1.1 Marketing Strategy
Marketing Strategy deals with Pricing, Selling and
Distributing a product.
There are several types of Marketing Strategy:
Market & Product Development
Push and Pull Strategy
Distribution System
Pricing
8.1.1.1 Types of Marketing
Strategy
8.1.1.4
Pricing
8.1.1 Marketing Strategy
8.1.1 4Ps of
Marketing
8.1.2 Financial Strategy
It focuses on the alignment of financial management
within an organization with its business and corporate
strategies to gain strategic advantages.
Forecasting, Planning and Budgeting
Credit & Liquidity Strategies
Capital Investment Methods/Systems
Financial Mix
Capital Budget & Working Capital
Stock / Dividend
Cash Flow, Loans or Leases
8.1.2.1 - Types of Financial
Strategy
Strong Balance Sheet
Strong credit rating.
Greater discipline and flexibility in Investment approach.
Help to build a robust business.
Healthier Economic Cycle.
Leveraged buyout (LBO) Strategy
Financial buyers or sponsors
Strategic Decisions
How much work should be done outside the firm?
On what basis should particular items be made in-
house?
When should items be outsourced?
How should suppliers be selected?
8.1.4.1 - Types of Operations
Strategy
Vertical Integration
8.1.4.1 - Types of Operations
Strategy
CAD/CAM Principles
Continuous Improvement Strategy
Product Life Cycle
8.1.4.1 - Types of Operations
Strategy
Improves quality.
Outsourcing Logistics
8.1.7 - HUMAN RESOURCE MANAGEMENT (HRM)
STRATEGY
The strategic & coherent approach to the most valued asset :
The People
Deals with
Right Employee for the Right Job
Headcount
Salary Structure
Hiring / Separation
360-degree appraisal
Employee Development
Diversified Workforce
8.1.8 Information Technology
Strategy
If focuses on the alignment of information management
system within an organization with its business and
corporate strategies to gain strategic advantage.
8.2 - The Sourcing Decision: Location of
Functions
Outsourcing is the contracting out of a business
process to a third-party.
Outsourcing is
Cost effective when used properly.
Budget flexibility and control.
8.2.1 - The Sourcing Decision: Outsourced
Activity
100%
78% 77%
80%
66%
63%
60% 56%
51%
40%
18%
20%
0%
General and Human Resource Transportation & Information Manufacturing Marketing Finance &
Administration Distribution System Accounting
Outsourced Departments as per AMA
8.2.2 - The Sourcing Decision: Off-Shoring
Off-shoring is the outsourcing of an activity or a
function to a wholly owned company or an
independent provider in another country.
Major off-shored industries are:
Customer Services
Information Technologies
8.2.3 - The Sourcing Decision: Why Off-
Shoring?
Low Cost Qualified Labor
Educated Workforce
Lower Regulatory Costs
Tax Benefits
Ability to Downsize at Will
Improved Performance
Freeing up Resources For Core Activities
Quicker Turnaround Time
8.2.4 - The Sourcing Decision:
Errors
Core Activities
Wrong Vendor
Poor Contract
Personnel Issues
Loosing Control
Hidden Cost
Exit Strategy
8.2.4 - The Sourcing Decision:
How?
Identify the companys or business units core competencies.
Ensure that the competencies are continually being
strengthened.
Manage the competencies in such a way that best preserves
the competitive advantage, they create.
8.2.5 - The Sourcing Decision: Proposed Outsourcing
Matrix
8.3 Strategies to Avoid
Follow the Leader.
Hit another home run.
Arms race.
Do everything.
Losing hand.
8.4 Strategic Choice?
Objective
Analysis Options
8.4.1 Strategic Choice: Selecting the Best
Strategy
Use industry scenarios.
Develop common-size financial statements
Historical common-size percentages