FUNCTIONAL STRATEGY AND

STRATEGIC CHOICE BS 8
Pushkar Bajracharya
FUNCTIONAL STRATEGY
 Functional strategy is 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.
 Market development strategy, a company or business
unit can (1) capture a larger share of an existing market
for current products through market saturation and
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.
 Push vs pull strategy

 High vs low price strategy

 Exclusive vs extensive distribution

 Promotion
FINANCIAL STRATEGY
 Capital structure
 Equity financing is preferred for related diversification,
whereas debt financing is preferred for unrelated
diversification.
 leveraged buyout

 Structure

 Profitability and its use

 Costs management and control

RESEARCH AND DEVELOPMENT (R&D)
STRATEGY
 technological leader, pioneering an innovation, or a
technological follower,
 strategic technology alliances

 open innovation,

 Purchase stakes in high-tech entrepreneurial ventures

OPERATIONS STRATEGY
 Resource configuration
 Materials management

 Planning including layout, aggregate

 Scheduling, loading, operating

 Controlling

 Logistics

 Environmental and other issues

PURCHASING STRATEGY

 Purchasing strategy deals with obtaining the raw

materials, parts, and supplies needed to perform the
operations function
 Supplier selection and supply chain management

 Multi-sourcing

 JIT

 Quality, price, capacity, dependability

LOGISTICS STRATEGY
 Logistics strategy deals with the flow of products into
and out of the manufacturing process.
 Centralisation of team

 Out sourcing
HUMAN RESOURCE MANAGEMENT
(HRM) STRATEGY
 Hiring-low vs high skilled, specialised vs multiple skills,
raw vs developed, self or out sourcing
 Development

 Promotion and career path

 Placement, transfer

 Retirement

 Rewards and compensation management

 Performance evaluation
INFORMATION TECHNOLOGY
STRATEGY
 information technology strategy to provide business
units with competitive advantage
 follow-the-sun management,

 Networking

 Data mining and retrieval

 Reach

 linkages
THE SOURCING DECISION: LOCATION
OF FUNCTIONS
 Outsourcing
 Offshoring
ERRORS TO BE AVOIDED
 Outsourcing activities that should not be outsourced
 Selecting the wrong vendor

 Writing a poor contract

 Overlooking personnel issues

 Losing control over the outsourced activity

 Overlooking the hidden costs of outsourcing

 Failing to plan an exit strategy

STRATEGIES TO AVOID
 Follow the leader
 Hit another home run

 Arms race

 Do everything

 Losing hand
STRATEGIC CHOICE: SELECTING THE
BEST STRATEGY
 CONSTRUCTING CORPORATE SCENARIOS
 Use industry scenarios

 Develop common-size financial statements

 Construct detailed pro forma financial statements for

each strategic alternative
SELECTING THE BEST STRATEGY
 Management’s Attitude Toward Risk
 Pressures from Stakeholders

 Needs and Desires of Key Managers

ASSESS THE IMPORTANCE OF
STAKEHOLDER
 How will this decision affect each stakeholder, especially
those given high and medium priority?
 How much of what each stakeholder wants is he or she
likely to get under this 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?
PROCESS OF STRATEGIC CHOICE
 Strategic choice is the evaluation of alternative strategies
and selection of the best alternative.
 People generally make mistakes (50%)

(1) their desire for speedy actions leads to a rush to

judgment,
(2) they apply failure-prone decision-making practices
such as adopting the claim of an influential stakeholder,
and
(3) they make poor use of resources by investigating
only one or two options.
TAKE CAUTION OF CONSENSUS
 In dynamic environment, the best strategic decisions
may not arrived at through consensus
1. Devil’s advocate
2. Dialectical inquiry
ALTERNATIVE
MEET FOUR CRITERIA
1. Mutual Exclusivity: Doing any one alternative would
preclude doing any other.
2. Success: It must be feasible and have a good probability
of success.
3. Completeness: It must take into account all the key
strategic issues.
4. Internal Consistency: It must make sense on its own as a
strategic decision for the entire firm and not contradict
key goals, policies, and strategies currently being
pursued by the firm or its units
DEVELOPING POLICIES
When crafted correctly, an effective policy accomplishes
three things:
 It forces trade-offs between competing resource
demands.
 It tests the strategic soundness of a particular action.

 It sets clear boundaries within which employees must

operate while granting them freedom to experiment
within those constraints