CHAPTER 8 Strategy

CHAPTER 8 Strategy Formulation:

Formulation: Functional
Functional Strategy & Strategic
Strategy & Strategic
Choice
Choice
STRATEGIC MANAGEMENT & BUSINESS POLICY
11TH EDITION
THOMAS L. WHEELEN J. DAVID HUNGER

8-1
Functional Strategy

The approach a functional area takes to

achieve corporate and business unit
objectives and strategies by maximizing
resource productivity

8-2
Functional Strategy

Marketing Strategy –

–Pricing

–Selling

–Distribution

8-3
Functional Strategy

Marketing Strategy –

–Pricing

•Skim pricing (new-product pioneers)

•Penetration pricing (low price and then dominate the

industry)

•Dynamic pricing (prices vary frequently based upon

demand, market segment, and product availability)

8-4
Functional Strategy

Marketing Strategy –

–Product development

•Line extension

8-5
Functional Strategy

Marketing Strategy –

–Advertising and promotion

•Push strategy (spending a large amount of money on

trade promotion)

•Pull strategy (advertising “pulls” the products through

the distribution channels)

8-6
Functional Strategy

Financial Strategy –

 Leveraged buyout (a company is acquired in a transaction

financed largely by debt, usually obtained from a third party, such as
an insurance company or an investment banker)

 Reversed stock split (1-for-2 stock split, the number of shares

an investor owns is reduced by half for the same total amount of
money (with each share now being worth twice as much)

 Tracking stock (allow larger companies to isolate the financial

performance of a higher growth segment. e.g., the mobile division
within a large telecom provider)

8-7
Functional Strategy

R&D Strategy –

–Technological leader (Nike)

–Technological follower (Dean Foods Company)

–Open innovation (Intel)

8-8
Functional Strategy

Purchasing Strategy –

–Multiple sourcing

–Sole sourcing

–Just-in-time (JIT)

–Parallel sourcing

8-9
Functional Strategy

Logistics Strategy –

–Centralization

–Outsourcing

–Internet

8-10
Functional Strategy

HRM Strategy –

 hire large number of low-skilled employees

 hire skilled employees who receive relatively
high pay
 360-degree appraisal

8-11
Proposed Outsourcing Matrix

8-12
Functional Strategy

Strategies to Avoid –

– Follow the leader (leader may be wrong)

–Hit another home run (search for another super product )

–Arms race (battle for market share may increase cost)

–Do everything

–Losing hand (unwilling to accept its failure)

8-13
Functional Strategy

Subjective Factors Affecting Decisions --

–Management’s attitude toward risk

–Pressures from stakeholders
–Pressures from corporate culture
–Needs and desires of key managers

8-14
Stakeholder Priority Matrix

8-15
Discussion

Question 1

You are appointed as a Strategic Manager

by XYZ co. Ltd. Being a Strategic Manager

what should be your tasks to perform?

8-16
Discussion

Question 2

Health Wellnow is a Delhi based charitable organisation promoting healthy

lifestyle amongst the office-goers. It organises programmes to encourage and
guide office-goers on matters related to stress relief, yoga, exercises, healthy
diet, weight management, work- life balance and so on. Many business
organisations and resident welfare associations take services of Health
Wellnow. Its daily yoga sessions are very popular in some of the big
companies located in Delhi, Noida and Gurgaon. The Health Wellnow has no
commercial interest and does not charge any fees for its services. However,
the organisation is able to get good charities and has sufficient funds to meet
its routine expenses.

Do you think the concepts of strategic management are relevant for Health
Wellnow? Discuss.

8-17