Strategy Formulation: Functional Strategy Quiz
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Questions and Answers

What is a primary advantage of multiple sourcing in purchasing strategy?

  • It eliminates the risk of delivery delays.
  • It ensures high quality from a single supplier.
  • It reduces purchasing costs by fostering competition. (correct)
  • It simplifies the production process.

    • How does a continuous improvement system view managers in relation to their teams?

  • As regulators who enforce strict guidelines.
  • As authoritative figures who dictate tasks.
  • As evaluators who assess performance metrics.
  • As coaches who facilitate teamwork and improvement. (correct)

    • What is one of the key characteristics of mass customization?

  • The requirement for technologies to be inflexible.
  • The ability to deliver products tailored to customer preferences. (correct)
  • The focus on producing large quantities of identical goods.
  • The emphasis on maintaining high inventory levels.

    • What does logistics strategy primarily deal with?

    <p>The flow of products into and out of manufacturing. (C)</p> Signup and view all the answers

    What is a drawback of sole sourcing as recommended by W. Edward Deming?

    <p>It can lead to higher production costs if the supplier raises prices. (B)</p> Signup and view all the answers

    Which of the following is a trend associated with logistics strategy?

    <p>Outsourcing transportation and logistics functions. (D)</p> Signup and view all the answers

    What is an essential feature of modular manufacturing?

    <p>Quick assembly of preassembled subassemblies on demand. (D)</p> Signup and view all the answers

    What does continuous improvement emphasize regarding workers' contributions?

    <p>Workers’ insights and experiences are valuable for solving production issues. (C)</p> Signup and view all the answers

    What is one of the main functions of Standard Operating Procedures (SOPs) within an organization?

    <p>To detail activities necessary to complete programs (C)</p> Signup and view all the answers

    Which of the following best represents the concept of 'shared know-how' in synergy?

    <p>Combining teams from different units to learn from each other's expertise (B)</p> Signup and view all the answers

    What is an example of achieving economies of scale in the context of synergy?

    <p>Coordinating product flows to enhance market access (A)</p> Signup and view all the answers

    What outcome does pooled negotiating power primarily aim to achieve?

    <p>Enhanced bargaining power to lower costs (A)</p> Signup and view all the answers

    In the context of synergy, what advantage does coordinated strategies provide?

    <p>Developing a unified approach to market challenges (C)</p> Signup and view all the answers

    Which of the following scenarios best illustrates the concept of shared tangible resources?

    <p>Building a common R&amp;D lab for multiple brands (C)</p> Signup and view all the answers

    Why is it important for procedures to be updated regularly?

    <p>To align with changes in technology and strategy (C)</p> Signup and view all the answers

    The merger between Arcelor and Mittal Steel primarily aimed to enhance which aspect of their operations?

    <p>Research and development capabilities (C)</p> Signup and view all the answers

    What is a key benefit of implementing a dynamic pricing strategy in online marketing?

    <p>Flexibility to adjust prices based on demand (C)</p> Signup and view all the answers

    Which of the following is a primary goal of a financial strategy?

    <p>Maximizing the financial value of a firm (A)</p> Signup and view all the answers

    In the context of R&D strategy, what is a technological leader expected to do?

    <p>Pioneer innovations in technology (D)</p> Signup and view all the answers

    How does operations strategy primarily contribute to a business?

    <p>By determining production processes and resource deployment (C)</p> Signup and view all the answers

    What aspect does Advanced Manufacturing Technology (AMT) focus on improving in operations?

    <p>Integration of diverse business activities (B)</p> Signup and view all the answers

    What does vertical integration in manufacturing primarily involve?

    <p>Gaining control over multiple stages of production (B)</p> Signup and view all the answers

    Which of the following best describes open innovation in R&D?

    <p>Collaboration with external entities to develop new products (C)</p> Signup and view all the answers

    A mass-production system is most effective for producing what type of goods?

    <p>A large volume of low-cost, standard goods (B)</p> Signup and view all the answers

    Flashcards

    Standard Operating Procedures (SOPs)

    Detailed instructions for completing corporate programs.

    Organizational Routines

    Procedures companies use to achieve tasks.

    Synergy (in Strategy)

    Combining functions/business units for greater benefit (e.g., better knowledge sharing).

    Shared Know-how

    Combining knowledge/skills of different business units to boost overall capabilities.

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    Coordinated Strategies

    Aligning business plans of units to reduce competition and improve responses to rivals.

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    Shared Tangible Resources

    Combining resources like facilities (manufacturing, R&D) to save costs.

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    Economies of Scale/Scope

    Matching product/service flows to lessen inventory, raise capacity, and reach new markets.

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    Pooled Negotiating Power

    Combining purchasing power to reduce costs and improve supplier relations.

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    Continuous Improvement

    A system focused on improving production processes through cross-functional teams, empowering workers, and managing through coaching rather than bossing. It emphasizes standardized, high-quality products at low cost.

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    Modular Manufacturing

    A production approach where pre-assembled sub-assemblies are delivered to the assembly line 'just in time', allowing for quick assembly of final products.

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    Mass Customization

    An approach to manufacturing that allows for the production of goods designed to meet the specific needs and preferences of individual customers.

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    Purchasing Strategy

    The process of obtaining raw materials, parts, and supplies for production, involving choices like multiple, sole, or parallel sourcing.

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    Multiple Sourcing

    Ordering parts from several vendors. This approach is typically considered better as it reduces costs by encouraging competition and provides backup in case of supplier issues.

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    Sole Sourcing

    Using only one supplier for a specific part. This approach often leads to higher quality and reduced costs, but it involves a higher risk if the supplier experiences issues.

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    Logistics Strategy

    The plan for the flow of products into and out of production, including centralization, outsourcing, and internet use.

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    Centralized Logistics

    A logistics approach that brings together specialists in various transport modes under one group.

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    Dynamic Pricing

    Adjusting prices frequently based on demand, market segments, and product availability.

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    Financial Strategy

    Analyzing financial impacts of business strategies to maximize firm value and gain competitive advantage.

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    R&D Strategy

    Making decisions about product and process innovation, choosing the right R&D types, and how to access new technologies.

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    Technological Leader

    Creating innovative products and taking a pioneering role, aiming for differentiation.

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    Technological Follower

    Imitating competitors' products and processes, aiming for lower costs.

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    Open Innovation

    Using external partnerships (corporations, governments, labs, etc.) to develop products/processes.

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    Operations Strategy

    Determining manufacturing methods, vertical integration, resource deployment, and supplier relationships.

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    Mass Production

    Method for producing a large quantity of low-cost, standard products.

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    Study Notes

    Strategy Formulation: Functional Strategy and Strategic Choice

    • Objectives:
      • Identify various functional strategies to achieve organizational goals.
      • Understand which activities and functions are suitable for outsourcing to gain or strengthen competitive advantage.
      • Recognize strategies to avoid and understand why they are dangerous.

    Functional Strategy

    • Functional strategy is the approach a functional area takes to achieve corporate and business unit objectives by maximizing resource productivity.
    • It builds a distinctive competence for a company or business unit to gain competitive advantage.
    • Marketing Strategy focuses on pricing, selling, and distributing products.
      • Using market development strategies, a company can capture a larger share of an existing market or develop new uses or markets for current products.
      • Product development strategies develop new products for existing markets or new markets.
        • Brand extension (using a successful brand to market other products) is a good way to appeal to current customers.
      • Marketing strategies include "push" and "pull" approaches for promotion and advertising, along with strategies for distribution and pricing.

    Marketing Strategy (continued)

    • Using product development, a company can develop new products for existing or new markets.
    • Successful brands can be extended to market other products.
    • There are other marketing strategies for advertising, promotion, distribution, and pricing
    • Direct marketing, distributors & dealers, internet.

    Marketing Strategy (continued)

    • Pricing: Companies can use skimming (high prices for new products) or penetration (low prices to enter markets quickly) strategies when pricing new products.
    • Internet marketing enables dynamic pricing, adapting costs based on demand, market segments, and product availability.

    Financial Strategy

    • Financial strategy assesses the financial implications of corporate and business-level strategic options.
    • It provides a competitive advantage through lower funding costs and a high financial flexibility in fundraising to support business strategies.
    • The goal is to maximize financial value of the firm.

    Research and Development (R&D) Strategy

    • R&D strategy focuses on product and process innovation and improvement.
    • It involves defining the right mix of R&D types (basic, product, or process), and how to access technology: internal development, external acquisition, or strategic alliances.
    • Companies can become technology leaders (pioneering innovations) or followers (imitating competitors' products.)
    • Open innovation involves strategic alliances and collaborations with corporates, governments, academia, and consumers in developing new products and processes.

    Operations Strategy

    • Operations strategy manages how and where products or services are manufactured (the production process), resource deployment; dealing with suppliers, and using technology effectively.
    • Advanced Manufacturing Technology (AMT) is revolutionizing operations, and corporations integrate diverse business activities using computer aided design/manufacturing.
    • Includes continuous improvement (high-quality low-cost output), and modular manufacturing.

    Purchasing Strategy

    • Purchasing strategy acquires required raw materials and supplies to support operations.
    • There are three choices: multiple sourcing (purchasing from multiple vendors to reduce costs), sole sourcing (relying on one vendor) and parallel sourcing (using both).
    • Sole sourcing improves quality but can increase costs.
    • Just-in-time (JIT) purchasing, which delivers supplies when and where they are needed.

    Logistics Strategy

    • Logistics strategy manages the flow of products into and out of manufacturing.
    • Trends include centralization (specialists handling transportation in different modalities), outsourcing (reducing costs and improving delivery time), and using the internet to streamline logistics.

    Human Resource Management (HRM) Strategy

    • HRM strategies address whether to hire low-skilled, low-pay employees, or higher-skilled, higher-pay employees.
    • Research suggests use of work teams increases quality, productivity, and employee satisfaction.
    • Companies following differentiation strategies often rely more on employee input in performance reviews. Diversity in the workforce can be a competitive advantage.

    Information Technology Strategy

    • Corporations leverage IT to provide business units with competitive advantages.
    • Sophisticated intranets enable follow-the-sun management, where work can be transferred across time zones.

    The Sourcing Decisions: Location of Functions

    • Outsourcing involves hiring another entity to perform a function previously done in-house.
    • Offshoring involves outsourcing a function to a wholly owned company or an external provider in another country.

    Strategies to Avoid

    • Follow the Leader: Imitating a competitor's strategy might neglect company strengths and weaknesses and be misguided.
    • Hit another home run: Seeking another successful product when previous success was tied to a specific product is dangerous and might lead to expensive development.
    • Arms Race: A battle for market share with another firm can easily outpace profits due to investment in advertising, promotion, R&D, and manufacturing).
    • Do everything: Trying to respond to all business opportunities leads to diluted efforts, missed opportunities.
    • Losing Hand: Investment in a strategy may become so extensive that management refuses to admit failure despite its lack of success.

    Strategic Choice: Selecting the Best Strategy

    • The best strategy should be capable of managing factors developed through SWOT analysis.
    • A good strategy must take advantage of opportunities and strengths/competencies and avoid threats and weaknesses.
    • The strategy should satisfy agreed-upon objectives with the least resources and minimal negative effects.

    Strategy Implementation: Organizing for Action

    • Strategy implementation involves creating programs, budgets, and procedures to execute a strategic plan.
    • The implementation process needs to address who will carry out the plan, how to realign operations towards the new direction, and how to coordinate individuals to succeed.

    Developing Programs, Budgets, and Procedures

    • Building programs ensures that strategy is action-oriented.
    • Lean Six Sigma is an example of a program to improve operations, budgets are for allocating funds and procedures for routine activities.
    • Updating procedures reflects changes in strategy and technology.

    Program

    • A matrix of change helps managers determine how quickly changes should be implemented, where to initiate them.
    • Questions to consider include: Feasibility, Sequence of execution, Location, Pace and nature of change, stakeholder evaluations.

    Budgets

    • A budget is a final check for strategic feasibility.
    • After establishing programs, budgets for each new activity are established.
    • Procedures known as SOPs detail ways to carry out tasks.

    Achieving Synergy

    • Synergy is achieved when a combination of function or business unit results in more than the sum of individual efforts.
    • Six forms of synergy:
      • Shared know-how (combine knowledge of various functions)
      • Coordinated strategies (coordinating business strategies of two or more units.)
      • Shared tangible resources (sharing resources to save money like R&D departments or manufacturing locations).
    • There are economies of scale & scope (by coordinating products and services, to increase capacity utilization), pooled negotiating power, and new business creation.

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    Related Documents

    Lessons 11-12: Strategy Formulation & Implementation PDF

    Description

    Test your knowledge on functional strategies and strategic choices crucial for achieving organizational goals. This quiz covers topics such as outsourcing, marketing strategies, and product development, essential for gaining a competitive edge. Enhance your understanding of how different functional areas contribute to overall business success.

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