Podcast
Questions and Answers
What is a primary advantage of multiple sourcing in purchasing strategy?
What is a primary advantage of multiple sourcing in purchasing strategy?
How does a continuous improvement system view managers in relation to their teams?
How does a continuous improvement system view managers in relation to their teams?
What is one of the key characteristics of mass customization?
What is one of the key characteristics of mass customization?
What does logistics strategy primarily deal with?
What does logistics strategy primarily deal with?
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What is a drawback of sole sourcing as recommended by W. Edward Deming?
What is a drawback of sole sourcing as recommended by W. Edward Deming?
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Which of the following is a trend associated with logistics strategy?
Which of the following is a trend associated with logistics strategy?
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What is an essential feature of modular manufacturing?
What is an essential feature of modular manufacturing?
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What does continuous improvement emphasize regarding workers' contributions?
What does continuous improvement emphasize regarding workers' contributions?
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What is one of the main functions of Standard Operating Procedures (SOPs) within an organization?
What is one of the main functions of Standard Operating Procedures (SOPs) within an organization?
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Which of the following best represents the concept of 'shared know-how' in synergy?
Which of the following best represents the concept of 'shared know-how' in synergy?
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What is an example of achieving economies of scale in the context of synergy?
What is an example of achieving economies of scale in the context of synergy?
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What outcome does pooled negotiating power primarily aim to achieve?
What outcome does pooled negotiating power primarily aim to achieve?
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In the context of synergy, what advantage does coordinated strategies provide?
In the context of synergy, what advantage does coordinated strategies provide?
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Which of the following scenarios best illustrates the concept of shared tangible resources?
Which of the following scenarios best illustrates the concept of shared tangible resources?
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Why is it important for procedures to be updated regularly?
Why is it important for procedures to be updated regularly?
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The merger between Arcelor and Mittal Steel primarily aimed to enhance which aspect of their operations?
The merger between Arcelor and Mittal Steel primarily aimed to enhance which aspect of their operations?
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What is a key benefit of implementing a dynamic pricing strategy in online marketing?
What is a key benefit of implementing a dynamic pricing strategy in online marketing?
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Which of the following is a primary goal of a financial strategy?
Which of the following is a primary goal of a financial strategy?
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In the context of R&D strategy, what is a technological leader expected to do?
In the context of R&D strategy, what is a technological leader expected to do?
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How does operations strategy primarily contribute to a business?
How does operations strategy primarily contribute to a business?
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What aspect does Advanced Manufacturing Technology (AMT) focus on improving in operations?
What aspect does Advanced Manufacturing Technology (AMT) focus on improving in operations?
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What does vertical integration in manufacturing primarily involve?
What does vertical integration in manufacturing primarily involve?
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Which of the following best describes open innovation in R&D?
Which of the following best describes open innovation in R&D?
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A mass-production system is most effective for producing what type of goods?
A mass-production system is most effective for producing what type of goods?
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Study Notes
Strategy Formulation: Functional Strategy and Strategic Choice
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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.
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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.
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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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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.
