Copyright © 2005 Pearson Education Canada Inc. Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-1 Chapter 7 Strategy Formulation: Functional Strategy and Strategic Choice

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-2 Copyright © 2005 Pearson Education Canada Inc. Functional Strategy Functional Strategy:  The approach a functional area takes to achieve organizational and business unit objectives and strategies by maximizing resource productivity.

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-3 Copyright © 2005 Pearson Education Canada Inc. Functional Strategy Core competency:  Something that a corporation can do exceedingly well – a key strength  Can be a core capability Includes a number of constituent skills

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-4 Copyright © 2005 Pearson Education Canada Inc. Functional Strategy Distinctive competencies:  Firm can gain access to distinctive competencies in 4 ways: 1. Asset endowment 2. Acquisition 3. Share with another business unit 4. Built and accumulated

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-5 Copyright © 2005 Pearson Education Canada Inc. Functional Strategy Sourcing Decision:  Outsourcing Purchasing from someone else a product or service that had been previously provided internally. Frequently outsourced activities  General and administrative  Human resources  Transportation and distribution  Information systems  Manufacturing  Marketing  Finance and accounting

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-6 Copyright © 2005 Pearson Education Canada Inc. Marketing Strategy An organization’s choices on product, pricing, promotion and distribution intended to achieve organizational objectives.

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-7 Copyright © 2005 Pearson Education Canada Inc. Marketing Strategy Product Development strategy –  Develop new products for existing markets  Develop new products for new markets

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-8 Copyright © 2005 Pearson Education Canada Inc. Financial Strategy Financial strategy –  Examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action.  Maximizes financial value of the firm

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-9 Copyright © 2005 Pearson Education Canada Inc. Types of Financial Strategy Leveraged buy out (LBO) –  Company is acquired financed largely by debt. Debt paid by acquired company’s operations or sale of assets

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-10 Copyright © 2005 Pearson Education Canada Inc. R&D Strategy Deals with product and process innovation and improvement Choice:  Technological leader  Technological follower

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-11 Copyright © 2005 Pearson Education Canada Inc. Purchasing Strategy Obtaining raw materials, parts and supplies Basic Purchasing Choices:  Multiple sourcing  Sole sourcing  Parallel sourcing

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-12 Copyright © 2005 Pearson Education Canada Inc. Logistics Strategy The way inputs enter, and products leave, the manufacturing process Three current trends: 1. Centralization 2. Outsourcing 3. Use of the Internet

Concepts in ﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 7-13 Copyright © 2005 Pearson Education Canada Inc. HRM Strategy Addresses issues of:  Low-skilled employees Low pay Repetitive tasks High turnover  Skilled employees High pay Cross trained Self-managing teams