1. Prentice Hall, Inc. © 20088-1 STRATEGIC MANAGEMENT & BUSINESS POLICY 11 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER CHAPTER 8 Strategy Formulation: Functional Strategy & Strategic Choice

2. Prentice Hall, Inc. © 20088-2 Functional Strategy The approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity

3. Prentice Hall, Inc. © 20088-3 Functional Strategy Marketing Strategy – Pricing –Selling –Distribution Product development –Line extension Advertising and promotion –Push strategy –Pull strategy Pricing –Skim pricing –Penetration pricing –Dynamic pricing

4. Prentice Hall, Inc. © 20088-4 Functional Strategy Financial Strategy – –Leveraged buyout –Reversed stock split –Tracking stock R&D Strategy – –Technological leader –Technological follower –Open innovation

5. Prentice Hall, Inc. © 20088-5 Functional Strategy Operations Strategy – –Job shop –Connected line batch flow –Flexible manufacturing systems –Dedicated transfer lines –Mass production –Continuous improvement system –Modular manufacturing

6. Prentice Hall, Inc. © 20088-6 Functional Strategy Purchasing Strategy – –Multiple sourcing –Sole sourcing –Just-in-time (JIT) –Parallel sourcing Logistics Strategy – –Centralization –Outsourcing –Internet HRM Strategy – –360 degree appraisal

7. Prentice Hall, Inc. © 20088-7 Functional Strategy Outsourcing errors – –Activities that should not be outsourced –Wrong vendor selection –Writing poor contract –Overlooking personnel issues –Hidden costs of outsourcing –Failing to plan exit strategy

8. Prentice Hall, Inc. © 20088-8 Proposed Outsourcing Matrix

9. Prentice Hall, Inc. © 20088-9 Functional Strategy Strategies to Avoid – –3 Follow the leader –Hit another home run –Arms race –Do everything –Losing hand

10. Prentice Hall, Inc. © 20088-10 Corporate Strategy Growth Strategies -- –External mechanisms Mergers Acquisitions Strategic alliances

11. Prentice Hall, Inc. © 20088-11 Constructing Corporate Scenarios

12. Prentice Hall, Inc. © 20088-12 Functional Strategy Subjective Factors Affecting Decisions -- –Management’s attitude toward risk –Pressures from stakeholders –Pressures from corporate culture –Needs and desires of key managers

13. Prentice Hall, Inc. © 20088-13 Stakeholder Priority Matrix

14. Prentice Hall, Inc. © 20088-14 Strategic Choice Avoiding the Consensus Trap -- –Devil’s Advocate –Dialectical Inquiry

15. Prentice Hall, Inc. © 20088-15 Strategic Choice Evaluation of Strategic Alternatives -- –Mutual exclusivity –Success –Completeness –Internal consistency