© Prentice-Hall 2005 5-1 Strategic Management in Action Mary Coulter 5 Functional Strategies.

© Prentice-Hall 2005 5-1

Strategic Management in Action

Mary Coulter

5 Functional Strategies


Learning Outline The role of strategies

Explain how the functional strategies fit into the strategic management process.

Describe what happens after the SWOT analysis is completed.

Types of functional strategies Define functional strategies. Describe the three basic functions that all organizations

perform. Discuss the various production-operations-manufacturing

strategies. Describe the various marketing strategies. Explain why high-performance work activities are

important. Discuss the various human resource management

strategies.


Learning Outline (contd.)

Describe the three strategic areas in research & development.

List the advantages and disadvantages of being a first mover.

Describe the strategies associated with the different information systems.

Explain the various financial-accounting strategies. Now what?

Explain the interrelatedness of the functional strategies. Discuss how the functional strategies are implemented,

evaluated, and changed. Discuss the importance of coordinating the functional

strategies with the other organizational strategies.


Functional Strategies

Functional strategies (or operational strategies) are the short-term goal-directed decisions and actions of the organization’s various functional areas.

Six functional strategy areas:• Marketing

• Research and development

• Production-operations-manufacturing

• Human resource management

• Financial-accounting

• Information systems-technology


Table 5.1 Possible POM Strategies

Table 5-1 Possible Production-Operations Management StrategiesProduction Process StrategiesProduction Process Strategies•••

Process focusedProduct focusedRepetitive focused

Capacity StrategiesCapacity Strategies••

Size of facilityEfficient use

Location StrategiesLocation Strategies• Location selection


Table 5.1 (contd.)

Possible Production-Operations Management Strategies

Work Design StrategiesWork Design Strategies•••••••

Job specializationJob enlargementJob enrichmentErgonomicsWork methodsMotivation-incentive systemsStandards-output levels


Table 5.1 (contd.)


Layout StrategiesLayout Strategies••••••

Fixed positionProcess orientedOfficeRetail-serviceWarehouseProduct oriented


Table 5.1 (contd.)


Production-Operations Management StrategiesProduction-Operations Management Strategies••••••••

Aggregate planning techniquesJust-in-time systemsPurchasing management proceduresInventory management systemsMaterials requirement planning techniquesShort-term scheduling techniquesProject management proceduresMaintenance management


Table 5.1 (contd.)


Current Production-Operations StrategiesCurrent Production-Operations Strategies•

•••

Integrated manufacturingAdvanced manufacturing technologyTotal quality managementJust-in-time inventory control

© Prentice-Hall 2005 5-

10

Figure 5.2 Six Requirements for Successful Value Chain Management

Leadership

Value Chain Strategy

Org. Culture and Attitudes

Employees Technology Investment

Processes

Coordination/Collaboration


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Table 5.2

Possible Marketing Strategies

Segmentation StrategiesSegmentation Strategies••••

GeographicDemographicPsychographicBehavioral

Target Market Selection StrategiesTarget Market Selection Strategies•••••

Single-segment concentrationSelective specializationProduct specializationMarket specializationFull market coverage


12

Table 5.2 (contd.)

Possible Marketing Strategies (selected)

Differentiation StrategiesDifferentiation Strategies••••

Product itselfServicesPersonnelImage

Positioning StrategiesPositioning Strategies•••••••

Attribute positioningBenefit positioningUse-application positioningUser positioningCompetitor positioningProduct category positioningQuality-price positioning


13

Table 5.2 (contd.)


Marketing Mix StrategiesMarketing Mix Strategies• Product

• New-product development• Product line• Brand• Packaging-labeling• Product life cycle decisions


14

Figure 5.3 Product Life Cycle

Introduction Growth Maturity Decline

Sales

Time


15

Table 5.2 (contd.)


Marketing Mix Strategies (Marketing Mix Strategies (continuedcontinued))• Pricing

• Markup pricing• Target-return pricing• Perceived-value pricing• Value pricing• Going-rate pricing• Sealed-bid pricing• Geographical pricing• Price discounts-allowances• Promotional pricing• Discriminatory pricing• Product mix pricing


16

Table 5.2 (contd.)


Marketing Mix Strategies (Marketing Mix Strategies (continuedcontinued))• Promoting

• Advertising• Billboards• Point-of purchase displays• Symbols and logos• Packaging inserts• Sales promotion• Public relations• Personal selling• Direct marketing


17

Table 5.2 (contd.)


Marketing Mix Strategies (Marketing Mix Strategies (continuedcontinued))• Place

• Channel choice• Market logistics• Inventory• Transportation modes-carriers

Current Marketing StrategiesCurrent Marketing Strategies• Relationship marketing

• Financial• Social• Structural

• Mass customization• Database marketing


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Table 5.4

Possible Human Resource Management Strategies

Work FlowsWork Flows••••

Organize for efficiency or innovationOrganize for control or flexibilityUse specialized or broad job categoriesUse detailed or loose work planning

StaffingStaffing••••

Use internal or external recruitmentWho makes hiring decisionWhat’s important in hiringFormal or informal approach


19

Table 5.4 (contd.)


Employee SeparationsEmployee Separations••••

How to downsizeHiring freezeSupport for terminated employeesPreferential or non-preferential rehiring process

Performance AppraisalPerformance Appraisal••••

Customized or uniform appraisalsAppraisal for developmental or control purposesMultipurpose or focused appraisalsUse multiple or one input


20

Table 5.4 (contd.)


Training and DevelopmentTraining and Development••••

Buy or develop skillsIndividual or team-based trainingOn-the-job or external trainingJob-specific or generic training

CompensationCompensation••••

Fixed-pay or variable pay systemJob-based or individual paySeniority-based or performance-based systemCentralize or decentralize pay decisions


21

Table 5.4 (contd.)


Employee and Labor RelationsEmployee and Labor Relations•••

Top-down or bottom-up communicationsInteractions with labor unionsAdversarial or cooperative relationship

Employee RightsEmployee Rights•••

Use discipline as control or learningProtect organization’s or employee’s rightsFormal or informal ethics program

Current HRM StrategiesCurrent HRM Strategies••

Employees as significant resourceHigh-tech human resources approach


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Table 5.5

Possible Research and Development Strategies

R&D EmphasisR&D Emphasis•••

Basic scientific researchProduct developmentProcess development

R&D TimingR&D Timing••

First moverFollower


23

Table 5.6 First Mover Advantages-Disadvantages

First MoverAdvantagesAdvantages DisadvantagesDisadvantages

• •

• •

• •

• •

Reputation for being innovative and industry leader

Cost and learning benefits resulting from moving along experience curve first

Control over scarce assets preventing competitors from having access to them

Opportunity to begin building customer relationships and customer loyalty

Uncertain over exact direction technology and market will go

Risk of competitors imitating innovations (free-rider effect)

Financial and strategic risks

High development costs


24

Table 5.5 (contd.)


Product and Process DevelopmentProduct and Process Development•

•

Who?• Separate R&D department• Cross-functional team• Some variationHow?• Formal or informal process• Use prototypes• Use product tests• Use design reviews• Use test markets• How to implement new design• How to evaluate success of new design


25

Table 5.5 (contd.)


Current R&D StrategiesCurrent R&D Strategies••

Employee suggestion systemsInnovative culture


26

Table 5.7

Possible Information Systems Strategies

System TechnologySystem Technology• Manual-based, computer-based, combination

Types of Information SystemsTypes of Information Systems••••••

Transaction processing systemOffice automation systemKnowledge work systemManagement information systemDecision support systemExecutive support system


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Table 5.7 (contd.)

Possible Information Systems Strategies

Current Information Systems StrategiesCurrent Information Systems Strategies•••

Information technologyBusiness intelligence applicationsInternet


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Table 5.9

Possible Financial-Accounting Strategies

Evaluating Financial PerformanceEvaluating Financial Performance••

How oftenHow much analysis

Financial Forecasting, Planning, and BudgetingFinancial Forecasting, Planning, and Budgeting•••

Percent of sales forecastDiscretionary financial needed modelSustainable rate of growth model; Types of budgets used

Financing MixFinancing Mix•

••

Financial structure-capital structureShort-term versus long-term fund sourcesPermanent or long-term sources


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Table 5.9 (contd.)

Possible Financial-Accounting Strategies

Other Financial Management DecisionsOther Financial Management Decisions••••••••

Capital budgeting choicesStock dividend policyCapital budgetingCash flow managementWorking capital management and short-term financingCash and marketable securities managementAccounts receivable and inventory managementUse term loans or leases

Current Financial-Accounting StrategiesCurrent Financial-Accounting Strategies•••

Controlling costsCompliance; New financial performance measuresValuing intangible assets


Chapter Five

Questions

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© Prentice-Hall 2005 5-1 Strategic Management in Action Mary Coulter 5 Functional Strategies.

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