Strategic Management and

Policy
By
Iram Fatima
PhD
 Functional Strategy

• It is the approach a functional area takes to achieve corporate and

business unit objectives and strategies by maximizing resource
productivity.
• It is concerned with developing and nurturing a distinctive competence to
provide a company or business unit with a competitive advantage.
• The orientation of a functional strategy is dictated by its parent business
unit’s strategy. For example, a business unit following a competitive
strategy of differentiation through high quality needs a manufacturing
functional strategy that emphasizes expansive quality assurance
processes over cheaper, high volume production, a human resource
functional strategy and marketing functional strategy.
 Functional Strategy
In determining functional strategy, the strategist must:
1. Identify the company’s or business unit’s core competencies.
2. Ensure that the competencies are continuously being strengthened.
3. Manage the competencies in such a way that best preserves the
competitive advantage they create.
Activity’s Total value added to Firm’s Products and Services
Low High
Table: Proposed
Outsourcing Activity’s High Taper Vertical Full Vertical
potential Integration Integration
Matrix Produce Some Produce all Internally
for
Competit Internally
ive
Advantag Low Outsource Outsource completely
e. Completely Purchase with long
Buy on open market term contracts
 Marketing Strategy
Marketing strategy deals with pricing, selling, and distributing a
product.
Using a market development strategy, a company or business unit can
1. Capture a larger share of an existing market for current products
through market saturation and market penetration
2. Develop new uses and/or markets for current products.
Consumer product giants such as P & G, Colgate-Palmolive, and
unilever are experts at using advertising and promotion to implement a
market saturation/penetration strategy to gain the dominant market
share in a product category
 Marketing Strategy
Using the product development strategy, a company or unit can
1. Develop new products for existing markets
2. Develop new products for new markets
When pricing a new product, a company or business unit can follow one of two
strategies.
For new product pioneers, skim pricing offers the opportunity to “skim the cream”
from the top of the demand curve with a high price while the product is novel and
competitors are few.
In penetrating pricing offer the pioneer the opportunity to use the experience curve
to gain market share with a low price and then dominate the industry.
In dynamic pricing, a practice in which prices vary frequently based upon demand,
market segment, and product availability.
 Financial Strategy
• Financial Strategy examines the financial implications of corporate
and business level strategic options and identifies the best financial
course of action.
• It can also provide competitive advantage through a lower cost of
funds and a flexible ability to raise capital to support a business
strategy.
• Financial strategy usually attempts to maximize the financial value of
the firm.
• Research reveals that a firm’s financial strategy is influenced by its
corporate diversification strategy.
 Research & Development Strategy
• R & D strategy deals with product and process innovation and improvement.
• It also deals with the appropriate mix of different types of R & D and with
the question of how new technology should be accessed- through internal
development, external acquisition or strategic alliances.
R & D choices include:
• Technology leader for example Nike Inc.
• Pioneering an innovation
• Technological follower for example Dean foods company
• Open innovation for example Intel opened four small scale research
facilities.
 Operations Strategy
• It determines how and where a product or service is to be
manufactured, the level of vertical integration in the production
process, the deployment of physical resources, and relationship with
suppliers.
• It should also deal with the optimum level of technology the firm
should use in its operations processes.
• A mass production system was an excellent method to produce a large
number of low-cost, standard goods and services.
• The other strategy is continuous improvement that use the same low-
cost competitive strategy but of higher level of quality.
 Purchasing Strategy
• Purchasing strategy deals with obtaining the raw materials, parts, and
supplies needed to perform the operations function.
• Deming, a well known management consultant, strongly recommend sole
sourcing as the only manageable way to obtain high supplier quality
• Sole sourcing reduces transaction costs and builds quality by having the
purchaser and supplier work together as partners rather than as adversaries.
• Parallel sourcing include two suppliers of two different parts, but they are
also backup suppliers for each other’s parts.
• If one vendor cannot supply all of its parts on time, the vendor is asked to
make up the difference.
 Logistics Strategy
• Logistics strategy deals with the flow of products into and out of the
manufacturing process.
• Three trends related to this strategy are evident:
1. Centralization
2. Outsourcing
3. Use of the Internet
Outsourcing logistics reduces costs and improves delivery time.
Many companies are using the internet to simplify their logistical
system.
 Human Resource Management Strategy
• HRM strategy, among other things, addresses the issue of whether a
company or business unit should hire a large number of low skilled
employees who receive low pay, perform repetitive jobs, and will most
likely quit after a short time or hire skilled employees who receive
relatively high pay and are cross trained to participate in self-
managing work teams.
• A 360 degree appraisal is being used by the Fortune 500.
• Having a diverse work force can be a competitive advantage
• Research reveals that firms with high degree of racial diversity have
high productivity than do with firms with less racial diversity.
 Information Technology Strategy
• Corporations are increasingly using information technology strategy
to provide business units with competitive advantage.
• Multinational corporations are finding that having a sophisticated
intranet allows employees to practice follow the sun management, in
which project team members living in one country can pass their work
to team member in another country in which the work day is just
beginning.
• Many companies like GE, Whirlpool use information technology to
form closer relationships with both their customers and suppliers
through sophisticated extranets.
 Errors that should be avoided while
outsourcing
a. Outsourcing activities that should not be outsourced: Companies
failed to keep core activities in-house.
b. Selecting the wrong vendor
c. Writing a poor contract
d. Overlooking personnel issues
e. Losing control over the outsourced activity
f. Overlooking the hidden costs of outsourcing
g. Failing to plan an exit strategy
 Strategies to Avoid

a. Follow the Leader

b. Hit another home run
c. Arms race
d. Do everything
e. Losing Hand