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Chapter 7

by: Shayna Davis

Chapter 7 CSR 404

Shayna Davis
GPA 3.4
Strategic Management

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Strategic Management
Class Notes
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This 3 page Class Notes was uploaded by Shayna Davis on Friday March 27, 2015. The Class Notes belongs to CSR 404 at Purdue University taught by Mohan in Spring2015. Since its upload, it has received 177 views.


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Date Created: 03/27/15
Chapter 7 Functional Strategy 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 capability to provide a company with a competitive advantage Marketing Strategy deals with pricing selling and distributing a product Market Development Strategy a company and business unit can 1 capture a larger share of an existing market for current products through market saturation and market penetration or 2 develop new uses andor markets for current products Product Development Strategy a company or unit can 1 develop new product for existing markets or 2 develop new products for new markets Push Strategy spending a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets Includes discounts in store offers and advertising allowances Pull Strategy advertising pulls the products through the distribution channels Builds brand awareness so customers ask for the product Financial Strategy examines the nancial implications of corporate and business level strategic options and identi es the best nancial course of action Leveraged Buyout LBO a company is acquired in a transaction nanced largely by debt which is usually obtained from a third party such as an insurance company Research and Development Strategy deals with product and process innovation and improvement Technological Leader pioneers and innovation Technological Follower imitates the products of competitors Open Innovation rm uses alliances and connections with corporate government academic labs and even consumers to develop new products and processes Operations Strategy determines how and where a product or service is to be manufactured the level of vertical integration the deployment of physical resources and relationships with suppliers Continuous Improvement crossfunctional work teams strive consistently to improve the production process Mass Customization appropriate for an everchanging environment requires that people processes units and technology recon gures themselves to give customers exactly what they want and when they want it the result is lowcost highquality customized goods and services Purchasing Strategy deals with obtaining the raw materials parts and supplies needed to perform the operations functions Logistics Strategy deals with the ow of products into and out of the manufacturing process Human Resource Management HRM Strategy attempts to nd the best t between people and the organization Information Technology Strategies provide business units with a new technology to give them a competitive advantage Outsourcing purchasing from someone else a product or service that had been previously provided internally Offshoring the outsourcing of an activity or function to a wholly owned company or an independent provider in another country The key to outsourcing is to purchase from outside only those activities that are not key to the company s distinctive competence In deciding on functional strategy a strategic manager must 1 Identify the company s core competencies 2 Ensure that the competencies are continually being strengthened 3 Manage the competencies in such a way that best preserves the competitive advantage they create Strategies to Avoid 0 Follow the Leader lmitating the strategy of a lead competitor 0 Hit Another Home Run the probability of pioneering a second winner is slight Arms Race entering into a spirited battle with another rm for an increase in market share might increase sales revenue but that increase will probably be more than offset by increases in advertising promotion RampD and manufacturing 0 Do Everything don t try to invest in several projects at the same time it will waste resources 0 Losing Hand when so much has been invested in a particular strategy and top management doesn t want to accept the fact that the strategy is unsuccessful Corporate Scenarios proforma balance sheets and income statements that forecast the effect that each alternative strategy and its various programs will likely have on division and corporate return on investment Creates 6 different proforma scenarios re ecting 3 different situations Optimistic Pessimistic and Most Likely for 2 strategic alternatives Risk composed not only of the probability that the strategy will be effective but also of the amount of assets the corporation must allocate to that strategy and the length of time the assets will be unavailable for other uses Real Options Approach when the future is highly uncertain it pays to have a broad range of options open Political Strategy aimed at in uencing key stakeholders Commonly used constituency building political action committee PAC contributions advocacy advertising lobbying and coalition Strategic Choice the evaluation of alternative strategies and the selection of the best alternative Devil39s Advocate a person or group assigned to identify potential pitfalls and problems with a purposed alternative Dialectical Inquiry requires that two proposals using different assumptions be generated for each alternative strategy under consideration Each resulting alternative must meet 4 criteria 1 Mutual Exclusivity doing any one alternative would preclude doing any other 2 Success it must be feasible and have a good probability of success 3 Completeness it must take into account all the strategic factors 4 Internal Consistency t must make sense on its own as a strategic decision for the entire rm and not contradict key goals policies and strategies currently being perused by the rms or units When crafted correctly an effective policy accomplishes Forces tradeoffs between competing resource demands Tests the strategic soundness of a particular action 0 Sets clear boundaries within which employees must operate while granting them freedom to experiment within those constraint


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