Role of Functional Strategy

1. Assist in the overall business strategy by providing information concerning the management of
business activities.
2. It explains the way in which functional manager should work, as to achieve better result.

Functional Strategy Objective

1. Profitability
2. Market share
3. Human talent
4. Financial health
5. Cost efficiency
6. Product quality
7. Innovation
8. Social responsibility

BUSINESS LEVEL STRATEGY: PRIMARY CONCERN

1. Coordinating and integrating unit activities so they conform to organizational activities.

2. Developing distinctive competency and competitive advantage on its unit.
3. Identifying product or service market mix and developing strategies for competing to its unit.
4. Monitoring product or service markets so that strategies conform to the needs of the market at
the current stage of evolution.

The main characteristics of business level strategy

a. Specific
b. Short term orientation
c. Simplicity – increase market share, develop brand recognition
d. Independent

Corporate governance is the processes through which the corporation objectives are set and pursued in
the context of social, regulatory and market environment, this includes the following:

 monitoring the actions

 policies
 practices
 decision of corporation, there agent and affected stakeholders

Function of Corporate Governance

 Accountability
 Transparency
 Ethics
 Compliance
 Company Vision
Benefits of Corporate Governance

1. Ensure corporate success and economic growth

2. Maintain investor confidence, as a result of which, the company can raise capital effectively
and efficiently
3. Lower capital cost
4. Positive impact in the share price
5. Provides proper inducement to the owners and also its managers to achieve objective that
are in interest of the shareholders and the organization
6. Minimizes wastage, corruption, risk, and mismanagement
7. Helps in brand formation and development
8. Ensures organization in management in a manner that fits the best interest of all
 Operational Plan Strategy

Financial Plan

-Determine the costing method to be used on tis products

-internal control, compliance, and improvement

-evaluating financial performance

-cost estimate of materials

Production Planning

-products specification

-set standard/product quality

-estimate changes in raw materials needed for the operation

Market Planning

-develop long term relationship with customer

-pricing strategies in order to be competitive

-target market selection

-increasing demand by sales and promotion

Manpower Planning

-design training program

-performance appraisal

-compensation and benefits of workers

-rewards, awards, recognition and other benefits intended for rank and file employees

Research &Development Planning

-improving quality and reliability of finished products

-survey or investigate what is lacking to improve low demand products

Product and Development Planning

-minimize defects or wastage

-optimize equipment waste and maximize capacity

-innovate, repackage the obsolete products with low market share

ENVIRONMENTAL

Demographic

Commonly analyzed on a global basis because of their potential effects across countries, borders, and
because many firms & companies’ concepts in the global market.

a. population

b. age factor

c. Geographic distribution

d. Ethnic needs

e. Income distribution

Economic

Refers to the nature and direction of the economy in which a company or firm competes or may
compete.

a. Inflation rates

b. Interest rate

c. Trade deficits/surplus

d. Budget deficits/surplus

e. Personal savings rate

f. Business trading rate

g. Gross domestic product

Political or Legal

Represents how organization and government represents mutually try to influence each other, and how
firms try to understand these influences on their strategic actions.

a. taxation laws

b. Anti-tax laws

c. Deregulated philosophies
d. Labor training law

e. Educational philosophies and policies

Socio Cultural

Is concerned with the society’s attitudes and cultural values. Attitudes and values form the cornerstone
of a society, they often drive demographic, economic, political/legal, and technological conditions and
changes.

a. Workforce

b. Diversity attitudes about the quality of work life

c. Shift in work and career preferences

d. Shift in product and service preferences, characteristics

e. Women in the workforce

Technological

Technology changes occur through new products, processes and materials. Technological environment
includes the activities involved in creating new knowledge and translating that new knowledge into new
outputs, products, processes, and materials. Given the rapid phase of technological changes and risk of
disruption, it is vital for firms to study this environment.

a. Product innovation

b. New communications technologies

c. Application of knowledge

d. Focus of private and government supported research and development expenditures

Global

Markets and consumers are more global. This environment includes relevant new global markets,
existing markets that are changing, important international political events and critical, cultural and
institutional characteristics of global markets.

a. Important political events

b. Critical global markets

c. Newly industrialized countries

d. Different cultural and institutional attributes.

Physical

Concerned with trend oriented to sustain the world’s physical environment, firms recognize that
ecological, social, and economic system interactively influence what happen in this particular
environment. Potential and actual changes in the physical environment and business practices that are
intended to positively respond to and deal with those changes.

a. Energy consumption

b. Practices sued to develop energy source

c. Renewable energy efforts

d. Minimizing a firm’s environmental footprint

e. Availability of water as a resource

f. Producing environmentally friendly product

g. Reacting to natural or manmade disaster

Types of Core Competencies

Skills in manufacturing high quality products

Speed in responding in new market trends

Better after sales service capabilities

Speeding new/next generation product to market

Innovation in developing popular product features

 TWO DIFFERENT TOOLS OF STRATEGY

A. Balance Scorecard

1. Learning and Growth Measures - are the engines of other measures. They motivate employees to
actualize other measures. Organizations will find difficulty in translating strategies to workable
performance.

2. Customer Measures – are used by organization to increase customer reach and satisfactions.

3. Internal Process – For operationally excellent organizations, relevant measures are on supply chain.
For product leader organizations, the measures are on innovation, while on customer intimate
organization, focus are on customer satisfaction.

4. Financial – This perspective stresses the need to define a mechanism that measures growth and
profitability.

B. As Information Strategy

1. Process Improvement – the entire workforce is empowered to initiate changes within the
organization. It creates a unique impact on work culture since every member in the organization is
involved.

2. Process Redesign – goes beyond just initiating changes. It involves a more serious and thorough study
on company directions, goals, and plans in the life of customer expectations and business profitability.

3. Business Process Reengineering – is a fundamental rethinking and radical redesign of business

processes to achieve dramatic improvements in critical contemporary performance and measures such
as cause, quality and service.
 CREATING AND SUSTAINING COMPETITIVE ADVANTAGES

1. Overall Cost leadership

a. low-cost position relative to company peers

b. Manage relationship throughout the entire value chain

2. Differentiation

a. create products or services that are unique and valued

b. non price attributes for which customer will pay a premium

3. Focus Strategy

a. Narrow product lines, buyer segment, or targeted geographic markets

b. Attain advantages either through differentiation or cost leadership

OVERALL COST LEADERSHIP

1. Tight cost, and overhead control

2. Cost minimization in all activities in the company’s value chain such as research and
development, salesforce and advertising, and service
3. Vigorous pursuit of cost reduction from experience.

Overall Cost leadership - Improving Competitive Position

a. Protects a company against rivalry from competitors

b. Protects a company against powerful buyers
c. Provides more flexibility to cope with demands from powerful suppliers for input cost increases
d. Provides substantial entry barriers from economics of scale and cost advantage
e. Puts the firm in a favorable position with respect to substitute products.

Pitfalls of Overall Cost Leadership

1. The strategy is initiated too easily

2. All rivals share a common input or raw materials
3. Lack of parity on differentiation
DIFFERENTIATION STRATEGY

1. Prestige or brand image

2. Technology
3. Innovation
4. Features
5. Customer service
6. Dealer network

Differentiation Strategy - Improving Competitive Position

a. Create higher entry barriers due to customer loyalty

b. Provides higher margins that enable company to deal with supplier power
c. Reduces buyer power because buyers lack suitable alternative
d. Reduces supplier power due to prestige associated with supplying to highly differentiated
products
e. Establish customer loyalty and less threat from substitute

Pitfalls of Differentiation Strategy

a. Too much differentiation

b. Too high price premium
c. Uniqueness that is not valuable
d. Differentiation that is easily imitated
e. Perception of differentiation may vary between buyers and sellers

FOCUS STRATEGY

Based on the choice of a narrow competitive scope within an industry

a. Company selects a group of segment and tailor its strategy to serve them
b. Company achieves competitive advantage by dedicating itself to these segments exclusively

Focus - Improving Competitive Position

a. Create barriers of either cost leadership or differentiation

b. Focus is used to select needs that are less vulnerable to substitute of where competitors are
weakest

Pitfalls of Focus Strategy

a. Focus products and services are still subject to competition from new products
b. Focusers can become too focused to satisfy buyer’s needs
PRIMARY BENEFITS OF SUCCESSFUL INTEGRATION OF LOW-COST AND DIFFERENTIATION STRATEGY

a. Difficulty for competitors to duplicate or imitate strategy

b. Goal of combination strategy is to provide unique value
c. Combination Strategy - Improving Competitive Position
d. High entry barriers
e. Reduces power of buyers
f. Bargaining power over supplier
g. Reduces possibility of head-to-head rivalry
h. Value position reduces threat from substitute products

Pitfalls of Combination Strategy

1. Company that fails to attain both strategies may end up with neither and stuck in the middle
2. Miscalculating sources of revenue
3. Profit pools in the company industry