Functional Strategies 1
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Transcript of Functional Strategies 1
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FUNCTIONAL STRATEGIES
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Functional Strategies
y Purchasing and Materials Management
y Production/ Operations Management
y Financey Research and Development
y Human Resources Management
y Information Systems
y Marketing
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Purchasing and Materials Management
Purchasing function is the first step in thematerials management process.
Function
In Manufacturing companies, purchasingdept. buy raw materials for productiondept.
In retailing organizations, individual
buyers purchase clothing, toys and othermaterial for resale to ultimate consumers.
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Purchasing and Materials Management
Tasks
Identify potential suppliers, evaluatethem,
Invite bids
Price quotations,
Negotiate prices and terms of payment,
Place orders, follow up on those orders,
Inspect incoming shipments
Pay suppliers.
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Purchasing and Materials Management
Niche-Low-Cost / Low-Cost StrategyCompanies using these strategies emphasize
purchasing at the lowest cost possible.
Large Org. purchase at low costs throughtheir ability to demand quantity discounts.
Small org. must attain low-cost purchasing
in other ways which may be in form ofIndustry Network or to develop contact with
Domestic & Foreign suppliers.
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Purchasing and Materials
ManagementNiche-Low-Cost / Low-Cost Strategy
Businesses using niche-low-cost or low-coststrategies should seek out the best cost.
The best cost is as low as possible
consistent with the quality of thepurchased good or service
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Purchasing and Materials Management
Niche-Differentiation / Differentiation Strategy
Organizations that use these strategiesemphasize on:
Procu
rement of high-quality inputs
The quality of the parts or products takesprecedence over cost considerations.
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Purchasing and Materials Management
Niche-Low-cost Differentiation / Low-CostDifferentiation Strategy
Organizations that use these strategiesemphasize on:
Buying high-quality inputs at low-costs
Businesses that adopt these strategies
may be able to attain this purchasing goalthrough the development of organizationalexpertise and image.
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Production/ Operations Management
POM is most often associated withmanufacturing processes, operations
management is crucial to all types oforganizations.
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Production/ Operations Management
Strategies for SBUs
Niche-Low-Cost Strategy
SBUs that use this strategy emphasize:
low initial investments to hold their fixed
costs down.
They attempt to keep their variableoperations costs as low as possible.
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Production/ Operations Management
Strategies for SBUs
Niche-Low-Cost Strategy
Since the emphasis in on holding costsdown, production/ operation strategies
are continuously scrutinized to makethem more efficient.
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Production/ Operations Management
Strategies for SBUs
Niche-Differentiation Strategy
Its emphasis is on Superior quality.
Low costs are not the primary concern ofthis strategy.
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Production/ Operations Management
Strategies for SBUs
Niche-Low-Cost Differentiation Strategy
Its emphasis simultaneously on lower
costs and heighten differentiation.
This strategy may initially involve highercosts but over time, cost savings and
quality improvements evolve.
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Production/ Operations Management
Strategies for Large BUs
Large BUs take advantage of experiencecurve.
Experience Curve
the reduction in per unit costs that occursas an organization gains experienceproducing a product service.
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Production/ Operations Management
Strategies for Large BUs
Variables of Experience Curve
Learning
Economies of Scale
Capital-labor substitution
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Production/ Operations Management
Strategies for Large BUs
Low-Cost Strategy
Businesses that compete with thisstrategy tend to buy their way to lower
costs.They sell their products or services at low
prices.
The low prices increase their volume,
thereby permitting them to lower theircosts by use of Experience Curve.
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Production/ Operations Management
Strategies for Large BUs
Low-Cost Strategy
These businesses are Vulnerable to BU
that are also able to attain low costs butoffer better quality products andservices. .
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Production/ Operations ManagementStrategies for Large BUs
Differentiation / Low-Cost-DifferentiationStrategy
Businesses using this strategy chargeaverage to high prices, seeking to gain
market share by offering higher qualityinputs.
Managers using differentiation strategy donot actively capitalize on the
opportunities presented by lower costs,whereas managers competing with low-cost differentiation do.
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Production/ Operations Management
Strategies for Large BUs
Differentiation / Low-Cost-DifferentiationStrategy
Differentiation strategy users arevulnerable to competitors that offeralternative products, but at lower orpredatory prices.
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FINANCE
The finance function encompasses not
only cash management but also the use
of credit and decisions regarding
capital investments.
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FINANCE
Niche-Low-Cost / Low-Cost Strategy
Businesses using this strategy pursuefinancial strategy that are intended to
lower their financial costs.
They attempt to keep their costs withinthe limits of the funds they are able to
generate from operations.
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FINANCE
Niche-Differentiation/ Differentiation
Strategy
Businesses that adopt these strategiespursue financial strategies that fund
quality enhancements.
To stay with their competitors, theydirect their financial efforts toward
upgrading their present and futureoutputs.
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FINANCE
Niche-Differentiation/ Differentiation
Strategy
In short the aim of these BU is t place
the highest strategic priority on Quality
maintenance rather than on financial
considerations.
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RESEARCH AND DEVELOPMENT
R&D has two basic components:
Product/ Service R&D refers to effortsthat ultimately lead to improvements or
innovations in the companys outputs.
Process R&D aims at reducing the costsof operations and making them more
efficient.
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RESEARCH AND DEVELOPMENT
Niche-Low-Cost/ Low-Cost Strategy
Business units that compete thesestrategies emphasize Process R&D to
reduce their operation costs.
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RESEARCH AND DEVELOPMENT
Niche-Differentiation/ DifferentiationStrategy
Business units that use these strategies
place more importance on Product/Service R&D to produce improved andnew innovative outputs.
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RESEARCH AND DEVELOPMENT
Niche-Low-Cost Differentiation/ Low-CostDifferentiation Strategy
Businesses using these simultaneously
stress both Product/ Service R&D andProcess R&D efforts.
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HUMAN RESOURCE MANAGEMENT
The HRM functions include such majoractivities as planning for future HR needs,recruiting personnel, and many others.
The aim is to build a work force thatenables the organization to achieve itsgoals.
To facilitate the development andutilization of organizationalcompetencies.
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HUMAN RESOURCE MANAGEMENT
Niche-Low-Cost/ Low-Cost Strategy
Businesses using these strategies must
reward employees who help reduceoperating costs.
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HUMAN RESOURCE MANAGEMENT
Niche-Differentiation/ DifferentiationStrategy
Businesses using these strategies shouldestablish reward systems that encourageoutput improvements or innovations.
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INFORMATION SYSTEMS MANAGEMENT
A well-designed information system canbenefit all of a business units functionalareas.
A computer-based DSS can permit eachfunctional area to access the info itneeds.
It allows to communicate with otherdepartments to enhanceinterdepartmental coordination.
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INFORMATION SYSTEMS MANAGEMENT
It can cut internal costs while promotingdifferentiation and quality through a
faster response to the market needs.
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MARKETING
Marketing consists of four dimensions:- Products/ Services- Pricing
- Channels of Distribution/ location ofoutlets- Promotion
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MARKETING
Low-Cost Differentiation / Differentiation
Strategy
Business units following these strategies
emphasize on Marketing quality products and
services that are distinguishable from theoutputs of rivals .
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MARKETING
Niche-Low-Cost Differentiation / Niche-
Differentiation Strategy
Business units following these strategies tend
to offer specialized, highest quality products
and services to meet the particular needs ofa relatively small market.
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BENCHMARKING
Buyers everywhere look for value.
Benchmarking refers to the comparison offunctional and cross-functional
performance of one business relative todesirable standards.
Businesses benchmarked their
performance relative to the superiorrivals in the same industry.
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INTEGRATING THE FUNCTIONS
Strategic success requires that allfunctional activities be tightly integrated.
Businesses that are best able to achievefunctional integration are those mostlikely to attain the competitiveadvantages.
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INTEGRATING THE FUNCTIONS
Superior Product Design
Superior Customer Service
Superior Speed
Superior Guarantee