CHAPTER 9 : FUNCTIONAL LEVEL STRATEGY MARKETING STRATEGY

Four functional units: - marketing logic by which company hopes to create

customer value and achieve profitable customer
1. Marketing relationships.
2. Finance
3. Human resources - aims to help business become successful in a market
4. Production and operation by delivering customer-value products.

Functional level strategy

- intended to maximize the resource productivity of a classification of marketing strategies

company
1) Competitive position strategy
- supports business level strategy which supports  Market leader strategy
corporate strategy  (Market leader ) the company with
largest market share
Expand total demand strategy – by
developing new users or promoting
new product usage
Protect market share strategy – when
market leader continuously innovates
and fixes its weaknesses so competitors
won’t take opportunities
Expand market strategy – when offering
superior-quality, builds close customer
relationships, and creates good service
experience with customers
 Market challenger strategies
 (Market challenger) has market share
lower than market leader
Full frontal attack strategy – attacks the
strength of the market leader (matches
their product, price, and distribution
system) not their weaknesses
Indirect attack strategy – attacks the
weaknesses of market leader
 Market follower strategies
 (market follower) simply follows the
market leader instead of attacking them
 Holds market share lower than market
leader
Follow closely strategy – learn from
experiences of market leader by
improving its products and programs at
lower cost
 Follow at a distance strategy – holds on
to its current customers and tries to win
new customers fairly
 Market nicher strategies
 (market nicher) provides the needs of
small segment in a market that has not
yet given preference by market leader
Specialization niching strategy –
specialize in one type of specific
customer
Multiple niching strategy – has multiple
niching strategy as it serves two or
more market niches
2) Market strategy
- (market ) buyers, not the place
 Market identification strategy
 To determine customers and the manner
they are to be served
Segmentation strategy – devide the market
into distinct groups
Targeting strategy – to identify the
particular group of customers to be served
Positioning strategy – the way customers
are served
 Market-product growth strategies
 Two dimensions: market and product
 These dimension are classified either existing or
new
 To determine which product should be sold to
grow relative to the market and the product
Market penetration strategy – to improve
sales by selling of existing product to
current market segment
Market development strategy – improve
sales by sale of existing products to new
markets without abandoning old market
Diversification strategy – plans to grow by
entering to new market with new product
line
3) Pricing strategies
- not fixed but changes a product moves in life cycle
 New product pricing strategy
 Introducing new product therefore first
time to set prices
Skim pricing strategy – high initial price to
obtain highest revenue
Penetration pricing – low initial price to
easily penetrate and gain market share.
 Product mix pricing strategies
 Set of product lines offered for single price
Product line pricing strategy – set across an
entire product line
Optimal product line pricing strategy –
when there are accessories that can be
added to main product
Captive product pricing strategy – when
certain product must be used with other
products. Ex: razor and blade
By-product pricing strategy – when
producing main product results in by-
product with saleable value
Product bundle pricing strategy - When
products are offered as a bundle with one
collective price
Price adjustment strategies – the market
price rises and falls
 Discount and allowance PS
 Promotional PS
 International PS
4) Promotion and distribution strategies
- plans for activities intended to communicate its
products to target customers
 Promotion mix strategy
Push strategy – uses distribution
channels in promoting and selling
Pull strategy – influence a buyer to
purchase by heavy advertising and
customer promotion
 Distribution strategies
Personal selling strategy – presents the
product to customers to sell and build
strong relationship
 Retailing strategy – sells goods directly
to customers for personal use
Wholesaling strategy – when planning
to sell goods to reseller companies
2) Investing strategies
 Concerned with investment portfolio management
to maximixe returns at certain level of risk

 Management strategy
 How company manages its investment portfolio
at a particular level of risk
Passive management strategy – places
investment portfolio when market prices are
rising and giving higher returns
Active management strategy – when market
prices are falling with shorter cycle (bear
market)
 Asset allocation strategies
 Company invests funds in a mixture of
assets that have low correlation to each
other , to optimize return and risk level
Strategic asset allocation strategy – when
company has fixed allocation of its
investment portfolio
FINANCIAL STRATEGY
Tactical asset allocation strategy – portfolio
- responsible for formulation of financial strategies mix is changed when market conditions
change. Risk is managed through (portfolio
Intended to maximize the financial value of a company rebalancing) the portfolio mix is returned to
original allocation to realize gains
1) Financing strategy
 Investing strategies
 Aggressive financing strategy
Value investing strategy – purchases
 Fixed assets are financed by long term debt,
discounted assets
equity, and spontaneous current liability
Growth stock investing strategy – purchases
 A leveraged buyout (LBO) where company
assets or companies that have above
borrows significant amount of funds to
average earnings growth
acquire another company; assets of
Momentum investing strategy – buys
acquired company as collateral
securities with average earning in short
 Conservative financing strategy
period of time then sells securities with
 Total asset is financed by long term debt,
poor growth
equity, and spontaneous current liability
 Only seasonal portion of temporary CA is
financed by short-term debt
 Maturity matching financing strategy
 Also known as self-liquidating strategy
 Funds all temporary current assets with
short term debt
 Permanent CA is financed by long term
debt, equity, and spontaneous current
liability

HUMAN RESOURCE STRATEGY
- Organizational plan about human resource policies
and practices and the way they integrate with other
functional areas
1. Overarching human resource strategies
 Concerned with overall effectivity of
company in terms of human resources
 Ensures that employees become
committed, motivated, and engaged
2. Specific human resource strategies
 What a company intends to do in specific
areas of HR management
 Organizational effectiveness strategy
 focus on improvement of the processes to
achieve company’s goals and development
of positive culture
Organizational development strategy – to
develop the preparation and implementation of
organizational development
Organizational transformation strategy –
radically change company’s structure, culture,
and processes
Culture management strategy – to identify the
way company can manage changes in culture
from present to future state
Knowledge management strategy – to acquire,
use, transfer knowledge effectively to achieve
competitive advantage
Commitment strategy – to develop
communication, education, training to increase
employee motivation for their commitment to
the company
Climate of trust strategy – to develop or build
trust
Quality management strategy – to create and
maintain quality-oriented culture and standards
Continuous improvement strategy – to create or
maintain quality and reliability of products and
services
Customer service strategy – to achieve
excellence in service in terms of delivering
promises, resolving customer’ problems, etc.
 Resource strategies
 Concerned with meeting requirements of
company in terms of skills, talents, and
behavior
 Match right people with appropriate skills,
knowledge, and potentials
Recruitment and selection strategy –
sourcing right employees for right positions
at right time
Retention strategy – to ensure that right
employees remain with a company
Flexibility strategy outsourcing or enhancing
multi-skilling to create flexible organization
Talent management strategy – develop
employees with talent and ensure that the
company is able to motivate and retain
them
 Learning and developing strategies
 Concerned with developing a learning
company that will provide opportunities to
enhance talents and skills
 Ensures that a company has talented and
skilled individuals
Creating a learning culture strategy – that
encourages growth, increases commitment,
empowers employees with sense of
purpose in workplace
Organizational learning strategy –
development of company’s resource-based
capacity by investing in people
 Learning organization strategy – continuous
expansion of learning organization by
facilitating learning of all members
Individual learning strategy – to identify,
manage, and support individual learning
through guidance, support, coaching,
mentoring, training
 Managing performance strategies
 Deliver and improve performance of
employees
 To develop high performance culture and
increase organizational effectiveness
Vertical integration strategy – align business
performance objectives with competency,
commitment, objectives in company
Functional integration strategy – align
functional strategies in f=different parts of
business
HR integration strategy – link aspects of HR
management to achieve coherent approach
in managing people
Individual’s needs integration – link it to the
performance of a company as a whole
 Reward strategies
 What a company believes should be valued
and rewarded
Broad-brush reward strategy – to commit or
support a company toward a total rewards
policy
Specific reward initiative strategy – to select
specific reward based on analysis
organizational situation and assessment of
company’s employees needs
 Employee retention strategies
 How a company determines what needs to
be done and changed in terms of managing
employee relationships
Adversarial strategy – company decides
what it wants to do and employees are
expected to cooperate
Traditional strategy – reflects daily working
relationship where employees react
through their elected officials
Power-sharing strategy involve employees
in operation and strategic decisions
HR management strategy – build employee
relations by considering support to all
employees with mutual commitment to
various functional areas
PRODUCTION AND OPERATION STRATEGY
-core functional unit of business
- formulated with coordination with other functional
units
- objective is to efficiently reconcile the market
requirements with operational resources of company
1. Infrastructural operation strategy
 To enhance efficiency of resource utilization
in order to achieve high level of productivity
 Production planning and control strategy – to
ensure that the right quantity of the product is
produced at a right time
Lean operation strategy – to eliminate
waste from the production process thus
reducing production cost and increase
customer value
TQM strategy – to continuously improve
production process by eliminating
manufacturing errors
Business process re-engineering BPR
strategy – to improve overall production
process by eliminating processes that do
not add value to product
Six sigma process strategy – to improve
production process by reducing number of
defective finished goods
 Inventory management strategies – to control
the flow and transfer of raw materials to
finished goods to prevent too high or love
inventory level.
Inventory planning and control strategy –
determine optimal quantity and timing of
inventory
Supply chain planning and control strategy –
streamline activities in the supply chain
JIT strategy – align the acquisition of raw
material with production schedule
 Economic order quantity strategy – reduce Functional layout strategy – products with
inventory costs by ensuring that a company different needs will be moved to different
orders the right material requirements locations
Cell- layout strategy – processed product
 Capacity planning strategies – produce and enters cell for further processing
maintain enough products to meet customer Product layout strategy – arranges the
demand that resolves shortage or overage transformation of resources so products
Lead capacity strategy – increases flow through prearranged route
production capacity in anticipation of
expected increase in market demand
Lag capacity strategy – only increase
production base on actual market demand
Match capacity strategy – makes small R&D STRATEGY
incremental capacity increase based on
 To introduce improvement and innovation to
changes in market situation
business procedures and products
Basic research strategy – to gain deeper
2. Structural operation strategies
understanding and build knowledge
 Tangible shape and architecture of
regarding the subject matter of inquiry
producing goods or providing services
Applied research strategy – to determine
 Process design strategies – in selection of
particular approach to address specific need
requirements, resources, and processing
of customer relative to the product
methods to convert inputs to outputs
Development research strategy – addresses
Project process design strategy – to produce
the need to innovate new product or
highly customized product over relatively
process
long period of time
Jobbing process design strategy – distribute TECHNOLOGY STRATEGY
company’s resources to more highly
customized products  Use of technology in production and operation,
Batch process design strategy – to produce including developing of product
several products that will undergo similar,
CRAFTING A FUNCTIONAL LEVEL STRATEGY
repetitive processes
Mass process design strategy – to produce  Observe the following
high volume of projects with narrow/limited 1. Review the focus of the business level strategy
design 2. Identify functional level strategic measures to
Continuous process design strategy – support business level strategy
produce high volume of products over long 3. Coordinate the strategic plans of different
period of time functional units
 Layout design strategies – physical arrangement of 4. Define the functional level strategy in every
resources; objective is to design a physical layout functional unit
that transforms resources relative to other tasks
 Facility layout strategies – to ensure that there is
efficient and smooth flow of production,
manpower, and equipment
Fixed- position layout strategy – equipment,
materials and other transforming facilities
are moved to a product