STRATEGY FORMULATION (Functional Area Analysis)

All organizations have strengths and weaknesses in the

functional areas of business. No enterprise is equally
strong or weak in all areas.

-requires the gathering and assimilating of information

about the firm’s:

1. Management
2. Marketing
3. Finance/Accounting
4. Production/Operations
5. Research and Development
6. Computer Information system

DISTINCTIVE COMPETENCIES - a firm’s strength that cannot be

easily matched or imitated by customers.

FUNCTIONAL AREAS
A. MANAGEMENT
Functions:

1. PLANNING
 essential bridge between the present and the future
that increases the likelihood of achieving desired
results.
 Cornerstone of effective strategy formulation
 Allows a firm to adapt to change
3 LEVELS
 TOP MGMT-2 to 5 years
 MIDDLE MGMT-6 mos to 2 yrs
 LOWER MGMT-1 wk to 6 mos

b. ORGANIZING
 the process of determining who does what and who
reports to whom
 means of achieving coordinated efforts by defining task
and authority responsibility

work specialization-breaking down tasks into jobs

departmentalization-combining jobs to form departments
delegating authority-

c. STAFFING
  includes all activities such as recruiting, selecting,
orienting, training, developing, evaluating, rewarding,
disciplining and determining movement of employees.

d. DIRECTING
1. Motivation
 process of influencing people to accomplish
specific objectives
 it explains why some people work hard and
others do not

2. Leadership-ability to achieve higher levels

3. Communication-determines whether strategies can be
implemented successfully; open to discuss concerns

e. CONTROLLING
 includes all activities undertaken to ensure that
actual operations conform to planned operations.
STEPS:
1. Establishing performance standard
2. Measuring individual and organizational performance
3. Comparing actual performance to planned performance
standards
4. taking corrective actions if necessary

B. MARKETING
-process of defining, anticipating, creating and fulfilling needs
and wants for products and services

9 FUNCTIONS:

1. Customer Analysis-the examination and evaluation of

consumers needs , desires and wants
2. Buying-consists of evaluating alternative suppliers or
vendors, selecting the best suppliers, arranging acceptable
terms with them and procuring the suppliers.
3. Selling products and services
4. Product and Service planning
5. Pricing
6. Distribution
7. Marketing research—systematic gathering, recording and
analyzing of data about problems relating to the marketing
of goods/ services.
8. Opportunity Analysis- involves assessing the costs
benefits and risks associated with marketing decisions.
9. Social responsibility
C. FINANCE/ACCOUNTING
3 decisions
1.Investment decisions/capital budgeting
 the allocation and reallocation of capital and
resources to projects, products, assets and divisions
of an organization.

2.Financing decisions
 concerns in determining the best capital structure for
the firm and includes examining various methods by
which the firm can raise capital

3.Dividend decisions
 concern on issues such as the percentage of earnings
paid to stockholders, the stability of dividends paid
overtime and the repurchase or issuance of stocks
 funds retained compared to paid-out

D. PRODUCTIONS/OPERATIONS
 consists of all those activities that transform inputs
into goods and services.
5 FUNCTIONS
a. Process-concern the design of the physical production
system
 choice of technology
 facility lay-out
 process-flow analysis
 facility location
 process control
 transportation analysis

b. capacity-determination of optimal output levels for the

organization
 forecasting
 scheduling

c. Inventory- managing the level of raw materials, work-in

process and finished goods
 what to order
 when to order
 how much to order
 materials handling

d. workforce- concerned with managing the skilled, unskilled

clerical and managerial employees
 job design
job enrichment
work status
motivation

e. quality – arrived of ensuring that high quality goods and

services are produced
 quality control
 sampling
 testing
 quality assurance
 cost control

E. Research and Development

 investments in this area lead to superior product or
service and give them competitive advantage
 developing new product, improving product quality,
improving manufacturing process
F. Computer Information System
 this improves firm’s performance by improving the quality of
managerial decisions
 information age