Question

What is a functional strategy? What are stability strategies in business? What are the pros and cons of these strategies? What are competitive and cooperative strategies? What are the tradeoffs (pros and cons) between an internal and an external growth strategy? Which approach is best as an international strategy? Why? What about retrenchment?

Answer 1

Functional Strategy:- functional strategy is the strategy or an organizational plan adopted by each functional area of a company such as marketing, finance, human resource and so on to achieve organizational objectives. each department develops certain objective and aids in the achievement of final organizational goals.

for example, marketing strategy involves decision how to price, sell, advertise and distribute a product so as to maximize company profit and to achieve the goal.

pros:- 1. employees feel that their abilities are effectively used

2.they are usually a complex of several operational plans.

3. by concentrationg on each and every functional area employees are effectively assigned to the task according to their knowledge and experience.

cons:- 1. they are not effective in small business as there is the need of extra staff.

2. functional managers can loose the sight of main organizational goal.

3. there can be conflict between overall corporate strategy and functional strategies of various areas.

Stability Strategy:- it refers to the strategy where the company stops the expenditure on expansion. it refers to the situation where the company do not venture into the new market and introduce new products. the company adopts this strategy when

1. company has too much debt in balance sheet.

2. when company is operating in the industry which is in its maturity phase.

3. there is no further scope of growth.

4. when the gains from the expansion plans are less than the cost involved.

5. when there is slowdown in the economy.

Pros:- 1. it is less risky because unless the condition is very bad there is no need to take additional risks.

2. there is no disruption in routine work while pursuing this strategy.

3. the management does not forsee any threat or opportunity in the market or any change in the environment.

Cons:- the downside of this strategy may be setting of boredom where you are going to do daily stuff.

Competitive strategy and corporate strategy:- competitive strategy refers to how a company competes in the market and seeks to gain advantages over its competitors or rivals. it is aimed at creating defensive position in an industry and creating a superior return on investment. corporate strategy is concerned how companies create values across differente businesses and asks how corporation can add value over and above that which a busines unit creates by itrself.

Internal and external growth strategies:- internal growth stratiegies refers to the action plans which uses the internal resources of the company to achieve goals. it includes such as expansion, diversification and modernization. it refers to the develpoement of new products, increasing efficiency, recruit the right people and better marketing. external growth strategy reliying on external forces. it uses corporate funds to purchase other companies/ bussineses/technologies.it includes foreign collaboration and joint venture, amalgamation , merger and acquisition.

tradeoffs of internal and external growth strategy

pros:- 1. company can grow quicker and can made partnerships.

2. building partnerships can take the business at global level

3. business can spend its operation internally because company can understand its produsts and services internally and can identify how operations can be grow.

4. bussiness can maximize its profit by creating ways to increase sales within the organization.

5. if the business is losing money within its organization then the business have chances to cutdown the cost of that operation.

Cons:- 1. it can be costly.

2. it can take too much time to produce new products to increase sales and profits.

it is not possible to trust other companies with privacy issues.

International strategy:- it refers to the plans that guide commercial transaction taking place between entities in different countries. or we can say it is the strategy by which a company sells its product and services to the outside of its country. it is generally adapted by private companies rather than that of government companies.

there are mainly three strategies under this such as multidomestic, global and transnational strategy.

in my view, transnational strategy is the best approach in this because in this firms tries to balance the desire for the efficiency with the need to adjust to local prefernces within various countries. for examples mc donalds and KFC is providing food with the same brand names and with the same menu items around the world.

retrenchment strategy:- a strategy used by companies to reduce the diversity or the overall size of the operations of the company. it is used to cut expenses so that company can become more stable financially.it includes turnaround strategies, divestment strategy and liquidation strategy.