5. strategies in action

7/31/2019 5. Strategies in Action

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Copyright 2011 Pearson EducationCh 5 -1

Chapter 5Strategies in Action

Strategic Management:

Concepts & Cases13th Edition

Global Edition

Fred David


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Long Term Objectives

Quantitative

Measurable

Realistic

Understandable

Challenging

Hierarchical

Obtainable

Congruent


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Financial vs. Strategic Objectives

Financial ObjectivesGrowth in revenues

Growth in earnings

Higher dividends

Larger profit margins

Greater ROI

Higher earnings per share

Rising stock price

Improved cash flow


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Financial vs. Strategic ObjectivesStrategic Objectives

Larger market share

Quicker on-time delivery than rivals

Shorter design-to-market times than rivals

Lower costs than rivals

Higher product quality than rivals

Wider geographic coverage than rivals

Achieving technological leadership Consistently getting new or improved

products to market ahead of rivals


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Not Managing by Objectives

Managing by Extrapolation If it aintbroke, dont fix it

Managing by Crisis The true measure of a

good strategist is the ability to fix problemsManaging by Subjectives Do your own

thing, the best way you know how

Managing by Hope The future is full ofuncertainty and if at first you dont succeed,

then you may on the second or third try


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The Balanced Scorecard

Robert Kaplan & David Norton

Strategy evaluation & control technique

Balance financial measures with

nonfinancial measures

Balance shareholder objectives with

customer & operational objectives


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Levels of Strategies

Large Company


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Small Company


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Corporate strategies:Which industry should we be in?, i.e.

deciding the size and composition of the

business portfolio.

Business strategies:

How should we compete?, i.e. aims at

improving the competitive position of a

business unit, thus gaining competitive

advantage.


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Example: Walt Disney

Corporate Strategy:

Which industry should we be in?. Disney should

own theme parks, restaurants, movie production,

etc.

Business Strategy:

Howshould wecompete?Analyze each individual

business of Disney relative to its competitor, e.g.ABC, one of Disneys TV networks, needs a

business strategy to succeed against NBC, Fox.


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Types of Strategies

VerticalIntegrationStrategies

ForwardIntegration

BackwardIntegration

HorizontalIntegration


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Vertical Integration Strategies

ForwardIntegration

Gaining ownership or increasedcontrol over distributors or retailers

BackwardIntegration

Seeking ownership or increasedcontrol of a firms suppliers

HorizontalIntegrationSeeking ownership or increasedcontrol over competitors


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Types of Strategies

IntensiveStrategies

MarketPenetration

MarketDevelopment

ProductDevelopment


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Intensive Strategies

MarketPenetration

Seeking increased market share for

present products or services inpresent markets through greatermarketing efforts

MarketDevelopment

Introducing present products orservices into new geographic areas

ProductDevelopment

Seeking increased sales by

improving present products orservices or developing new ones


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Types of Strategies

DiversificationStrategies

RelatedDiversification

UnrelatedDiversification


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Diversification Strategies

RelatedDiversification

Adding new but related products orservices

UnrelatedDiversification

Adding new, unrelated products orservices


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Types of Strategies

DefensiveStrategies

Retrenchment

Divestiture

Liquidation


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Defensive Strategies

RetrenchmentRegrouping through cost and assetreduction to reverse declining sales

and profit

Divestiture Selling a division or part of anorganization

Liquidation Selling all of a companys assets, inparts, for their tangible worth


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Retrenchment Strategy

Bankruptcy types

Chapter 7 liquidation

Chapter 9 municipalities Chapter 11 reorganization

Chapter 12 family farmers

Chapter 13 small businesses


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Porters Five Generic Strategies

Type 1 Cost Leadership Low cost

Type 2 Cost Leadership Best value

Type 3 Differentiation

Type 4 Focus Low cost

Type 5 Focus Best value


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Type 1 or 2 Cost Leadership Strategy

Conditions

Vigorous price competition

Plentiful supply of identical products

Little product differentiation

Products used in same ways

Low cost to switch

Large buyers with power

Industry newcomers use low prices to attract

buyers


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Type 3 Differentiation Strategy

Conditions

Many ways to differentiate and buyers

perceive the differences as having

value

Diverse buyer needs and uses

Few rival firms following similar

differentiation approach Fast paced technological change and

evolving product features


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Type 4 or 5 Focus Strategy

Conditions

Large, profitable, and growing target marketniche

Industry leaders do not consider the niche

crucial to their success Industry leaders consider it costly or difficult

to meet the needs of this niche

Industry has many niches and segments

Few rivals are specializing on this targetsegment


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Copyright 2011 Pearson Education

Ch 5 -28

Means for Achieving Strategies

Cooperation among competitors

Joint venture / partnering

Merger / acquisition

First mover advantages

Outsourcing


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Ch 5 -29

Strategic Management in Nonprofit and

Governmental Organizations

Educational Institutions

Medical Organizations

Governmental Agencies and

Departments


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Ch 5 -30

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