lecture 12 strategies in action. lecture outline long-term objectives types of strategies...

Lecture 12Strategies in Action

Lecture Outline

• Long-Term Objectives

• Types of Strategies

• Integration Strategies

Lecture Outline

• Intensive Strategies

• Diversification Strategies

• Defensive Strategies

• Means for Achieving Strategies

Lecture Outline

• Michael Porter’s Generic Strategies

• Strategic Management in Nonprofit and Governmental Organizations

• Strategic Management in Small Firms

Strategies in Action

Even if you’re on the right track, you’ll get run over if you just sit there.

-- Will Rogers

Strategies in Action

Hundreds of companies today –

• Embrace strategic planning• Quest for higher revenues• Quest for higher profits

Long-Term Objectives

• The results expected from pursuing certain strategies


Objectives –

– Quantifiable– Measurable– Realistic– Understandable– Challenging– Hierarchical– Obtainable – Congruent– Time-line


Long-term objectives are necessary –

– Corporate– Divisional– Functional levels


Strategists should avoid –

– Managing by Extrapolation– Managing by Crisis– Managing by Subjectives– Managing by Hope

Integration StrategiesIntegration Strategies

Vertical Integration Strategies

Forward Integration

Backward Integration

Horizontal Integration

Integration Strategies

Vertical Integration strategies –

– Allow a firm to gain control over:• Distributors• Suppliers• competitors


Forward Integration –

– Gaining ownership or increased control over distributors or retailers


Guidelines for Forward Integration –

Present distributors are expensive, unreliable, or incapable of meeting firm’s needs

Availability of quality distributors is limited When firm competes in an industry that is expected to

grow markedly Organization has both capital and human resources

needed to manage new business of distribution Advantages of stable production are high Present distributors have high profit margins


Backward Integration –

– Seeking ownership or increased control of a firm’s suppliers


Guidelines for Backward Integration –

When present suppliers are expensive, unreliable, or incapable of meeting needs

Number of suppliers is small and number of competitors large

High growth in industry sector Firm has both capital and human resources to manage

new business Advantages of stable prices are important Present supplies have high profit margins


Horizontal Integration –

– Seeking ownership or increased control over competitors


Guidelines for Horizontal Integration –

Firm can gain monopolistic characteristics without being challenged by federal government

Competes in growing industry Increased economies of scale provide major competitive

advantages Faltering due to lack of managerial expertise or need for

particular resources

Michael Porter’s Generic Strategies

Cost Leadership Strategies

Differentiation Strategies

Focus Strategies

Generic Strategies

Cost Leadership Strategies –

Pursued in conjunction with differentiation Economies or diseconomies of scale Capacity utilization achieved Linkages with suppliers and distributors

Generic Strategies

Low Cost Producer Advantages –

Market of many price-sensitive buyers Few ways of achieving product differentiation Buyers not sensitive to brand differences Large number of buyers with bargaining power

Generic Strategies

Differentiation Strategies –

Greater product flexibility Greater compatibility Lower costs Improved service Greater convenience More features

Generic Strategies

Differentiation Strategies –

Allow firm to charge higher price Gain customer loyalty

Generic Strategies

Focus Strategies –

Industry segment of sufficient size Good growth potential Not crucial to success of major competitors

Generic Strategies

Focus Strategies –

Consumers have distinctive preferences Rival firms not attempting to specialize in the

same target segment

Intensive StrategiesIntensive Strategies

Intensive Strategies

Market Penetration

Market Development

Product Development


Intensive strategies –

– Require intensive efforts to improve a firm’s competitive position with existing products


Market Penetration –

– Seeking increased market share for present products or services in present markets through greater marketing efforts


Guidelines for Market Penetration –

Current markets not saturated Usage rate of present customers can be increased

significantly Market shares of competitors declining while total

industry sales increasing Increased economies of scale provide major competitive

advantages


Market Development –

– Introducing present products or services into new geographic area


Guidelines for Market Development –

New channels of distribution that are reliable, inexpensive, and good quality

Firm is very successful at what it does Untapped or unsaturated markets Capital and human resources necessary to manage

expanded operations Excess production capacity Basic industry rapidly becoming global


Product Development –

– Seeking increased sales by improving present products or services or developing new ones


Guidelines for Product Development –

Products in maturity stage of life cycle Competes in industry characterized by rapid

technological developments Major competitors offer better-quality products at

comparable prices Compete in high-growth industry Strong research and development capabilities

Diversification StrategiesDiversification Strategies

Diversification Strategies

Concentric Diversification

Conglomerate Diversification

Horizontal Diversification


Diversification strategies –

– Becoming less popular as organizations are finding it more difficult to manage diverse business activities


Concentric Diversification –

– Adding new, but related, products or services


Guidelines for Concentric Diversification –

Competes in no- or slow-growth industry Adding new & related products increases sales of

current products New & related products offered at competitive prices Current products are in decline stage of the product life

cycle Strong management team


Conglomerate Diversification –

– Adding new, unrelated products or services


Guidelines for Conglomerate Diversification –

Declining annual sales and profits Capital and managerial talent to compete successfully in

a new industry Financial synergy between the acquired and acquiring

firms Exiting markets for present products are saturated


Horizontal Diversification –

– Adding new, unrelated products or services for present customers


Guidelines for Horizontal Diversification –

Revenues from current products/services would increase significantly by adding the new unrelated products

Highly competitive and/or no-growth industry w/low margins and returns

Present distribution channels can be used to market new products to current customers

New products have counter cyclical sales patterns compared to existing products

Thank You

lecture 12 strategies in action. lecture outline long-term objectives types of strategies...

Documents

horizontal integration

increased control

highpresent distributors

present suppliers

limitedwhen firm

human resources

higher revenuesquest

stable production