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(1)

Chapter 5

Strategies in Action

Strategic Management:

Concepts & Cases

13

th

Edition

(2)
(3)

Long Term Objectives

Quantitative

Measurable

Realistic

Understandable

Challenging

Hierarchical

Obtainable

Congruent

(4)
(5)
(6)

Financial vs. Strategic Objectives

Financial Objectives

Growth in revenues

Growth in earnings

Higher dividends

Larger profit margins

Greater ROI

Higher earnings per share

Rising stock price

(7)

Financial vs. Strategic Objectives

Strategic 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

(8)

Not Managing by Objectives

Managing by Extrapolation – “If it ain’t

broke, don’t fix it”

Managing by Crisis – The true measure of a

good strategist is the ability to fix problems

Managing by Subjectives – “Do your own

thing, the best way you know how”

Managing by Hope – The future is full of

uncertainty and if at first you don’t succeed,

then you may on the second or third try

(9)

The Balanced Scorecard

Robert Kaplan & David Norton –

Strategy evaluation & control technique

Balance financial measures with

nonfinancial measures

Balance shareholder objectives with

(10)

Levels of Strategies –

Large Company

(11)

Levels of Strategies –

Small Company

(12)

Types of Strategies

Vertical

Integration

Strategies

Forward

Integration

Backward

Integration

Horizontal

Integration

(13)

Vertical Integration Strategies

Forward

Integration

Gaining ownership or increased

control over distributors or retailers

Backward

Integration

Seeking ownership or increased

control of a firm’s suppliers

Horizontal

Integration

Seeking ownership or increased

control over competitors

(14)

Types of Strategies

Intensive

Strategies

Market

Penetration

Market

Development

Product

Development

(15)

Intensive Strategies

Market

Penetration

Seeking increased market share for

present products or services in

present markets through greater

marketing efforts

Market

Development

Introducing present products or

services into new geographic areas

Product

Development

Seeking increased sales by

improving present products or

services or developing new ones

(16)

Types of Strategies

Diversification

Strategies

Related

Diversification

Unrelated

Diversification

(17)

Diversification Strategies

Related

Diversification

Adding new but related products or

services

Unrelated

Diversification

Adding new, unrelated products or

(18)

Types of Strategies

Defensive

Strategies

Retrenchment

Divestiture

Liquidation

(19)

Defensive Strategies

Retrenchment

Regrouping through cost and asset

reduction to reverse declining sales

and profit

Divestiture

Selling a division or part of an

organization

Liquidation

Selling all of a company’s assets, in

(20)

Retrenchment Strategy

Bankruptcy types

Chapter 7 – liquidation

Chapter 9 – municipalities

Chapter 11 – reorganization

Chapter 12 – family farmers

(21)

Porter’s Five Generic Strategies

Type 1 Cost Leadership – Low cost

Type 2 Cost Leadership – Best value

Type 3 Differentiation

Type 4 Focus – Low cost

(22)
(23)

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

(24)

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

(25)

Type 4 or 5 Focus Strategy

Conditions

Large, profitable, and growing target market

niche

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 target

(26)

Means for Achieving Strategies

Cooperation among competitors

Joint venture / partnering

Merger / acquisition

First mover advantages

(27)

Strategic Management in Nonprofit and

Governmental Organizations

Educational Institutions

Medical Organizations

Governmental Agencies and

(28)

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written

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