Chapter 5 Strategies in Action

Strategic Management: Concepts & Cases 13th Edition Global Edition Fred David

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Ch 5 -1

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Ch 5 -2

Long Term Objectives

Quantitative Measurable Realistic

Understandable

Challenging Hierarchical Obtainable

Congruent
Ch 5 -3

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Ch 5 -4

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Ch 5 -5

Financial vs. Strategic Objectives Financial Objectives

Growth

in revenues

Growth
Higher Larger

in earnings

dividends
profit margins ROI

Greater Higher Rising

earnings per share stock price

Improved

cash flow
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Ch 5 -6

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 products to market ahead of rivals
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Ch 5 -7

Not Managing by Objectives

by Extrapolation If it aint broke, dont 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 dont succeed, then you may on the second or third try
Managing
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Ch 5 -8

The Balanced Scorecard

Robert Kaplan & David Norton
Strategy Balance

evaluation & control technique

financial measures with nonfinancial measures

Balance

shareholder objectives with customer & operational objectives

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Ch 5 -9

Levels of Strategies Large Company

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Ch 5 -10

Levels of Strategies Small Company

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Ch 5 -11

Levels of Strategies

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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Ch 5 -12

Levels of Strategies
Example: Walt Disney

Corporate Strategy:

Which industry should we be in?. Disney should

own theme parks, restaurants, movie production, etc.

Business Strategy:

How should we compete? 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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Ch 5 -13

Types of Strategies
Forward Integration

Vertical Integration Strategies

Backward Integration

Horizontal Integration

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Ch 5 -14

Vertical Integration Strategies

Forward Integration Backward Integration Horizontal Integration
Gaining ownership or increased control over distributors or retailers

Seeking ownership or increased control of a firms suppliers

Seeking ownership or increased control over competitors

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Ch 5 -15

Types of Strategies
Market Penetration

Intensive Strategies

Market Development

Product Development

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Ch 5 -16

Intensive Strategies
Market Penetration Market Development Product Development
Seeking increased market share for present products or services in present markets through greater marketing efforts
Introducing present products or services into new geographic areas Seeking increased sales by improving present products or services or developing new ones

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Ch 5 -17

Types of Strategies
Related Diversification

Diversification Strategies

Unrelated Diversification

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Ch 5 -18

Diversification Strategies

Related Diversification
Unrelated Diversification

Adding new but related products or services

Adding new, unrelated products or services

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Ch 5 -19

Types of Strategies
Retrenchment

Defensive Strategies

Divestiture

Liquidation

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Ch 5 -20

Defensive Strategies
Retrenchment
Regrouping through cost and asset reduction to reverse declining sales and profit Selling a division or part of an organization

Divestiture

Liquidation

Selling all of a companys assets, in parts, for their tangible worth

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Ch 5 -21

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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Ch 5 -22

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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Ch 5 -23

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Ch 5 -24

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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Ch 5 -25

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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Ch 5 -26

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 segment
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Ch 5 -27

Means for Achieving Strategies

Cooperation among competitors Joint venture / partnering Merger / acquisition First mover advantages Outsourcing

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Ch 5 -28

Strategic Management in Nonprofit and Governmental Organizations

Educational Medical

Institutions

Organizations

Governmental

Agencies and

Departments
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Ch 5 -29

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 permission of the publisher. Printed in the United States of America.

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Ch 5 -30