5. strategies in action
TRANSCRIPT
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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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Copyright 2011 Pearson EducationCh 5 -2
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Copyright 2011 Pearson EducationCh 5 -3
Long Term Objectives
Quantitative
Measurable
Realistic
Understandable
Challenging
Hierarchical
Obtainable
Congruent
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Copyright 2011 Pearson EducationCh 5 -4
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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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Copyright 2011 Pearson EducationCh 5 -8
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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Copyright 2011 Pearson EducationCh 5 -9
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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Copyright 2011 Pearson EducationCh 5 -10
Levels of Strategies
Large Company
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Levels of Strategies
Small Company
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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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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:
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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Copyright 2011 Pearson EducationCh 5 -18
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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Copyright 2011 Pearson EducationCh 5 -26
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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Copyright 2011 Pearson EducationCh 5 -27
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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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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