Chapter 5 Strategies in Action Strategic Management: Concepts & Cases 13th Edition Fred David
Long Term Objectives Quantitative Measurable Realistic Understandable Challenging Hierarchical Obtainable Congruent
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 Improved cash flow
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
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
The Balanced Scorecard Robert Kaplan & David Norton – Strategy evaluation & control technique Balance financial measures with nonfinancial measures Balance shareholder objectives with customer & operational objectives
Levels of Strategies – Large Company
Levels of Strategies – Small Company
Horizontal Integration Types of Strategies Forward Integration Vertical Integration Strategies Backward Integration Horizontal Integration
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
Types of Strategies Market Penetration Market Development Intensive Strategies Market Development Product Development
Intensive Strategies Market Penetration Market Development 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
Diversification Strategies Types of Strategies Related Diversification Diversification Strategies Unrelated Diversification
Diversification Strategies Related Diversification Adding new but related products or services Unrelated Diversification Adding new, unrelated products or services
Types of Strategies Retrenchment Divestiture Liquidation Defensive Strategies Divestiture Liquidation
Defensive Strategies Retrenchment Divestiture Liquidation 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 parts, for their tangible worth
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 Type 5 Focus – Best value
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
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
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
Means for Achieving Strategies Cooperation among competitors Joint venture / partnering Merger / acquisition First mover advantages Outsourcing
Strategic Management in Nonprofit and Governmental Organizations Educational Institutions Medical Organizations Governmental Agencies and Departments