Ch 5 -1 Copyright 2007 Prentice Hall Chapter 5 Strategies in Action Strategic Management: Concepts & Cases 11 th Edition Fred David

Ch 5 -2 Copyright 2007 Prentice Hall Long-Term Objectives Objectives --  Quantifiable  Measurable  Realistic  Understandable  Challenging Hierarchical Obtainable Congruent Time-line

Ch 5 -3 Copyright 2007 Prentice Hall Long-Term Objectives Objectives --  Hierarchical  Obtainable  Congruent  Time-line

Ch 5 -4 Copyright 2007 Prentice Hall Varying Performance Measures by Organizational Level Organizational Level Basis for Annual Bonus/Merit Pay Corporate 75% on long-term objectives 25% on annual objectives Division 50% on long-term objectives 50% on annual objectives Function 25% on long-term objectives 75% on annual objectives Long-Term Objectives

Ch 5 -5 Copyright 2007 Prentice Hall Financial vs. Strategic Objectives Financial Objectives  Growth in revenues  Growth in earnings  Higher dividends  Higher profit margins  Higher earnings per share  Improved cash flow

Ch 5 -6 Copyright 2007 Prentice Hall The Balanced Scorecard Robert Kaplan & David Norton --  Strategy evaluation & control technique  Balance financial measures with non-financial measures  Balance shareholder objectives with customer & operational objectives

Ch 5 -7 Copyright 2007 Prentice Hall Types of Strategies Operational Level Functional Level Division Level Corp Level A Large Company

Ch 5 -8 Copyright 2007 Prentice Hall Types of Strategies Vertical Integration Strategies Forward Integration Backward Integration Horizontal Integration

Ch 5 -9 Copyright 2007 Prentice Hall 2003 Examples Forward Integration Budget Rent-a-Car is Opening car rental shops in Wal-Mart Backward Integration Hotels, Inc. purchased a furniture producer Horizontal Integration Federated Department Stores acquired May Department Stores

Ch Copyright 2007 Prentice Hall Types of Strategies Intensive Strategies Market Penetration Market Development Product Development

Ch Copyright 2007 Prentice Hall 2003 Examples Market Penetration Coca-Cola is spending millions to advertise Coca-Cola Zero Market Development Bank of America purchased a 9% stake in China Construction Bank Product Development Advanced Medical Optics is using acquisition to obtain all medical aspects of eye care

Ch Copyright 2007 Prentice Hall Types of Strategies Diversification Strategies Related Diversification Unrelated Diversification

Ch Copyright 2007 Prentice Hall 2003 Examples Related Diversification UPS acquired Overnite to diversify its packaging business into the trucking business Unrelated Diversification Tupperware Corp. has entered and is growing its skin and Beauty business through BeautiControl Retrenchment Viacom is selling non-core assets

Ch Copyright 2007 Prentice Hall Types of Strategies Defensive Strategies Retrenchment Divestiture Liquidation

Ch Copyright 2007 Prentice Hall 2003 Examples Divestiture Goodyear Tire & Rubber Co. sold its North American farm- tire business to Titan International Liquidation Britain’s last major car manufacturer, MG Rover Group Ltd., liquidated in 2005 and laid off its 5,000 employees

Ch Copyright 2007 Prentice Hall Michael Porter’s Generic Strategies Cost Leadership Strategies (Low-Cost & Best-Value) Differentiation Strategies Focus Strategies (Low-Cost Focus & Best-Value Focus)

Ch Copyright 2007 Prentice Hall

Ch Copyright 2007 Prentice Hall

Ch Copyright 2007 Prentice Hall Recent Mergers Acquiring FirmAcquired Firm IBMAscential Software Philip MorrisPT Hanjaya Mandala Samp U.S. SteelNational Steel Corp OraclePeopleSoft OSIM Int’l LtdBrookstone Adobe SystemsMacromedia US AirwaysAmerican West United Parcel ServiceOvernight Corp.

Ch Copyright 2007 Prentice Hall First Mover Advantages  Benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms

Ch Copyright 2007 Prentice Hall Outsourcing  Companies taking over the functional operations of other firms Business-process outsourcing (BPO)