Bus 411 Day 8 Copyright 2005 Prentice Hall1
Ch 1 -2 Agenda Question? Assignment 2 DUE Assignment 3 Posted IFE and Ratio analysis Due Feb 12:30 PM Bus 411 assignment three.pdf Bus 411 assignment three.pdf Begin Discussion on Strategies in Action
Copyright 2005 Prentice Hall Ch 3 -3
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -4 Chapter 5 Strategies in Action Strategic Management: Concepts & Cases 13 th Edition Fred David
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -5
CHAPTER OBJECTIVES Discuss the value of establishing long-term objectives. Identify 16 types of business strategies. Identify numerous examples of organizations pursuing different types of strategies. Discuss guidelines when particular strategies are most appropriate to pursue. Discuss Porter’s five generic strategies. Describe strategic management in nonprofit, governmental, and small organizations. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -6
Discuss joint ventures as a way to enter the Russian market. Discuss the Balanced Scorecard. Compare and contrast financial with strategic objectives. Discuss the levels of strategies in large versus small firms. Explain the First Mover Advantages concept. Discuss recent trends in outsourcing. Discuss strategies for competing in turbulent, high velocity markets. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 2 -7
Copyright 2005 Prentice Hall Ch 3 -8 Strategies for taking the hill won’t necessarily hold it. – Amar Bhide Strategies in Action The early bird may get the worm, but the second mouse gets the cheese. – Unknown
Copyright 2005 Prentice Hall Ch 3 -9 Strategies in Action -- Quest for higher revenues -- Quest for higher profits Companies Embrace Strategic Planning
Copyright 2005 Prentice Hall Ch Results expected from pursuing certain strategies Strategies represent actions to accomplish long-term objectives Long-Term Objectives
Copyright 2005 Prentice Hall Ch A SMART way to Look at Objectives 1.Specific – Objectives should specify what they want to achieve. 2.Measurable – You should be able to measure whether you are meeting the objectives or not. 3.Achievable - Are the objectives you set, achievable and attainable? 4.Realistic – Can you realistically achieve the objectives with the resources you have? 5.Time – When do you want to achieve the set objectives?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Long Term Objectives Quantitative Measurable Realistic Understandable Challenging Hierarchical Obtainable Congruent
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -13
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -14
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch The Balanced Scorecard Robert Kaplan & David Norton – Strategy evaluation & control technique Balance financial measures with nonfinancial measures Balance shareholder objectives with customer & operational objectives
Balanced Scorecard Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996): 76.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Levels of Strategies – Large Company
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Levels of Strategies – Small Company
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Types of Strategies Vertical Integration Strategies Forward Integration Backward Integration Horizontal Integration
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Types of Strategies Intensive Strategies Market Penetration Market Development Product Development
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Types of Strategies Diversification Strategies Related Diversification Unrelated Diversification
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Diversification Strategies Related Diversification Adding new but related products or services Unrelated Diversification Adding new, unrelated products or services
Growth Strategies
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Types of Strategies Defensive Strategies Retrenchment Divestiture Liquidation
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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 parts, for their tangible worth
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Defensive Strategy Bankruptcy types Chapter 7 – liquidation Chapter 9 – municipalities Chapter 11 – reorganization Chapter 12 – family farmers Chapter 13 – small businesses
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -33
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Means for Achieving Strategies Cooperation among competitors Joint venture / partnering Merger / acquisition First mover advantages Outsourcing
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch Strategic Management in Nonprofit and Governmental Organizations Educational Institutions Medical Organizations Governmental Agencies and Departments
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 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.