1. Formulating Long-Term Objectives and Grand Strategies

2. Types of Long-Term Objectives
Profitability
Productivity
Competitive position
Employee development
Employee relations
Technological leadership
Public responsibility

3. Qualities of Long-Term Objectives
Acceptable
Achievable
Flexible
Measurable
Motivating
Suitable
Understandable

4. The Balanced Scorecard
The Balanced Scorecard is a set of measures that are directly linked to the company’s strategy. It directs a company to link its own long-term strategy with tangible goals and actions.

5. The Balanced Scorecard

6. 5 Generic Competitive Strategies

7. Menu of Strategy Options for Winning in the Marketplace

8. GENERIC STRATEGIES Low-Cost Leadership
A strategy aimed at producing standardized products at low per-unit cost for consumers who are price-sensitive .
Examples:
H.J Heinz – because beans and canned vegetables do not permit much of a mark-up, the profit comes from the large volume of cans sold. Thus, Heinz goes to extraordinary lengths to reduce costs – by even one-twentieth of a cent per can.

9.  Wal-Mart is famous for squeezing its suppliers to ensure low prices for its goods especially that they are famous for their Every Day Low Pricing strategy (EDLP)
Dell Computer initially achieved market share by keeping inventories low and only building computers to order.

10. GENERIC STRATEGIES Differentiation
A strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive .

11. Differentiation Themes
unique taste – Dr. Pepper
multiple features – Microsoft Office
wide selection and one-stop shopping – Home Depot, Wal-Mart
engineering design and performance – BMW, Ferrari
rapid product innovation
prestige and distinctiveness – Rolex, Chanel, Mercedes Benz
top-of-the-line image and reputation – Starbucks, Tiffany

12. GENERIC STRATEGIES Focus
A strategy aimed at producing products and services that fulfill the needs of small groups of customers .
Example:
RTW stores selling plus-size clothes

13. Risks of Generic Strategies
Risks of Cost Leadership
Risks of Differentiation
Risks of Focus
Cost leadership is not sustained
Competitors imitate
Technology changes
Other bases for cost leadership erode
Proximity in differentiation is lost
Cost focusers achieve even lower cost in segments
Differentiation is not sustained
Bases for differentiation become less important to buyers
Cost proximity is lost
Differentiation focusers achieve greater differentiation in segments
Focus strategy is imitated
Target segment becomes unattractive
Structure erodes
Demand disappears
Broadly target competitors overwhelm segments
Segment’s differences from others narrow
Advantages of broad line increase

14. The Value Disciplines Operational Excellence
A specific strategic approach to the production and delivery of products and services. A company that follows this strategy attempts to lead its industry in price and convenience by pursuing a focus on lean and efficient operations.

15. The Value Disciplines Customer Intimacy
Companies excelling in customer intimacy combine detailed customer knowledge with operational flexibility. They are willing to spend money now to build customer loyalty for the long-term, considering each customer’s lifetime value to the company, not the profit of any single transaction.

16. The Value Disciplines Product Leadership
Companies that pursue the discipline of product leadership strive to produce a continuous stream of state-of-the-art products and services. The 3 challenges that must be met are:
Creativity
Commercialize ideas quickly
Release their own improvements

17. GRAND STRATEGIES Types of Grand Strategies Concentrated growth
Market development
Product development
Innovation
Horizontal integration
Vertical integration
Concentric diversification
Conglomerate diversification
Turnaround
Divestiture
Liquidation
Bankruptcy
Joint ventures
Strategic alliances
Consortia

18. Characteristics of a Concentrated Growth Strategy
Involves focusing resources on the profitable growth of a single product, in a single market, with a single dominant technology
Rationale – Firm develops and exploits its expertise in a delimited competitive arena
Determinants of competitive market success
Ability to assess market needs
Knowledge of buyer behavior
Customer price sensitivity
Effectiveness of promotion

19. Strategies of Market & Product Development
Market development
Consists of marketing present products, often with only cosmetic modifications to customers in related market areas by
Adding channels of distribution or
Changing content of advertising or promotion I

20. Strategies of Market & Product Development
Involves substantial modification of existing products or creation of new but related products
Based on penetrating existing market by
- Incorporating product modifications into existing items or
- Developing new products connected to existing products

21. Innovation Strategy
Involves creating a new product life cycle,
thereby making similar existing products
obsolete.

22. Horizontal and Vertical Integration Strategies
Horizontal Integration
Based on growth via acquisition of one or more similar firms operating at the same stage of the production-marketing chain

23. Horizontal and Vertical Integration Strategies
Involves acquiring firms
That supply acquiring firm with inputs (backward integration) or
Are customers for firm’s outputs (forward integration)

24. Vertical and Horizontal Integrations
Textile producer
Textile producer
Shirt manufacturer
Shirt manufacturer
Clothing store
Clothing store

25. Motivations for Diversification
 Increase firm’s stock value
 Increase growth rate of firm
 Investment is better use of funds than using them for internal growth
 Improves stability of earnings and sales
 Balance or fill out product line
 Diversify product line
 Acquire a needed resource quickly
 Achieve tax savings
 Increase efficiency and profitability

26. Diversification Strategies
Concentric Diversification
Involves acquisition of businesses related to acquiring firm in terms of technology, markets, or products

27. Diversification Strategies
Conglomerate Diversification
Involves acquisition of a business because it represents a promising investment opportunity
Primary motivation is profit pattern of venture

28. Turnaround Strategy
A turnaround situation represents absolute and relative-to-industry declining performance of a sufficient magnitude to warrant explicit turnaround actions
The immediacy of the resulting threat to company survival posed by the turnaround situation is known as situation severity
Turnaround responses typically include two stages of strategic activities
Retrenchment
Recovery response

29. Divestiture and Liquidation Strategies
Divestiture Strategy
Involves selling a firm or a major component of a firm
Reasons for divestiture
Partial mismatches between acquired firm and parent firm
Corporate financial needs
Government antitrust action

30. Divestiture and Liquidation Strategies
Liquidation Strategy
Involves selling parts of a firm, usually for its tangible asset value and not as a going concern

31. The Strategy of Bankruptcy
Two approaches
Liquidation – Involves complete distribution of a firm’s assets to creditors, most of whom receive a small fraction of amount owed
Reorganization – Involves creditors temporarily freezing their claims while a firm reorganizes and rebuilds its operations more profitably
Advantage of a reorganization bankruptcy
Proactive option offering maximum repayment of a firm’s debt in the future if a recovery strategy is successful

32. Corporate Combination Strategies
Joint Ventures
Involves establishing a third company (child), operated for the benefit of the co-owners (parents)
Strategic Alliance
Involves creating a partnership between two or more companies that contribute skills and expertise to a cooperative project
Exists for a defined period
Does not involve the exchange of equity

33. Corporate Combination Strategies
Consortia are defined as large interlocking relationships between businesses of an industry. In Japan such consortia are known as keiretsus, in South Korea as chaebols
A Japanese keiretsu is an undertaking involving up to 50 different firms that are joined around a large trading company or bank and are coordinated through interlocking directories and stock exchanges
Chaebols are typically financed through government banking groups and largely are run by professional managers trained by participating firms expressly for the job