Bus 411
Day 8
Copyright 2005 Prentice Hall
1
Agenda
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Question?
Assignment 2 DUE
Assignment 3 Posted
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IFE and Ratio analysis
Due Feb 27 @ 12:30 PM
Bus 411 assignment three.pdf
Begin Discussion on Strategies in Action
Copyright 2005 Prentice Hall
Ch 1 -2
Copyright 2005 Prentice Hall
Ch 3 -3
Chapter 5
Strategies in Action
Strategic Management:
Concepts & Cases
13th Edition
Fred David
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 5 -4
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Ch 5 -5
CHAPTER OBJECTIVES
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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.
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Ch 2 -6
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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.
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Ch 2 -7
Strategies in Action
Strategies for taking the hill won’t
necessarily hold it. –
Amar Bhide
The early bird may get the worm, but the
second mouse gets the cheese. –
Unknown
Copyright 2005 Prentice Hall
Ch 3 -8
Strategies in Action
Companies Embrace Strategic Planning
-- Quest for higher revenues
-- Quest for higher profits
Copyright 2005 Prentice Hall
Ch 3 -9
Long-Term Objectives
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Results expected from pursuing certain
strategies
Strategies represent actions to accomplish
long-term objectives
Copyright 2005 Prentice Hall
Ch 3 -10
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 2005 Prentice Hall
Ch 3 -11
Long Term Objectives
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Quantitative
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Challenging
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Measurable
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Hierarchical
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Realistic
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Obtainable
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Understandable
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Congruent
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Ch 5 -12
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Ch 5 -13
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Ch 5 -14
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.
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Ch 5 -15
Financial vs. Strategic Objectives
Strategic Objectives
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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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Ch 5 -16
Not Managing by Objectives
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
Managing
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Ch 5 -17
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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Ch 5 -18
Balanced Scorecard
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.
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Ch 2 -19
Levels of Strategies –
Large Company
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Ch 5 -20
Levels of Strategies –
Small Company
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Ch 5 -21
Types of Strategies
Forward
Integration
Vertical
Integration
Strategies
Backward
Integration
Horizontal
Integration
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Ch 5 -22
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
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Ch 5 -23
Types of Strategies
Market
Penetration
Intensive
Strategies
Market
Development
Product
Development
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Ch 5 -24
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
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Ch 5 -25
Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
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Ch 5 -26
Diversification Strategies
Related
Diversification
Unrelated
Diversification
Adding new but related products or
services
Adding new, unrelated products or
services
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Ch 5 -27
Growth Strategies
Types of Strategies
Retrenchment
Defensive
Strategies
Divestiture
Liquidation
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Ch 5 -29
Defensive Strategies
Retrenchment
Divestiture
Liquidation
Regrouping through cost and asset
reduction to reverse declining sales
and profit
Selling a division or part of an
organization
Selling all of a company’s assets, in
parts, for their tangible worth
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Ch 5 -30
Defensive Strategy
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Bankruptcy types
Chapter 7 – liquidation
 Chapter 9 – municipalities
 Chapter 11 – reorganization
 Chapter 12 – family farmers
 Chapter 13 – small businesses
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Ch 5 -31
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
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Ch 5 -32
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Ch 5 -33
Type 1 or 2 Cost Leadership Strategy
Conditions
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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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Ch 5 -34
Type 3 Differentiation Strategy
Conditions
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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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Ch 5 -35
Type 4 or 5 Focus Strategy
Conditions
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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
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Ch 5 -36
Means for Achieving Strategies
Cooperation among competitors
 Joint venture / partnering
 Merger / acquisition
 First mover advantages
 Outsourcing
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Ch 5 -37
Strategic Management in Nonprofit and
Governmental Organizations
Educational
Medical
Institutions
Organizations
Governmental
Agencies and
Departments
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Ch 5 -38
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.
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Ch 5 -39