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Publishing as Prentice Hall

Ch 5 -1
Chapter 5
Strategies in Action


Strategic Management:
Concepts & Cases
13
th
Edition
Fred David



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Ch 5 -2
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Ch 5 -3
Long Term Objectives
Quantitative

Measurable

Realistic

Understandable
Challenging

Hierarchical

Obtainable

Congruent
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Ch 5 -4
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Ch 5 -5
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Ch 5 -6
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
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Ch 5 -7
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
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Ch 5 -8
Not Managing by Objectives
Managing by Extrapolation If it aint
broke, dont 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 dont succeed,
then you may on the second or third try
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Ch 5 -9
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 -10
Levels of Strategies
Large Company
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Ch 5 -11
Levels of Strategies
Small Company
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Ch 5 -12
Types of Strategies

Vertical
Integration
Strategies

Forward
Integration
Backward
Integration
Horizontal
Integration
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Ch 5 -13
Vertical Integration Strategies
Forward
Integration
Gaining ownership or increased
control over distributors or retailers
Backward
Integration
Seeking ownership or increased
control of a firms suppliers
Horizontal
Integration
Seeking ownership or increased
control over competitors
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Ch 5 -14
Types of Strategies

Intensive
Strategies

Market
Penetration
Market
Development
Product
Development
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Ch 5 -15
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 -16
Types of Strategies

Diversification
Strategies

Related
Diversification
Unrelated
Diversification
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Ch 5 -17
Diversification Strategies
Related
Diversification
Adding new but related products or
services
Unrelated
Diversification

Adding new, unrelated products or
services
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Ch 5 -18
Types of Strategies

Defensive
Strategies

Retrenchment
Divestiture
Liquidation
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Ch 5 -19
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 companys assets, in
parts, for their tangible worth
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Ch 5 -20
Retrenchment Strategy
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 -21
Porters 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 -22
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Ch 5 -23
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
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Ch 5 -24
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
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Ch 5 -25
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
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Ch 5 -26
Means for Achieving Strategies
Cooperation among competitors
Joint venture / partnering
Merger / acquisition
First mover advantages
Outsourcing
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Ch 5 -27
Strategic Management in Nonprofit and
Governmental Organizations
Educational Institutions
Medical Organizations
Governmental Agencies and
Departments
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Ch 5 -28
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