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Chapter 5Strategies in Action
Strategic Management: Concepts & Cases
13th Edition
Fred David
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Long Term Objectives
Quantitative
Measurable
Realistic
Understandable
Challenging
Hierarchical
Obtainable
Congruent
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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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Financial vs. Strategic ObjectivesStrategic 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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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
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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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Levels of Strategies – Large Company
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Levels of Strategies – Small Company
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Types of Strategies
Vertical IntegrationStrategies
Forward Integration
BackwardIntegration
HorizontalIntegration
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Vertical Integration Strategies
ForwardIntegration
Gaining ownership or increased control over distributors or retailers
BackwardIntegration
Seeking ownership or increased control of a firm’s suppliers
HorizontalIntegration
Seeking ownership or increased control over competitors
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Types of Strategies
IntensiveStrategies
MarketPenetration
MarketDevelopment
ProductDevelopment
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Intensive Strategies
MarketPenetration
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
ProductDevelopment
Seeking increased sales by improving present products or services or developing new ones
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Types of Strategies
DiversificationStrategies
Related Diversification
Unrelated Diversification
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Diversification Strategies
Related Diversification
Adding new but related products or services
Unrelated Diversification Adding new, unrelated products or
services
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Types of Strategies
DefensiveStrategies
Retrenchment
Divestiture
Liquidation
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Defensive Strategies
RetrenchmentRegrouping 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
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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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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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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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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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Means for Achieving Strategies
Cooperation among competitors Joint venture / partnering Merger / acquisition First mover advantages Outsourcing
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Strategic Management in Nonprofit and Governmental Organizations
Educational Institutions
Medical Organizations
Governmental Agencies and Departments
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