Module 5
Strategies in Action
Ch 5 -1
Ch 5 -2
Long Term Objectives

Quantitative

Challenging

Measurable

Hierarchical

Realistic

Obtainable

Understandable

Congruent
Ch 5 -3
Ch 5 -4
Ch 5 -5
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
Ch 5 -6
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
Ch 5 -7
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
Ch 5 -8
The Balanced Scorecard
Robert Kaplan & David Norton –
Strategy
evaluation & control technique
Balance
financial measures with
nonfinancial measures
Balance
shareholder objectives with
customer & operational objectives
Ch 5 -9
Levels of Strategies –
Large Company
Ch 5 -10
Levels of Strategies –
Small Company
Ch 5 -11
Types of Strategies
Forward
Integration
Vertical
Integration
Strategies
Backward
Integration
Horizontal
Integration
Ch 5 -12
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
Ch 5 -13
Types of Strategies
Market
Penetration
Intensive
Strategies
Market
Development
Product
Development
Ch 5 -14
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
Ch 5 -15
Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
Ch 5 -16
Diversification Strategies
Related
Diversification
Unrelated
Diversification
Adding new but related products or
services
Adding new, unrelated products or
services
Ch 5 -17
Types of Strategies
Retrenchment
Defensive
Strategies
Divestiture
Liquidation
Ch 5 -18
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
Ch 5 -19
Retrenchment Strategy

Bankruptcy types
Chapter 7 – liquidation
 Chapter 9 – municipalities
 Chapter 11 – reorganization
 Chapter 12 – family farmers
 Chapter 13 – small businesses

Ch 5 -20
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

Ch 5 -21
Ch 5 -22
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
Ch 5 -23
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
Ch 5 -24
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
Ch 5 -25
Means for Achieving Strategies
Cooperation among competitors
 Joint venture / partnering
 Merger / acquisition
 First mover advantages
 Outsourcing

Ch 5 -26
Strategic Management in Nonprofit and
Governmental Organizations
Educational
Medical
Institutions
Organizations
Governmental
Agencies and
Departments
Ch 5 -27