Chapter 5
Strategies in Action
Strategic
Management:
Concepts & Cases
11th Edition
Fred David
Copyright 2007 Prentice Hall
Ch 5 -1
Long-Term Objectives
Objectives --
Quantifiable
Measurable
Realistic
Understandable
Challenging
•Hierarchical
•Obtainable
•Congruent
•Time-line
Copyright 2007 Prentice Hall
Ch 5 -2
Long-Term Objectives
Varying Performance Measures
by Organizational Level
Organizational
Basis for Annual Bonus/Merit Pay
Level
Corporate
Division
Function
75% on long-term objectives
25% on annual objectives
50% on long-term objectives
50% on annual objectives
25% on long-term objectives
75% on annual objectives
Copyright 2007 Prentice Hall
Ch 5 -4
The Balanced Scorecard
Robert Kaplan & David Norton -Strategy evaluation & control technique
Balance financial measures with non-financial
measures
Balance shareholder objectives with customer
& operational objectives
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Ch 5 -6
Types of Strategies
Forward
Integration
Vertical
Integration
Strategies
Backward
Integration
Horizontal
Integration
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Ch 5 -8
2003 Examples
Forward
Integration
Budget Rent-a-Car is Opening
car rental shops in Wal-Mart
Backward
Integration
Hotels, Inc. purchased a
furniture producer
Horizontal
Integration
Federated Department Stores
acquired May Department
Stores
Copyright 2007 Prentice Hall
Ch 5 -9
Types of Strategies
Market
Penetration
Intensive
Strategies
Market
Development
Product
Development
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Ch 5 -10
2003 Examples
Market
Penetration
Coca-Cola is spending millions
to advertise Coca-Cola Zero
Market
Development
Bank of America purchased a
9% stake in China Construction
Bank
Product
Development
Advanced Medical Optics is
using acquisition to obtain all
medical aspects of eye care
Copyright 2007 Prentice Hall
Ch 5 -11
Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
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Ch 5 -12
2003 Examples
Related
Diversification
Unrelated
Diversification
Retrenchment
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UPS acquired Overnite to
diversify its packaging
business into the trucking
business
Tupperware Corp. has entered
and is growing its skin and
Beauty business through
BeautiControl
Viacom is selling non-core
assets
Ch 5 -13
Types of Strategies
Retrenchment
Defensive
Strategies
Divestiture
Liquidation
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Ch 5 -14
2003 Examples
Divestiture
Liquidation
Copyright 2007 Prentice Hall
Goodyear Tire & Rubber Co.
sold its North American farmtire business to Titan
International
Britain’s last major car
manufacturer, MG Rover Group
Ltd., liquidated in 2005 and laid
off its 5,000 employees
Ch 5 -15
Michael Porter’s Generic
Strategies
Cost Leadership Strategies
(Low-Cost & Best-Value)
Differentiation Strategies
Focus Strategies
(Low-Cost Focus &
Best-Value Focus)
Copyright 2007 Prentice Hall
Ch 5 -16
Copyright 2007 Prentice Hall
Ch 5 -17
Copyright 2007 Prentice Hall
Ch 5 -18
Recent Mergers
Acquiring Firm
IBM
Philip Morris
Acquired Firm
Ascential Software
PT Hanjaya Mandala
Samp
U.S. Steel
National Steel Corp
Oracle
PeopleSoft
OSIM Int’l Ltd
Brookstone
Adobe Systems
Macromedia
US Airways
American West
United Parcel Service Overnight Corp.
Copyright 2007 Prentice Hall
Ch 5 -19
First Mover Advantages

Benefits a firm may achieve by entering a
new market or developing a new product
or service prior to rival firms
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Ch 5 -20
Outsourcing
Business-process outsourcing
(BPO)

Companies taking over the functional
operations of other firms
Copyright 2007 Prentice Hall
Ch 5 -21