5 1Strategy Lecture

8/3/2019 5 1Strategy Lecture

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1

Chapter 5Strategies in Action

-- Quest for higher revenues

-- Quest for higher profits

Companies Embrace Strategic Planning


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Ch 5 -2

CORPORATE STRATEGY

MISSION & VISION

OBJECTIVES

STRATEGY

Strategists Should

Avoid --

Managing by ExtrapolationManaging by Crisis

Managing by Subjectives

Managing by Hope


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Ch 5 -3

Chapter Outline

A. Long-Term Objectives

B. Types of Strategies

1. Integration Strategies

2. Intensive Strategies3. Diversification Strategies

4. Defensive Strategies

5. Michael Porters Generic Strategies

6. Means for Achieving Strategies7. First Mover Advantages

8. Outsourcing


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Ch 5 -4

Results expected from pursuing certain

strategies. Strategies represent actions to accomplish

long-term objectives.

Long-Term Objectives


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Ch 5 -5


Objectives --

Quantifiable

Measurable

Realistic

Understandable

Challenging

Hierarchical

Obtainable

Congruent

Time-line


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Ch 5 -6


Objectives Necessary --

Corporate LevelDivisional Level

Functional Level


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Ch 5 -7

Varying Performance Measuresby Organizational Level

OrganizationalLevel

Basis for Annual Bonus/Merit Pay

Corporate 75% on long-term objectives25% on annual objectives

Division 50% on long-term objectives50% on annual objectives

Function 25% on long-term objectives75% on annual objectives



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Ch 5 -8

Financial vs. Strategic

Objectives

Financial Objectives

Growth in revenues

Growth in earnings

Higher dividends

Higher profit margins

Higher Earnings per share

Improved cash flow

Larger market share

Quicker on-time delivery thanrivals

Quicker design-to-market times

than rivals

Lower costs than rivalsHigher product quality than rivals

Wider geographic coverage than

rivals


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Ch 5 -9

Financial vs. Strategic

Objectives

Trade-Off

Maximize short-term financial objectives harm

long-term strategic objectivesPursue increased market share at the expense

of short-term profitability

Tradeoffs related to risk of actions; concern for

business ethics; need to preserve natural

environment; social responsibility issues


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Ch 5 -10

Strategy in Action

A. Long-Term Objectives

B. Types of Strategies1. Integration Strategies

2. Intensive Strategies3. Diversification Strategies

4. Defensive Strategies

5. Michael Porters Generic Strategies

6. Means for Achieving Strategies7. First Mover Advantages

8. Outsourcing


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Ch 5 -11

Strategy in Action


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Ch 5 -12

Types of Strategies

Operational Level

Functional Level

Division Level

CorpLevelA Large Company


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Ch 5 -13

Types of Strategies

Operational Level

Functional Level

Company

Level

A Small Company


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Ch 5 -14

The Balanced Scorecard

Robert Kaplan & David Norton --

Strategy evaluation & control techniqueBalance financial measures with non-financial

measures

Balance shareholder objectives with customer &

operational objectives


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Ch 5 -15

Types of Strategies

IntegrationStrategies

Forward

Integration

BackwardIntegration

Horizontal

Integration


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Ch 5 -16

Vertical Integration

Strategies

Gain Control Over

Distributors

Suppliers

Competitors

Forward Integration

Strategies

Gain Control Over

Distributors

Retailers

Backward Integration

Strategies

Ownership or Control

Firms suppliers

Horizontal Integration

Strategies

Ownership or Control

Firms competitors


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Ch 5 -17

Types of Strategies

IntensiveStrategies

Market

Penetration

MarketDevelopment

Product

Development


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Ch 5 -18

Intensive Strategies

Intensive Efforts

Improve competitive

position with existing

products

Market Penetration

Strategies

Increased Market Share

Present products/services

Present markets

Greater marketing efforts

Market Development

Strategies

New Markets

Present products/services

to new geographic areas

Product Development

Strategies

Increased Sales

Improving presentproducts/services

Developing new

products/services


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Ch 5 -19

Types of Strategies

DiversificationStrategies

Concentric

Diversification

ConglomerateDiversification

Horizontal

Diversification


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Ch 5 -20

Diversification

Strategies

More difficult to

manage diverse

business activities

Concentric

Diversification

Strategies

New & related

products/services

Conglomerate

Diversification

Strategies

New & unrelated

products/services

Horizontal

Diversification

Strategies

New & unrelated

products/services for

current customers


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Ch 5 -21

Types of Strategies

DefensiveStrategies

Retrenchment

Divestiture

Liquidation


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Ch 5 -22

Retrenchment

Strategies

RegroupingCost & asset reduction to

reverse declining sales &

profit

Divestiture Strategies

Selling a division or part

of an organization.

Liquidation Strategies

Selling

Companys assets, inparts, for their tangible

worth


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Ch 5 -23

Michael Porters Generic Strategies

Cost Leadership Strategies

DifferentiationStrategies

Focus Strategies


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Ch 5 -24

Generic Strategies

In conjunction with

differentiation

Economies ordiseconomies of scale

Capacity utilization

achieved

Linkages w/ suppliers

& distributors

Cost Leadership

Many price-sensitive

buyers

Few ways of achievingdifferentiation

Buyers not sensitive to

brand differences

Large # of buyers

w/bargaining power

Low Cost Producer Advantage


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Ch 5 -25

Generic Strategies

Greater product flexibility

Greater compatibility

Lower costs

Improved service

Greater convenience

More features

Differentiation

Industry segment of

sufficient size

Good growth potential

Not crucial to success of

major competitors

Focus


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Ch 5 -26

Means for Achieving Strategies

Two or more companies

form a temporary

partnership or consortium

for purpose of capitalizing

on some opportunity.

Joint

Venture/Partnering R&D partnerships Cross-distribution agreements

Cross-licensing agreements

Cross-manufacturing

agreements Joint-bidding consortia

Cooperative Arrangements

Provide improved capacity utilization

Better use of existing sales force Reduce managerial staff

Gain economies of scale

Smooth out seasonal trends in sales

Gain new technology

Access to new suppliers, distributors, customers, products, creditors

Mergers & Acquisitions


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Ch 5 -27

Means for Achieving Strategies

Managers who must collaborate daily; notinvolved in developing the venture

Benefits the company not the customers

Not supported equally by both partners

May begin to compete with one of the

partners

Why Joint Ventures Fail -


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Ch 5 -28

First Mover Advantages

Benefits a firm may achieve by entering a

new market or developing a new product orservice prior to rival firms.


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Ch 5 -29

First Mover Advantages

Securing access to rare resources

Gaining new knowledge of key factors &issues

Carving out market share

Easy to defend position & costly for rivalfirms to overtake

Potential Advantages


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Ch 5 -30

Outsourcing

Companies taking over the functionaloperations of other firms

Business-process outsourcing(BPO)


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Ch 5 -31

Outsourcing

Less expensive Allows firm to focus on core business

Enables firm to provide better services

Benefits

5 1Strategy Lecture

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