1

Ch 5 -1

Chapter 5

Strategies in Action

Ch 5 -2

Ch 5 -3

Long Term Objectives

Quantitative

Measurable

Realistic

Understandable

Challenging

Hierarchical

Obtainable

Congruent

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

The Balanced Scorecard

Robert Kaplan & David Norton –

Strategy evaluation & control technique

Balance financial measures with

nonfinancial measures

Balance shareholder objectives with

customer & operational objectives

2

Ch 5 -7

Levels of Strategies –

Large Company

Ch 5 -8

Levels of Strategies –

Small Company

Ch 5 -9

Types of Strategies

Vertical

Integration

Strategies

Forward

Integration

Backward

Integration

Ch 5 -10

Vertical Integration Strategies

Forward

IntegrationGaining ownership or increased

control over distributors or retailers

Backward

IntegrationSeeking ownership or increased

control of a firm’s suppliers

Ch 5 -11

Types of Strategies

Intensive

Strategies

Market

Penetration

Market

Development

Product

Development

Ch 5 -12

Intensive Strategies

Market

Penetration

Seeking increased market share for

present products or services in

present markets through greater

marketing efforts

Market

DevelopmentIntroducing present products or

services into new geographic areas

Product

Development

Seeking increased sales by

improving present products or

services or developing new ones

3

Ch 5 -13

Types of Strategies

Diversification

Strategies

Related

Diversification

Unrelated

Diversification

Ch 5 -14

Diversification Strategies

Related

DiversificationAdding new but related products or

services

Unrelated

DiversificationAdding new, unrelated products or

services

Ch 5 -15

Types of Strategies

Defensive

Strategies

Retrenchment

Divestiture

Liquidation

Ch 5 -16

Defensive Strategies

RetrenchmentRegrouping through cost and asset

reduction to reverse declining sales

and profit

Divestiture Selling a division or part of an

organization

LiquidationSelling all of a company’s assets, in

parts, for their tangible worth

Ch 5 -17

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