Chapter 5 Strategies in Action

Ch 5 -1Chapter 5: Strategies in ActionHuynh Thi Doan ThuyHuynh Thi My DieuNguyen Thi ThuanNguyen Thy Ngoc Dung

1Ch 5 -2Long Term ObjectivesQuantitativeMeasurableRealisticUnderstandableChallengingHierarchicalObtainableCongruentTimeline

represent the results expected from pursuing certain strategies

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Ch 5 -5Financial vs. Strategic ObjectivesFinancial Objectives Growth in revenues Growth in earnings Higher dividends Larger profit margins Greater ROI Higher earnings per share Rising stock price Improved cash flow

Larger market shareQuicker on-time delivery than rivalsShorter design-to-market times than rivalsLower costs than rivalsHigher product quality than rivalsWider geographic coverage than rivalsAchieving technological leadershipConsistently getting new or improved products to market ahead of rivalsStrategic Objectives5Ch 5 -6Not Managing by Objectives Managing by Extrapolation If it aint broke, dont 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 dont succeed, then you may on the second or third try.

6Ch 5 -7The Balanced ScorecardRobert Kaplan & David Norton Strategy evaluation & control techniqueBalance financial measures with nonfinancial measuresBalance shareholder objectives with customer & operational objectives

7Ch 5 -8Levels of Strategies Large Company

Small Company

Ch 5 -9Types of Strategies

Vertical IntegrationStrategies

Forward IntegrationBackwardIntegrationHorizontalIntegrationGaining ownership or increased control over distributors or retailersSeeking ownership or increased control of a firms suppliersSeeking ownership or increased control over competitors

9Ch 5 -10Types of Strategies

IntensiveStrategies

MarketPenetrationMarketDevelopmentProductDevelopmentSeeking increased market share for present products or services in present markets through greater marketing efforts Introducing present products or services into new geographic areasSeeking increased sales by improving present products or services or developing new ones

10Ch 5 -11Types of Strategies

DiversificationStrategies

Related DiversificationUnrelated DiversificationAdding new but related products or servicesAdding new, unrelated products or services

11Ch 5 -12Types of Strategies

DefensiveStrategies

RetrenchmentDivestitureLiquidationRegrouping through cost and asset reduction to reverse declining sales and profitSelling a division or part of an organizationSelling all of a companys assets, in parts, for their tangible worth

12Ch 5 -13Examples for types of Strategies

Vertical IntegrationStrategies

Forward IntegrationBackwardIntegrationHorizontalIntegrationExp: Wal- Mart recently announced that over thenext five years the companyWill double the amount Of food bought from localFarmers in USExp: Unilever just acquired The U.S Hair Care firm AlbertoCulver, moving into direct competition with Procter & GambleAnd LOreal SA in shampoo And other personal products. Exp: Apple Inc began selling its Ipad, Iphone through Verizon Wirelesss 2000 stores and AT &T s 2,200tores

13Ch 5 -14Examples for Intensive StrategiesMarketPenetrationSeeking increased market share for present products or services in present markets through greater marketing efforts Ex: United Parcel Service (UPS) recently launched its large marketing campaign ever, replacing its memorable slogan What can Brown do for you? with the slogan We [heart] Logistics . Ads promoting this new slogan are running worldwide on both TV and digital media outlets.Market Development Introducing present products or services into new geographic areas

Ex: Both Subway and Dunkin Brands recently opened their first restaurants in Viet Nam. Subway also just opened its first in Bahrain. Subway expects its number of international restaurants to surpass its number of U.S restaurants by 2020. Many customers say it is hard to beat Subways $5 foot long sandwiches in terms of value and nutrition. Starbucks expects to open its first restaurants in India within 12 months.ProductDevelopment Seeking increased sales by improving present products or services or developing new onesEx: Hilton Worldwide recently opened its first new hotel brand in 20 years a Home 2 Suites in Fayetteville, North California. . Home 2 suites moves Hilton into the mid tier extended stay market, although the company already owns Homewood Suites, aimed at the upscale extended stay segment. Hilton opened about 10 new Home 2 Suites in the U.S in 2011.

14Ch 5 -15Examples for Diversification StrategiesRelated Diversification Adding new but related products or services

Ex: Amazon.com began allowing users to pay $79 per year for Amazon Prime , which allows users to stream over 5,000 movies and TV showsUnrelated Diversification Adding new, unrelated products or services

Ex: Tyson Foods recently launched a new diversification strategy, successfully opening a manufacturing plant that makes diesel and jet fuel from chicken fat, beef tallow, and leftover food grease from the firms meat-processing plants. Tysons new louisiana factory can produce 75 million gallons of fat based fuel annually. Working with syntroleum Corp, Tyson is using heat to change the molecular structure of fats and oils so their new product perform like conventional fuels rather than similar biodiesel products.

15Ch 5 -16Examples for Defensive StrategiesRetrenchment Regrouping through cost and asset reduction to reverse declining sales and profit

Exp: Abbott Laboratories in 2011 cut about 3,000jobs or 3% of workforce, a part of major strategy to streamline operations and improve efficiencies.- Borders closed 200 of its 488 superstores and laid off 6,000 of its 19,500 employeesDivestiture Selling a division or part of an organization

Exp: Arriott sold its timeshare business, creating the worlds largest autonomous time-share business, consisting of 71 properties with 33,000rooms.Liquidation Selling all of a companys assets, in parts, for their tangible worth

Exp: Blockbuster Inc. barely escaped liquidation in March 2011- Based on Mayodan, North Carolina, General Tobaco liquidated in 2011, as the market of low priced cigarettes failed to make payments owed to states under a massive industry settlement.

16Ch 5 -17Porters Five Generic Strategies

Ch 5 -18Type 1 or 2 Cost Leadership Strategy ConditionsVigorous price competitionPlentiful supply of identical productsLittle product differentiationProducts used in same waysLow cost to switchLarge buyers with powerIndustry newcomers use low prices to attract buyers

Ch 5 -19Type 3 Differentiation Strategy ConditionsMany ways to differentiate and buyers perceive the differences as having valueDiverse buyer needs and usesFew rival firms following similar differentiation approachFast paced technological change and evolving product features

Ch 5 -20Type 4 or 5 Focus Strategy ConditionsLarge, profitable, and growing target market nicheIndustry leaders do not consider the niche crucial to their successIndustry leaders consider it costly or difficult to meet the needs of this nicheIndustry has many niches and segmentsFew rivals are specializing on this target segment

Ch 5 -21Means for Achieving StrategiesCooperation among competitorsJoint venture/ partneringMerger/ acquisitionFirst mover advantages: Benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firmsOutsourcing: Business-Process Outsourcing (BPO): Companies taking over the functional operations of other firms

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