AGENDA Week 3 • Hypercompetition • Current Situation • Break • Intel • Practice Individual Case – Hershey
AGENDA Week 3
• Hypercompetition• Current Situation• Break• Intel• Practice Individual Case
– Hershey
Current Situation
What is current mission statement?
Purposes of Mission Statement
• Communication Tool – External– Internal
• Decision-Making Tool– Long-term Objectives– Corporate Strategies– Business Objectives & Strategies– Functional Strategies & Strategies– Operating Decisions
What are current long termobjectives?
• Specific results - more than one year.
• Challenging, measurable, reasonable, clear.
• Established for overall corporation and each business/division.
Quantitative (“Hard”)AreasProfitability Net profit margin; ROI;
ROE Productivity
Lower costs (% of sales CGS, S&A)Activity ratios
GrowthIncreases in sales, assets, net income
Competitive PositionMarket Share
Shareholder WealthEPS; Dividends; Shareholder Value
Qualitative Areas (“Soft” )
• Employee Relations• Social Responsibility• Reputation• Technological Leadership
What are the current Corporate Strategies?
The overall managerial game plan Specifies:
• Organization’s orientation toward growth
• Industries or markets in which it will compete.
• Multi-business corporations it also involves decisions regarding position of that business in the organization.
Existing Market New Market
ExistingProduct
New Product
MarketPenetration
ProductDevelopment
Market Development
DiversificationRelatedUnrelated
Alternatives for Growth
Alternatives for Growth
Expansioninto existingBusinesses
Diversificationinto new Businesses
Changesof product,marketgeographicalscope
VerticalIntegrationexpanding the Value Chain
Related
Unrelated
Expansion into existing businesses
Changesof product,marketgeographicalscope
VerticalIntegrationexpanding the Value Chain
Existing products and markets•Market Penetration
Existing products into new markets•Expansion of uses and applications•Market Development
New Products into existing markets•Product Development•Expanding the breadth of product lines
Forward: Getting closer to customers
Backward: Getting closer to suppliers
Diversification into new businesses
Related
Unrelated
Product TechnologyProcess TechnologyProcurementBasic raw materialsProcesses or fabricated materialsFabricated componentsAssembled productsTestingDistributionMarketing and salesRetailingService
Bases for relatedness
Federal Gov’t looks atStandard IndustrialClassification (SIC)
Rationales for Diversification
• Economies of Scope– Electronic calculators and digital
watches
• Financial Synergies• Economizing on Transaction Costs• Managerial or Behavioral
Financial Synergies
• Diversification is need for adequate and stable cash flow
• Use profits from one business to subsidize another
• Underlies BCG Matrix
• Smooth cash flows and prop up expanding or troubled businesses– Investors can smooth out (PM & Kraft)– Other sources of expansion funds
Economizing on Transactions Costs
• Multiproduct firm is efficient choice when coordination between independent firms is complicated by transaction costs, and
• When the self-interested behavior of independent firms jeopardizes the value of investments, integration is option– similar with vertical integration
Managerial/Behavioral Reasons
• Maintaining or enhancing the position of executives making diversification decisions.
• Efficient for managers, but not for shareholders.– Divergence between management action and
shareholder interests.
• Pursuit of growth– easier to acquire new sales than internal
develop
• To avoid getting fired– reducing the risk of poor performance
• The persistence of diversification despite– vigorous antitrust enforcement – evidence of poor performance– suggest that managerial rationales
help explain diversification activity.
• If managers do entrench themselves at shareholder expense,– Shareholders must be more vigorous– Use outsiders– Revise compensation
Modes of Expansion
• Internal development• Acquiring
– Horizontal Integration
• Collaborative arrangements– Strategic Alliances– Joint Ventures– Licensing
Other Types of Corporate Strategies
Repositioning Strategies
• Retrenchment– Assets and/or costs
• Divestiture• Spin-offs
Termination Strategies
• Liquidation• Merger• Being acquired
Market Segment and Product Group
Analysis
•What markets do we currently serve with what product group?•What is the contribution to sales,
– operating income; net profit, etc.?
HUDSON FOODSMarket Segments:
Retail
Food Service
Club Store
International
Other
•Group of Consumers served
•Geographical Location
HUDSON FOODS
PRODUCTS
Hudson Foods - Product GroupsChicken Turkey Portioned Luncheon BeefOther
Entrees Meats
Chicken Turkey Portioned Luncheon Beef OtherEntrees Meats
Retail
Food Service
Club Store
Int’l
Other