Chapter 5Strategies in Action

Chapter 5Strategies in Action

Strategic Management: Concepts & Cases13th EditionFred David

Long Term ObjectivesQuantitative

Measurable

Realistic

UnderstandableChallenging

Hierarchical

Obtainable

Congruent

Financial vs. Strategic ObjectivesFinancial ObjectivesGrowth in revenuesGrowth in earningsHigher dividendsLarger profit marginsGreater ROIHigher earnings per shareRising stock priceImproved cash flow

Financial vs. Strategic ObjectivesStrategic Objectives

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 rivals

Not Managing by ObjectivesManaging by Extrapolation If it aint broke, dont fix itManaging by Crisis The true measure of a good strategist is the ability to fix problemsManaging 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

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

Levels of Strategies Large Company

Levels of Strategies Small Company

Types of Strategies Vertical Integration Strategies Forward IntegrationBackward IntegrationHorizontal Integration

Vertical Integration Strategies

Types of Strategies Intensive Strategies Market PenetrationMarket DevelopmentProduct Development

Intensive Strategies

Types of Strategies Diversification Strategies Related DiversificationUnrelated Diversification

Diversification Strategies

Types of Strategies Defensive Strategies RetrenchmentDivestitureLiquidation

Defensive Strategies

Retrenchment StrategyBankruptcy typesChapter 7 liquidationChapter 9 municipalitiesChapter 11 reorganizationChapter 12 family farmersChapter 13 small businesses

Porters Five Generic StrategiesType 1 Cost Leadership Low costType 2 Cost Leadership Best valueType 3 DifferentiationType 4 Focus Low costType 5 Focus Best value

Type 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

Type 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

Type 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

Means for Achieving StrategiesCooperation among competitorsJoint venture / partneringMerger / acquisitionFirst mover advantagesOutsourcing

Strategic Management in Nonprofit and Governmental OrganizationsEducational InstitutionsMedical OrganizationsGovernmental Agencies and Departments

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