Chapter 5 Strategies in Action Strategic Management Concepts

Chapter 5 Strategies in Action Strategic Management: Concepts & Cases 12 th Edition Fred David Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 1

Long-Term Objectives – §Quantifiable §Measurable §Realistic §Understandable §Challenging Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 2

Long-Term Objectives – §Hierarchical §Obtainable §Congruent §Timeline Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 3

Varying Performance Measures by Organizational Level Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 4

Financial vs. Strategic Objectives Financial Objectives §Growth in revenues §Growth in earnings §Higher dividends §Higher profit margins §Higher earnings per share §Improved cash flow Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5

Not Managing by Objective §Managing by Extrapolation – “If it ain’t broke, don’t 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 first you don’t succeed, then you may on the second or third try. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 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 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 7

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Types of Strategies Corp Level A Large Company Division Level Functional Level Operational Level Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 9

Types of Strategies Forward Integration Vertical Integration Strategies Backward Integration Horizontal Integration Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 10

Types of Strategies Market Penetration Intensive Strategies Market Development Product Development Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 11

Types of Strategies Related Diversification Strategies Unrelated Diversification Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 12

Types of Strategies Retrenchment Defensive Strategies Divestiture Liquidation Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 13

Natural Environment Perspective Songbirds and Coral Reefs in Trouble n n Songbirds – 76 songbird species have dramatically declined in numbers Coral Reefs – Trawl fishing destroys coral reefs q Total area of fully protected marine habitats in the US is only 50 square miles (93 million acres of national wildlife refuges and national parks) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 14

2007 Examples Forward Integration Southwest Airlines selling tickets through Galileo Backward Integration Hilton Hotels could acquire a large furniture manufacturer Horizontal Integration Huntington Bancshares and Sky Financial Group merged Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 15

2007 Examples Market Penetration Mc. Donald’s selling millions of “Shrek the Third” items to a healthier image Market Development Burger King opened its first restaurant in Japan Product Development Google introduced “Google Presents” to compete with Power. Point Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 16

2007 Examples Related Diversification Unrelated Diversification Retrenchment MGM Mirage is opening its first noncasino luxury hotel Ford Motor Company entered the industrial bank business Discovery Channel closed 103 mallbased and stand-alone stores Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 17

2007 Examples Divestiture Liquidation Whirlpool sold its struggling Hoover floor-care business to Techtronic Industries Follow Me Charters sold all of its assets and ceased doing business Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 18

Michael Porter’s Generic Strategies Cost Leadership Strategies (Low-Cost & Best-Value) Differentiation Strategies Focus Strategies (Low-Cost Focus & Best-Value Focus) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 19

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First Mover Advantages § Benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 23

Outsourcing Business-Process Outsourcing (BPO) § Companies taking over the functional operations of other firms Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 24

Global Perspective Joint Ventures Mandatory for All Foreign Firms in India n n n n India’s experiencing fastest growth in over 18 years Second fastest (behind China) growth rate at 10. 7% Also experiencing 6. 6% inflation Gap between rich and poor widening Joint venture mandatory Vast majority of joint ventures fail Tourism also growing Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 25

Strategic Management in Nonprofit and Governmental Organizations §Educational Institutions §Medical Organizations §Governmental Agencies and Departments Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 26

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