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Lecture chapter 5
- 1. Chapter 5
Strategies in Action
Strategic Management:
Concepts & Cases
13th Edition
Global Edition
Fred David
Copyright © 2011 Pearson Education Ch 5 -1
- 3. Long Term Objectives
Quantitative Challenging
Measurable Hierarchical
Realistic Obtainable
Understandable Congruent
Copyright © 2011 Pearson Education Ch 5 -3
- 6. 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
Copyright © 2011 Pearson Education Ch 5 -6
- 7. Financial vs. Strategic Objectives
Strategic Objectives
Larger market share
Quicker on-time delivery than rivals
Shorter design-to-market times than rivals
Lower costs than rivals
Higher product quality than rivals
Wider geographic coverage than rivals
Achieving technological leadership
Consistently getting new or improved
products to market ahead of rivals
Copyright © 2011 Pearson Education Ch 5 -7
- 8. Not Managing by Objectives
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 at first you don’t succeed,
then you may on the second or third try
Copyright © 2011 Pearson Education Ch 5 -8
- 9. 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 © 2011 Pearson Education Ch 5 -9
- 12. Types of Strategies
Forward
Integration
Vertical Backward
Integration Integration
Strategies
Horizontal
Integration
Copyright © 2011 Pearson Education Ch 5 -12
- 13. Vertical Integration Strategies
Forward Gaining ownership or increased
Integration control over distributors or retailers
Backward Seeking ownership or increased
Integration control of a firm’s suppliers
Horizontal Seeking ownership or increased
Integration control over competitors
Copyright © 2011 Pearson Education Ch 5 -13
- 14. Types of Strategies
Market
Penetration
Intensive Market
Strategies Development
Product
Development
Copyright © 2011 Pearson Education Ch 5 -14
- 15. Intensive Strategies
Seeking increased market share for
Market present products or services in
Penetration present markets through greater
marketing efforts
Market Introducing present products or
Development services into new geographic areas
Seeking increased sales by
Product
improving present products or
Development services or developing new ones
Copyright © 2011 Pearson Education Ch 5 -15
- 16. Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
Copyright © 2011 Pearson Education Ch 5 -16
- 17. Diversification Strategies
Related Adding new but related products or
Diversification services
Unrelated
Adding new, unrelated products or
Diversification services
Copyright © 2011 Pearson Education Ch 5 -17
- 18. Types of Strategies
Retrenchment
Defensive Divestiture
Strategies
Liquidation
Copyright © 2011 Pearson Education Ch 5 -18
- 19. Defensive Strategies
Regrouping through cost and asset
Retrenchment reduction to reverse declining sales
and profit
Divestiture Selling a division or part of an
organization
Selling all of a company’s assets, in
Liquidation parts, for their tangible worth
Copyright © 2011 Pearson Education Ch 5 -19
- 20. Retrenchment Strategy
Bankruptcy types
Chapter 7 – liquidation
Chapter 9 – municipalities
Chapter 11 – reorganization
Chapter 12 – family farmers
Chapter 13 – small businesses
Copyright © 2011 Pearson Education Ch 5 -20
- 21. 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
Copyright © 2011 Pearson Education Ch 5 -21
- 23. Type 1 or 2 Cost Leadership Strategy
Conditions
Vigorous price competition
Plentiful supply of identical products
Little product differentiation
Products used in same ways
Low cost to switch
Large buyers with power
Industry newcomers use low prices to attract
buyers
Copyright © 2011 Pearson Education Ch 5 -23
- 24. Type 3 Differentiation Strategy
Conditions
Many ways to differentiate and buyers
perceive the differences as having
value
Diverse buyer needs and uses
Few rival firms following similar
differentiation approach
Fast paced technological change and
evolving product features
Copyright © 2011 Pearson Education Ch 5 -24
- 25. Type 4 or 5 Focus Strategy
Conditions
Large, profitable, and growing target market
niche
Industry leaders do not consider the niche
crucial to their success
Industry leaders consider it costly or difficult
to meet the needs of this niche
Industry has many niches and segments
Few rivals are specializing on this target
segment
Copyright © 2011 Pearson Education Ch 5 -25
- 26. Means for Achieving Strategies
Cooperation among competitors
Joint venture / partnering
Merger / acquisition
First mover advantages
Outsourcing
Copyright © 2011 Pearson Education Ch 5 -26
- 27. Strategic Management in Nonprofit and
Governmental Organizations
Educational Institutions
Medical Organizations
Governmental Agencies and
Departments
Copyright © 2011 Pearson Education Ch 5 -27
- 28. GROUP EXERCISE
Estee Lauder Case Study
Copyright © 2011 Pearson Education Ch 5 -28
- 29. Next Week
• Readings 9 & 10 Strategic Management
Supplement for Southern Africa
• Assurance of Learning exercise 5A –
Group exercise
• Read Business Report, www.busrep.co.za
• Read CNBC, www.cnbc.com
Copyright © 2011 Pearson Education Ch 5 -29