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
- 2. Copyright © 2011 Pearson Education Ch 5 -2
- 3. Long Term Objectives Quantitative Challenging Measurable Hierarchical Realistic Obtainable Understandable Congruent Copyright © 2011 Pearson Education Ch 5 -3
- 4. Copyright © 2011 Pearson Education Ch 5 -4
- 5. Copyright © 2011 Pearson Education Ch 5 -5
- 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
- 10. Levels of Strategies – Large Company Copyright © 2011 Pearson Education Ch 5 -10
- 11. Levels of Strategies – Small Company Copyright © 2011 Pearson Education Ch 5 -11
- 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
- 22. Copyright © 2011 Pearson Education Ch 5 -22
- 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