The document discusses various strategic management concepts including long-term objectives, vertical integration strategies, intensive strategies, diversification strategies, and defensive strategies. Specifically, it provides examples and guidelines for different types of strategies such as forward integration, market penetration, conglomerate diversification, joint ventures, and more. The overall document serves as a reference for various strategic management concepts and considerations for companies.
The document discusses various strategic management concepts including long-term objectives, vertical integration strategies, intensive strategies, diversification strategies, and defensive strategies. Specifically, it provides examples and guidelines for different types of strategies such as forward integration, market penetration, conglomerate diversification, joint ventures, and more. The overall document serves as a reference for various strategic management concepts and considerations for companies.
The document discusses various strategic management concepts including long-term objectives, vertical integration strategies, intensive strategies, diversification strategies, and defensive strategies. Specifically, it provides examples and guidelines for different types of strategies such as forward integration, market penetration, conglomerate diversification, joint ventures, and more. The overall document serves as a reference for various strategic management concepts and considerations for companies.
The document discusses various strategic management concepts including long-term objectives, vertical integration strategies, intensive strategies, diversification strategies, and defensive strategies. Specifically, it provides examples and guidelines for different types of strategies such as forward integration, market penetration, conglomerate diversification, joint ventures, and more. The overall document serves as a reference for various strategic management concepts and considerations for companies.
certain strategies Tme frame —2 to 5 years Nature of Long-Term Objectives
Quantitative Measurable Realistic Understandable Challenging Hierarchical Obtainable Congruent among organizational units Nature of Long-Term Objectives (Cont’d)
Objectives are associated with a time line and stated in terms:
• Growth in assets • Growth in sales • Profitability • Market share • Diversification • Integration • EPS • Social responsibility Nature of Long-Term Objectives (Cont’d)
Objectives are the basis for:
• Designing jobs • Organizing activities • Providing direction • Organizational synergy • Standards for evaluation Nature of Long-Term Objectives (Cont’d)
Strategists should avoid:
• Managing by extrapolation “If it ain’t broke, don’t fix it.” Nature of Long-Term Objectives (Cont’d)
Strategists should avoid:
• Managing by crisis: Reactive vs. proactive Nature of Long-Term Objectives (Cont’d)
Strategists should avoid:
• Managing by subjectives: Mystery approach to decision making Subordinates are left to figure out what is happening and why Nature of Long-Term Objectives (Cont’d)
Strategists should avoid:
• Managing by hope: Good times are just around the corner Strategies in Action
acquiring 10% of its • Gaining dealers. ownership or increased control over distributors or retailers Guidelines for Forward Integration
Present distributors are expensive, unreliable, or
incapable of meeting firm’s needs Availability of quality distributors is limited When firm competes in an industry that is expected to grow markedly Advantages of stable production are high Present distributor have high profit margins Strategies in Action Backward Integration Example
• Motel 8 acquired a Defined furniture manufacturer. • Seeking ownership or increased control of a firm’s suppliers Guidelines for Backward Integration
When present suppliers are expensive, unreliable,
or incapable of meeting needs Number of suppliers is small and number of competitors large High growth in industry sector Firm has both capital and human resources to manage new business Advantages of stable prices are important Present supplies have high profit margins Strategies in Action Horizontal Integration Example
Defined • Hilton recently
acquired Promus. • Seeking ownership or increased control over competitors Guidelines for Horizontal Integration
Firm can gain monopolistic characteristics without
being challenged by federal government Competes in growing industry Increased economies of scale provide major competitive advantages Faltering due to lack of managerial expertise or need for particular resources Strategies in Action
Intensive Strategies
• Market penetration • Market development • Product development Strategies in Action Market Penetration Example Defined • Ameritrade, the on- line broker, tripled its • Seeking increased annual advertising market share for expenditures to $200 present products million to convince or services in people they can make present markets their own investment through greater decisions. marketing efforts Guidelines for Market Penetration
Current markets not saturated
Usage rate of present customers can be increased significantly Market shares of competitors declining while total industry sales increasing Increased economies of scale provide major competitive advantages Strategies in Action Market Development Example
Defined • Britain’s leading
supplier of buses, Henlys PLC, acquires • Introducing Blue Bird Corp. North present products America’s leading or services into school bus maker. new geographic area Guidelines for Market Development
New channels of distribution that are reliable,
inexpensive, and good quality Firm is very successful at what it does Untapped or unsaturated markets Capital and human resources necessary to manage expanded operations Excess production capacity Basic industry rapidly becoming global Strategies in Action Product Development
Defined Example
• Seeking increased • Apple developed the
sales by improving G4 chip that runs at present products 500 megahertz. or services or developing new ones Guidelines for Product Development
Products in maturity stage of life cycle
Competes in industry characterized by rapid technological developments Major competitors offer better-quality products at comparable prices Compete in high-growth industry Strong research and development capabilities Strategies in Action
Diversification Strategies
• Concentric diversification • Conglomerate diversification • Horizontal diversification Strategies in Action Concentric Diversification Example
Defined • National Westminister
Bank PLC in Britain • Adding new, but bought the leading related, products British insurance or services company, Legal & General Group PLC. Guidelines for Concentric Diversification
Competes in no- or slow-growth industry
Adding new & related products increases sales of current products New & related products offered at competitive prices Current products are in decline stage of the product life cycle Strong management team Strategies in Action Conglomerate Diversification Example
Defined • H&R Block, the top tax
preparation agency, said it will buy • Adding new, discount stock unrelated products brokerage Olde or services Financial for $850 million in cash. Guidelines for Conglomerate Diversification
Declining annual sales and profits
Capital and managerial talent to compete successfully in a new industry Financial synergy between the acquired and acquiring firms Exiting markets for present products are saturated Strategies in Action Horizontal Diversification Example
Defined • The New York Yankees
baseball team are • Adding new, merging with the New unrelated products Jersey Nets basketball or services for team. present customers Guidelines for Horizontal Diversification
Revenues from current products/services would
increase significantly by adding the new unrelated products Highly competitive and/or no-growth industry w/low margins and returns Present distribution channels can be used to market new products to current customers New products have counter cyclical sales patterns compared to existing products Strategies in Action
Joint Venture Example Defined • Lucent Technologies • Two or more and Philips Electronic sponsoring firms NV formed Philips forming a separate Consumer organization for Communications to cooperative make and sell purposes telephones. Guidelines for Joint Venture
Combination of privately held and publicly held can
be synergistically combined Domestic forms joint venture with foreign firm, can obtain local management to reduce certain risks Distinctive competencies of two or more firms are complementary Overwhelming resources and risks where project is potentially very profitable (e.g., Alaska pipeline) Two or more smaller firms have trouble competing with larger firm A need exists to introduce a new technology quickly Strategies in Action
Retrenchment
Defined Example • Regrouping • Singer, the sewing through cost and machine company, asset reduction to declared bankruptcy. reverse declining sales and profit Guidelines for Retrenchment
Firm has failed to meet its objectives and goals
consistently over time but has distinctive competencies Firm is one of the weaker competitors Inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance. When an organization’s strategic managers have failed Very quick growth to large organization where a major internal reorganization is needed. Strategies in Action
Divestiture
Example Defined • Harcourt General, the • Selling a division large US publisher, is or part of an selling its Neiman organization Marcus division. Guidelines for Divestiture
When firm has pursued retrenchment but failed to
attain needed improvements When a division needs more resources than the firm can provide When a division is responsible for the firm’s overall poor performance When a division is a misfit with the organization When a large amount of cash is needed and cannot be obtained from other sources. Strategies in Action
Liquidation
Defined Example • Selling all of a • Ribol sold all its assets company’s assets, and ceased business. in parts, for their tangible worth Guidelines for Liquidation
When both retrenchment and divestiture have been
pursued unsuccessfully If the only alternative is bankruptcy, liquidation is an orderly alternative When stockholders can minimize their losses by selling the firm’s assets Cost Leadership Strategies
