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Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
Lecture chapter 5
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Lecture chapter 5

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  • 1. Chapter 5Strategies 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 ObjectivesFinancial 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 ObjectivesStrategic 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’tbroke, don’t fix it”Managing by Crisis – The true measure of agood strategist is the ability to fix problemsManaging by Subjectives – “Do your ownthing, the best way you know how”Managing by Hope – The future is full ofuncertainty 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 ScorecardRobert Kaplan & David Norton –Strategy evaluation & control techniqueBalance financial measures withnonfinancial measuresBalance shareholder objectives withcustomer & 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 StrategiesForward Gaining ownership or increasedIntegration control over distributors or retailersBackward Seeking ownership or increasedIntegration control of a firm’s suppliersHorizontal Seeking ownership or increasedIntegration 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 forMarket present products or services inPenetration present markets through greater marketing effortsMarket Introducing present products orDevelopment services into new geographic areas Seeking increased sales byProduct improving present products orDevelopment services or developing new ones Copyright © 2011 Pearson Education Ch 5 -15
  • 16. Types of Strategies Related DiversificationDiversification Strategies Unrelated Diversification Copyright © 2011 Pearson Education Ch 5 -16
  • 17. Diversification StrategiesRelated Adding new but related products orDiversification servicesUnrelated Adding new, unrelated products orDiversification 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 assetRetrenchment reduction to reverse declining sales and profitDivestiture Selling a division or part of an organization Selling all of a company’s assets, inLiquidation 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 StrategyConditions 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 StrategyConditions 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 StrategyConditions 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 andGovernmental OrganizationsEducational InstitutionsMedical OrganizationsGovernmental Agencies andDepartments 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

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