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Strategic management.Chapter 2
1.
Strategies in Action Chapter Five Copyright
©2017 Pearson Education, Inc. 5-1
2.
Long-Term Objectives The results
expected from pursuing certain strategies 2-to-5 year timeframe Copyright ©2017 Pearson Education, Inc. 5-2
3.
Varying Performance Measures
by Organizational Level Copyright ©2017 Pearson Education, Inc. 5-3
4.
The Desired Characteristics of
Objectives Copyright ©2017 Pearson Education, Inc. 5-4
5.
The Nature of
Long-Term Objectives Objectives provide direction allow synergy assist in evaluation establish priorities reduce uncertainty minimize conflicts stimulate exertion aid in both the allocation of resources and the design of jobs Copyright ©2017 Pearson Education, Inc. 5-5
6.
Financial versus Strategic Objectives
Financial objectives include growth in revenues, growth in earnings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and so on. Strategic objectives include a 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, and so on. Copyright ©2017 Pearson Education, Inc. 5-6
7.
Types of Strategies
Most organizations simultaneously pursue a combination of two or more strategies, but a combination strategy can be exceptionally risky if carried too far. No organization can afford to pursue all the strategies that might benefit the firm. Difficult decisions must be made and priorities must be established. Copyright ©2017 Pearson Education, Inc. 5-7
8.
Varying Performance Measures
by Organizational Level Copyright ©2017 Pearson Education, Inc. 5-3
9.
Alternative Strategies Defined
and Exemplified Copyright ©2017 Pearson Education, Inc. 5-9
10.
Integration Strategies Forward Integration involves
gaining ownership or increased control over distributors or retailers Backward Integration strategy of seeking ownership or increased control of a firm's suppliers Horizontal Integration a strategy of seeking ownership of or increased control over a firm's competitors Copyright ©2017 Pearson Education, Inc. 5-10
11.
Intensive Strategies Market
Penetration Strategy seeks to increase market share for present products or services in present markets through greater marketing efforts Market Development involves introducing present products or services into new geographic areas Product Development Strategy seeks increased sales by improving or modifying present products or services Copyright ©2017 Pearson Education, Inc. 5-11
12.
Diversification Strategies Related Diversification value
chains possess competitively valuable cross-business strategic fits Unrelated Diversification value chains are so dissimilar that no competitively valuable cross-business relationships exist Copyright ©2017 Pearson Education, Inc. 5-12
13.
Defensive Strategies Retrenchment Regroups
through cost and asset reduction to reverse declining sales and profits Divestiture Selling a division or part of an organization Often used to raise capital for further strategic acquisitions or investments Liquidation Selling all of a company’s assets, in parts, for their tangible worth Copyright ©2017 Pearson Education, Inc. 5-13
14.
Defensive Strategies Retrenchment occurs when
an organization regroups through cost and asset reduction to reverse declining sales and profits also called a turnaround or reorganizational strategy designed to fortify an organization’s basic distinctive competence Copyright ©2017 Pearson Education, Inc. 5-14
15.
Porter's Five Generic
Strategies 5-15
16.
The Desired Characteristics of
Objectives Copyright ©2017 Pearson Education, Inc. 5-4
17.
Michael Porter's Five Generic
Strategies Type 3 Differentiation is a strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive Copyright ©2017 Pearson Education, Inc. 5-17
18.
Michael Porter's Five Generic
Strategies Type 4 low-cost focus strategy that offers products or services to a niche group of customers at the lowest price available on the market Type 5 best-value focus strategy that offers products or services to a small range of customers at the best price-value available on the market Copyright ©2017 Pearson Education, Inc. 5-18
19.
Strategy Analysis and Choice Chapter Six Copyright
©2017 Pearson Education, Inc. 6-19
20.
The Process of
Generating and Selecting Strategies A manageable set of the most attractive alternative strategies must be developed. The advantages, disadvantages, trade- offs, costs, and benefits of these strategies should be determined. Copyright ©2017 Pearson Education, Inc. 6-20
21.
The Process of
Generating and Selecting Strategies Identifying and evaluating alternative strategies should involve many of the managers and employees who earlier assembled the organizational vision and mission statements, performed the external audit, and conducted the internal audit. Copyright ©2017 Pearson Education, Inc. 6-21
22.
The Process of
Generating and Selecting Strategies Alternative strategies proposed by participants should be considered and discussed in a series of meetings. Proposed strategies should be listed in writing. When all feasible strategies identified by participants are given and understood, the strategies should be ranked in order of attractiveness. Copyright ©2017 Pearson Education, Inc. 6-22
23.
The Strategy-Formulation Analytical Framework 6-23
24.
The Nature of
Long-Term Objectives Objectives provide direction allow synergy assist in evaluation establish priorities reduce uncertainty minimize conflicts stimulate exertion aid in both the allocation of resources and the design of jobs Copyright ©2017 Pearson Education, Inc. 5-5
25.
A Comprehensive Strategy- Formulation
Framework Stage 2 - Matching Stage focuses on generating feasible alternative strategies by aligning key external and internal factors techniques include the Strengths-Weaknesses- Opportunities-Threats (SWOT) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE) Matrix, and the Grand Strategy Matrix Copyright ©2017 Pearson Education, Inc. 6-25
26.
A Comprehensive Strategy- Formulation
Framework Stage 3 - Decision Stage involves the Quantitative Strategic Planning Matrix (QSPM) reveals the relative attractiveness of alternative strategies and thus provides objective basis for selecting specific strategies Copyright ©2017 Pearson Education, Inc. 6-26
27.
Matching Key External
and Internal Factors to Formulate Alternative Strategies Copyright ©2017 Pearson Education, Inc. 6-27
28.
The Matching Stage The
Strengths-Weaknesses- Opportunities-Threats (SWOT) Matrix helps managers develop four types of strategies: SO (strengths-opportunities) Strategies WO (weaknesses-opportunities) Strategies ST (strengths-threats) Strategies WT (weaknesses-threats) Strategies Copyright ©2017 Pearson Education, Inc. 6-28
29.
Financial versus Strategic Objectives
Financial objectives include growth in revenues, growth in earnings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and so on. Strategic objectives include a 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, and so on. Copyright ©2017 Pearson Education, Inc. 5-6
30.
The Matching Stage ST
Strategies use a firm's strengths to avoid or reduce the impact of external threats WT Strategies defensive tactics directed at reducing internal weakness and avoiding external threats Copyright ©2017 Pearson Education, Inc. 6-30
31.
SWOT Matrix 1. List
the firm's key external opportunities. 2. List the firm's key external threats. 3. List the firm's key internal strengths. 4. List the firm's key internal weaknesses. 5. Match internal strengths with external opportunities, and record the resultant SO strategies. Copyright ©2017 Pearson Education, Inc. 6-31
32.
SWOT Matrix (cont.) 6.
Match internal weaknesses with external opportunities, and record the resultant WO strategies. 7. Match internal strengths with external threats, and record the resultant ST strategies. 8. Match internal weaknesses with external threats, and record the resultant WT strategies. Copyright ©2017 Pearson Education, Inc. 6-32
33.
The SPACE Matrix 6-33
34.
Types of Strategies
Most organizations simultaneously pursue a combination of two or more strategies, but a combination strategy can be exceptionally risky if carried too far. No organization can afford to pursue all the strategies that might benefit the firm. Difficult decisions must be made and priorities must be established. Copyright ©2017 Pearson Education, Inc. 5-7
35.
The SPACE Matrix Two
internal dimensions (financial position [FP] and competitive position [CP]) Two external dimensions (stability position [SP] and industry position [IP]) Most important determinants of an organization's overall strategic position Copyright ©2017 Pearson Education, Inc. 6-35
36.
SPACE Matrix Axes Copyright
©2017 Pearson Education, Inc. 6-36
37.
Steps to Develop
a SPACE Matrix 1. Select a set of variables to define financial position (FP), competitive position (CP), stability position (SP), and industry position (IP). Copyright ©2017 Pearson Education, Inc. 6-37
38.
Steps to Develop
a SPACE Matrix 2. Assign a numerical value ranging from +1 (worst) to +7 (best) to each of the variables that make up the FP and IP dimensions. Assign a numerical value ranging from –1 (best) to –7 (worst) to each of the variables that make up the SP and CP dimensions. Copyright ©2017 Pearson Education, Inc. 6-38
39.
Steps to Develop
a SPACE Matrix 3. Compute an average score for FP, CP, IP, and SP. 4. Plot the average scores for FP, IP, SP, and CP on the appropriate axis. 5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis and plot the resultant point on Y. Plot the intersection of the new xy point. Copyright ©2017 Pearson Education, Inc. 6-39
40.
Steps to Develop
a SPACE Matrix 6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection point. ► This vector reveals the type of strategies recommended for the organization: aggressive, competitive, defensive, or conservative Copyright ©2017 Pearson Education, Inc. 6-40
41.
Alternative Strategies Defined
and Exemplified Copyright ©2017 Pearson Education, Inc. 5-8
42.
Example Strategy Profiles Copyright
©2017 Pearson Education, Inc. 6-42
43.
The Boston Consulting
Group (BCG) Matrix BCG Matrix graphically portrays differences among divisions in terms of relative market share position and industry growth rate allows a multidivisional organization to manage its portfolio of businesses by examining the relative market share position and the industry growth rate of each division relative to all other divisions in the organization Copyright ©2017 Pearson Education, Inc. 6-43
44.
The BCG Matrix 6-44
45.
The BCG Matrix Question
Marks – Quadrant I Organization must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, or product development) or to sell them Stars – Quadrant II represent the organization’s best long-run opportunities for growth and profitability Copyright ©2017 Pearson Education, Inc. 6-45
46.
The BCG Matrix Cash
Cows – Quadrant III generate cash in excess of their needs should be managed to maintain their strong position for as long as possible Dogs – Quadrant IV compete in a slow- or no-market-growth industry businesses are often liquidated, divested, or trimmed down through retrenchment Copyright ©2017 Pearson Education, Inc. 6-46
47.
The BCG Matrix The
major benefit of the BCG Matrix is that it draws attention to the cash flow, investment characteristics, and needs of an organization's various divisions. Copyright ©2017 Pearson Education, Inc. 6-47
48.
The Internal-External (IE)
Matrix 6-48
49.
Alternative Strategies Defined
and Exemplified Copyright ©2017 Pearson Education, Inc. 5-9
50.
The IE Matrix 6-50
51.
The Grand Strategy
Matrix Grand Strategy Matrix based on two evaluative dimensions: competitive position and market (industry) growth Copyright ©2017 Pearson Education, Inc. 6-51
52.
The Grand Strategy
Matrix 6-52
53.
The Grand Strategy
Matrix Quadrant I continued concentration on current markets (market penetration and market development) and products (product development) is an appropriate strategy Quadrant II unable to compete effectively need to determine why the firm's current approach is ineffective and how the company can best change to improve its competitiveness Copyright ©2017 Pearson Education, Inc. 6-53
54.
The Grand Strategy
Matrix Quadrant III must make some drastic changes quickly to avoid further decline and possible liquidation Extensive cost and asset reduction (retrenchment) should be pursued first Quadrant IV have characteristically high cash-flow levels and limited internal growth needs and often can pursue related or unrelated diversification successfully Copyright ©2017 Pearson Education, Inc. 6-54
55.
The Quantitative Strategic
Planning Matrix (QSPM) Quantitative Strategic Planning Matrix (QSPM) objectively indicates which alternative strategies are best uses input from Stage 1 analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies Copyright ©2017 Pearson Education, Inc. 6-55
56.
The Quantitative Strategic
Planning Matrix (QSPM) Copyright ©2017 Pearson Education, Inc. 6-56
57.
Integration Strategies Forward Integration involves
gaining ownership or increased control over distributors or retailers Backward Integration strategy of seeking ownership or increased control of a firm's suppliers Horizontal Integration a strategy of seeking ownership of or increased control over a firm's competitors Copyright ©2017 Pearson Education, Inc. 5-10
58.
Steps in a
QSPM (cont.) 4. Determine the Attractiveness Scores (AS). 5. Compute the Total Attractiveness Scores. 6. Compute the Sum Total Attractiveness Score. Copyright ©2017 Pearson Education, Inc. 6-58
59.
Positive Features of
the QSPM Sets of strategies can be examined sequentially or simultaneously Requires strategists to integrate pertinent external and internal factors into the decision process Can be adapted for use by small and large for-profit and nonprofit organizations Copyright ©2017 Pearson Education, Inc. 6-59
60.
Limitations of the
QSPM Always requires informed judgments It is only as good as the prerequisite information and matching analyses on which it is based Copyright ©2017 Pearson Education, Inc. 6-60
61.
A QSPM for
a Retail Computer Store Copyright ©2017 Pearson Education, Inc. 6-61
62.
Intensive Strategies Market
Penetration Strategy seeks to increase market share for present products or services in present markets through greater marketing efforts Market Development involves introducing present products or services into new geographic areas Product Development Strategy seeks increased sales by improving or modifying present products or services Copyright ©2017 Pearson Education, Inc. 5-11
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