Sunday, April 18, 2010

Strategic Management: Strategies in Action

Long-Term Objectives:

  • Results expected from pursuing certain strategies
    • Time 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

Integration Strategies
  • Forward integration
  • Backward integration
  • Horizontal integration

Defined
  • Gaining ownership or increased control over distributors or retailers

Example

  • General Motors is acquiring 10% of its dealers.



Forward Integration


Defined
  • Seeking ownership or increased control of a firm’s suppliers

Example

  • Motel 8 acquired a furniture manufacturer.



Backward Integration



Defined
  • Seeking ownership or increased control over competitors

Example

  • Hilton recently acquired Promus.



Horizontal Integration



Intensive Strategies
  • Market penetration
  • Market development
  • Product development


Defined
  • Seeking increased market share for present products or services in present markets through greater marketing efforts




Example

  • Ameritrade, the on-line broker, tripled its annual advertising expenditures to $200 million to convince people they can make their own investment decisions.



Market Penetration



Defined
  • Introducing present products or services into new geographic area




Example

  • Britain’s leading supplier of buses, Henlys PLC, acquires Blue Bird Corp. North America’s leading school bus maker.



Market Development



Defined
  • Seeking increased sales by improving present products or services or developing new ones




Example

  • Apple developed the G4 chip that runs at 500 megahertz.



Product Development


Diversification Strategies
  • Concentric diversification
  • Conglomerate diversification
  • Horizontal diversification

Defined
  • Adding new, but related, products or services




Example

  • National Westminister Bank PLC in Britain bought the leading British insurance company, Legal & General Group PLC.

Concentric Diversification



Defined
  • Adding new, unrelated products or services




Example

  • H&R Block, the top tax preparation agency, said it will buy discount stock brokerage Olde Financial for $850 million in cash.

Conglomerate Diversification


Defined
  • Adding new, unrelated products or services for present customers




Example

  • The New York Yankees baseball team are merging with the New Jersey Nets basketball team.

Horizontal Diversification



Alliance Strategies
    • Joint Venture
    • Strategic Alliance
    • Networks

Defensive Strategies
  • Retrenchment
  • Divestiture
  • Liquidation


Defined
  • Regrouping through cost and asset reduction to reverse declining sales and profit




Example

  • Singer, the sewing machine company, declared bankruptcy.

Retrenchment



Defined
  • Selling a division or part of an organization




Example

  • Harcourt General, the large US publisher, is selling its Neiman Marcus division.

Divestiture



Defined
  • Selling all of a company’s assets, in parts, for their tangible worth




Example

  • Ribol sold all its assets and ceased business.

Liquidation



Michael Porter’s Generic Strategies

Cost Leadership Strategies

Differentiation Strategies

Focus Strategies



Key Terms & Concepts
  • Acquisition
  • Backward integration
  • Bankruptcy
  • Combination strategy
  • Concentric diversification
  • Conglomerate diversification
  • Cooperative arrangements
  • Cost leadership





  • Differentiation
  • Diversification strategies
  • Divestiture
  • Focus
  • Forward integration
  • Franchising
  • Generic strategies
  • Horizontal diversification
  • Horizontal integration
  • Integration strategies


Key Terms & Concepts (Cont’d)
  • Intensive strategies
  • Joint venture
  • Leveraged buyout
  • Liquidation
  • Merchant banking
  • Market development
  • Market penetration




  • Merger
  • Outsourcing
  • Product development
  • Retrenchment
  • Takeover
  • Vertical integration


Key Terms & Concepts (Cont’d)
  • Product and service planning
  • Production/operations functions
  • Profitability ratios
  • Research and development




  • Selling
  • Social responsibility
  • Staffing
  • Synergy
  • Test marketing

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