Chapter 5

Strategies in Action

Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Ch 5 -1

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Ch 5 -2

Long Term Objectives

Quantitative

Challenging

Measurable

Hierarchical

Realistic

Obtainable

Understandable

Congruent

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Ch 5 -3

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Ch 5 -4

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Ch 5 -5

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
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Ch 5 -6

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
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Ch 5 -7

Not Managing by Objectives

Managing

by Extrapolation If it aint
broke, dont 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 dont succeed,
then you may on the second or third try
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Ch 5 -8

The Balanced Scorecard

Robert Kaplan & David Norton
Strategy

evaluation & control technique

Balance

financial measures with

nonfinancial measures
Balance

shareholder objectives with

customer & operational objectives
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Ch 5 -9

Levels of Strategies
Large Company

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Ch 5 -10

Levels of Strategies
Small Company

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Ch 5 -11

Types of Strategies
Forward
Integration

Vertical
Integration
Strategies

Backward
Integration

Horizontal
Integration

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Ch 5 -12

Vertical Integration Strategies

Forward
Integration

Gaining ownership or increased

control over distributors or retailers

Backward
Integration

Seeking ownership or increased

control of a firms suppliers

Horizontal
Integration

Seeking ownership or increased

control over competitors

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Ch 5 -13

Types of Strategies
Market
Penetration

Intensive
Strategies

Market
Development

Product
Development

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Ch 5 -14

Intensive Strategies
Market
Penetration

Seeking increased market share for

present products or services in
present markets through greater
marketing efforts

Market
Development

Introducing present products or

services into new geographic areas

Product
Development

Seeking increased sales by

improving present products or
services or developing new ones

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Ch 5 -15

Types of Strategies
Related
Diversification

Diversification
Strategies

Unrelated
Diversification

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Ch 5 -16

Diversification Strategies

Related
Diversification

Adding new but related products or

services

Unrelated
Diversification

Adding new, unrelated products or

services

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Ch 5 -17

Types of Strategies
Retrenchment

Defensive
Strategies

Divestiture

Liquidation

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Ch 5 -18

Defensive Strategies
Retrenchment

Regrouping through cost and asset

reduction to reverse declining sales
and profit

Divestiture

Selling a division or part of an

organization

Liquidation

Selling all of a companys assets, in

parts, for their tangible worth

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Ch 5 -19

Retrenchment Strategy

Bankruptcy types
Chapter 7 liquidation
Chapter 9 municipalities
Chapter 11 reorganization
Chapter 12 family farmers
Chapter 13 small businesses

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Ch 5 -20

Porters 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

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Ch 5 -21

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Ch 5 -22

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
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Ch 5 -23

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

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Ch 5 -24

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
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Ch 5 -25

Means for Achieving Strategies

Cooperation among competitors
Joint venture / partnering
Merger / acquisition
First mover advantages
Outsourcing

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Ch 5 -26

Strategic Management in Nonprofit and

Governmental Organizations
Educational
Medical

Institutions

Organizations

Governmental

Agencies and

Departments
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Inc.

Ch 5 -27

All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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Ch 5 -28