Chapter 5

Strategies in Action

Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Long Term Objectives

 Quantitative  Challenging

 Measurable  Hierarchical

 Realistic  Obtainable

 Understandable  Congruent
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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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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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Levels of Strategies –
Large Company

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Levels of Strategies –
Small Company

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Types of Strategies

Forward
Integration

Vertical Backward
Integration Integration
Strategies

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Vertical Integration Strategies
Forward Gaining ownership or increased
Integration control over distributors or retailers

Backward Seeking ownership or increased

Integration control of a firm’s suppliers

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Types of Strategies

Market
Penetration

Intensive Market
Strategies Development

Product
Development

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Intensive Strategies
Seeking increased market share for
Market present products or services in
Penetration present markets through greater
marketing efforts

Market Introducing present products or

Development services into new geographic areas

Seeking increased sales by

Product
improving present products or
Development services or developing new ones

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Types of Strategies

Related
Diversification

Diversification
Strategies

Unrelated
Diversification

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Diversification Strategies

Related Adding new but related products or

Diversification services

Unrelated
Adding new, unrelated products or
Diversification services

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Types of Strategies

Retrenchment

Defensive Divestiture
Strategies

Liquidation

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Defensive Strategies
Regrouping through cost and asset
Retrenchment reduction to reverse declining sales
and profit

Divestiture Selling a division or part of an

organization

Selling all of a company’s assets, in

Liquidation parts, for their tangible worth

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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

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