Professional Documents
Culture Documents
Strategies in Action: Hundreds of Companies Today
Strategies in Action: Hundreds of Companies Today
Strategies in Action: Hundreds of Companies Today
Long-Term Objectives
Long-Term Objectives
Objectives
Quantifiable Measurable Realistic Understandable Challenging Hierarchical Obtainable Congruent Time-line
Long-Term Objectives
Long-term objectives are necessary
Corporate Divisional Functional levels
Long-Term Objectives
Strategists should avoid
Managing by Extrapolation Managing by Crisis Managing by Subjectives Managing by Hope
Integration Strategies
Forward Integration
Integration Strategies
Vertical Integration strategies
Allow a firm to gain control over:
Distributors Suppliers competitors
Integration Strategies
Forward Integration
Gaining ownership or increased control over distributors or retailers
Integration Strategies
Guidelines for Forward Integration
Present distributors are expensive, unreliable, or incapable of meeting firms needs Availability of quality distributors is limited When firm competes in an industry that is expected to grow markedly Organization has both capital and human resources needed to manage new business of distribution Advantages of stable production are high Present distributors have high profit margins
Integration Strategies
Backward Integration
Seeking ownership or increased control of a firms suppliers
Integration Strategies
Guidelines for Backward Integration
When present suppliers are expensive, unreliable, or incapable of meeting needs Number of suppliers is small and number of competitors large High growth in industry sector Firm has both capital and human resources to manage new business Advantages of stable prices are important Present supplies have high profit margins
Integration Strategies
Horizontal Integration
Seeking ownership or increased control over competitors
Integration Strategies
Guidelines for Horizontal Integration
Firm can gain monopolistic characteristics without being challenged by federal government Competes in growing industry Increased economies of scale provide major competitive advantages Faltering due to lack of managerial expertise or need for particular resources
Intensive Strategies
Market Penetration
Intensive Strategies
Intensive Strategies
Intensive strategies
Require intensive efforts to improve a firms competitive position with existing products
Intensive Strategies
Market Penetration
Seeking increased market share for present products or services in present markets through greater marketing efforts
Intensive Strategies
Guidelines for Market Penetration
Current markets not saturated Usage rate of present customers can be increased significantly Market shares of competitors declining while total industry sales increasing Increased economies of scale provide major competitive advantages
Intensive Strategies
Market Development
Introducing present products or services into new geographic area
Intensive Strategies
Guidelines for Market Development
New channels of distribution that are reliable, inexpensive, and good quality Firm is very successful at what it does Untapped or unsaturated markets Capital and human resources necessary to manage expanded operations Excess production capacity Basic industry rapidly becoming global
Intensive Strategies
Product Development
Seeking increased sales by improving present products or services or developing new ones
Intensive Strategies
Guidelines for Product Development
Products in maturity stage of life cycle Competes in industry characterized by rapid technological developments Major competitors offer better-quality products at comparable prices Compete in high-growth industry Strong research and development capabilities
Diversification Strategies
Concentric Diversification
Diversification Strategies
Conglomerate Diversification
Horizontal Diversification
Diversification Strategies
Diversification strategies
Becoming less popular as organizations are finding it more difficult to manage diverse business activities
Diversification Strategies
Concentric Diversification
Adding new, but related, products or services
Diversification Strategies
Guidelines for Concentric Diversification
Competes in no- or slow-growth industry Adding new & related products increases sales of current products New & related products offered at competitive prices Current products are in decline stage of the product life cycle Strong management team
Diversification Strategies
Conglomerate Diversification
Adding new, unrelated products or services
Diversification Strategies
Guidelines for Conglomerate Diversification
Declining annual sales and profits Capital and managerial talent to compete successfully in a new industry Financial synergy between the acquired and acquiring firms Exiting markets for present products are saturated
Diversification Strategies
Horizontal Diversification
Adding new, unrelated products or services for present customers
Diversification Strategies
Guidelines for Horizontal Diversification
Revenues from current products/services would increase significantly by adding the new unrelated products Highly competitive and/or no-growth industry w/low margins and returns Present distribution channels can be used to market new products to current customers New products have counter cyclical sales patterns compared to existing products
Defensive Strategies
Retrenchment
Defensive Strategies
Divestiture Liquidation
Defensive Strategies
Retrenchment
Regrouping through cost and asset reduction to reverse declining sales and profit
Defensive Strategies
Guidelines for Retrenchment
Firm has failed to meet its objectives and goals consistently over time but has distinctive competencies Firm is one of the weaker competitors Inefficiency, low profitability, poor employee morale, and pressure from stockholders to improve performance. When an organizations strategic managers have failed Very quick growth to large organization where a major internal reorganization is needed
Defensive Strategies
Divestiture
Selling a division or part of an organization
Defensive Strategies
Guidelines for Divestiture
When firm has pursued retrenchment but failed to attain needed improvements When a division needs more resources than the firm can provide When a division is responsible for the firms overall poor performance When a division is a misfit with the organization When a large amount of cash is needed and cannot be obtained from other sources.
Defensive Strategies
Liquidation
Selling all of a companys assets, in parts, for their tangible worth
Defensive Strategies
Guidelines for Liquidation
When both retrenchment and divestiture have been pursued unsuccessfully If the only alternative is bankruptcy, liquidation is an orderly alternative When stockholders can minimize their losses by selling the firms assets
Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity.
Research and development partnerships Cross-distribution agreements Cross-licensing agreements Cross-manufacturing agreements Joint-bidding consortia
Managers who must collaborate daily not involved in forming or shaping the venture Venture may benefit the companies but not the customers Venture not supported equally by both partners Venture may begin to compete with one of the partners more so than the other
Combination of privately held and publicly held can be synergistically combined Domestic forms joint venture with foreign firm, can obtain local management to reduce certain risks Distinctive competencies of two or more firms are complementary Overwhelming resources and risks where project is potentially very profitable (e.g., Alaska pipeline) Two or more smaller firms have trouble competing with larger firm A need exists to introduce a new technology quickly
Example of Mergers
Acquiring Firm Mittal Tata Hewlett-Packard Ebay PepsiCo Sara Lee Phillips Petroleum Devon Acquired Firm Arcelor Corus Compaq Computer$ HomesDirect Quaker Oats Earthgrains Company Conoco Anderson Exploration
Differentiation strategy
Unique and superior value in terms of product quality, features, service
Differentiation Strategies
Focus Strategies
Generic Strategies
Cost Leadership Strategies
Pursued in conjunction with differentiation Economies or diseconomies of scale Capacity utilization achieved Linkages with suppliers and distributors
Generic Strategies
Low Cost Producer Advantages
Market of many price-sensitive buyers Few ways of achieving product differentiation Buyers not sensitive to brand differences Large number of buyers with bargaining power
Generic Strategies
Differentiation Strategies
Greater product flexibility Greater compatibility Lower costs Improved service Greater convenience More features
Generic Strategies
Differentiation Strategies
Generic Strategies
Focus Strategies
Industry segment of sufficient size Good growth potential Not crucial to success of major competitors
Generic Strategies
Focus Strategies
Consumers have distinctive preferences Rival firms not attempting to specialize in the same target segment
Business Strategies
Business Strategy:
Focuses on improving the competitive position of a companys or business units products or services within the specific industry or market segment that the firm serves.
Competitive Advantage:
Determined by Competitive Scope
Breadth of the companys target market
Competitive Strategy
Industry Structure:
Fragmented Industry
Many small and medium-sized local companies compete for small shares of total market
Focus strategies predominate
Competitive Strategy
Industry Structure:
Consolidated industry
Mature industry dominated by a few large companies
Cost Leadership or Differentiation predominate
Dimensions of Quality
Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived Quality
Dimensions Quality
Competitive Strategy
Strategic rollup:
Quickly consolidate fragmented industry Money from venture capital Entrepreneur acquires hundreds of owner-operated firms Creates large firm with economies of scale
Competitive Strategy
Strategic rollup:
Differ from Conventional M&As
Large number of firms Owner-operated firms Goal to reinvent entire industry
Competitive Tactics
Tactic:
Specific operating plan detailing how a strategy is to be implemented in terms of when and where it is to be put into action.
Timing tactics Market location tactics
Competitive Tactics
Timing Tactics:
First mover (pioneer)
Reputation as industry leader High profits Sets standards for subsequent products in the industry
Late mover
Able to imitate technological advances of others
Keeps R&D costs down Keeps risks down
Competitive Tactics
Market Location Tactics:
Offensive Tactics
Frontal assault Flanking maneuver Bypass attack Encirclement Guerrilla warfare
Competitive Tactics
Market Location Tactics:
Defensive Tactics
Raise structural barriers Increase expected retaliation Lower the inducement for attack
Cooperative Strategies
Cooperative Strategies:
Collusion
Active cooperation of firms to reduce output and raise prices
Explicit Tacit
Cooperative Strategies
Cooperative Strategies:
Strategic Alliance:
Partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.
Cooperative Strategies
Obtain technology
Access to markets
Strategic Alliance