Strategic Management ( 6 questions)
odehe
strategic_management_5.pptStrategic Management #5
Strategies in Action
Growth Planning Process
Goals
Long-Term Objectives
Blue Ocean Strategy
Types of Strategies
Integration Strategies
Intensive Strategies
Diversification Strategies
Growth Planning Process Overview
SWOT
Vision
Mission
Values
Performance
Evaluation
Goals
Objectives
Method of
Competition
Dashboard
Action Plans
Implementation
Balanced
Scorecard
Strategy
Development
Strategic
Growth
Plan
Goals
Marketing
Profitability
Infrastructure
Long-Term Objectives
Objectives --
- Quantifiable
- Measurable
- Realistic
- Understandable
- Challenging
- Hierarchical
- Obtainable
- Congruent
- Time-line
Results expected from pursuing certain strategies
Strategies represent actions to accomplish long-term objectives
Long-Term Objectives
Strategists Should Avoid --
- Managing by Extrapolation
- Managing by Crisis
- Managing by Subjectives
- Managing by Hope
Financial vs. Strategic Objectives
Financial Objectives
- Growth in revenues
- Growth in earnings
- Higher dividends
- Higher profit margins
- Higher earnings per share
- Improved cash flow
Financial vs. Strategic Objectives
Strategic Objectives
- Larger market share
- Quicker on-time delivery than rivals
- Quicker design-to-market times than rivals
- Lower costs than rivals
- Higher product quality than rivals
- Wider geographic coverage than rivals
Financial vs. Strategic Objectives
Trade-Off
- Maximize short-term financial objectives
– harm long-term strategic objectives - Pursue increased market share at
the expense of short-term profitability - Tradeoffs related to risk of actions; concern
for business ethics; need to preserve natural environment; social responsibility issues
The Balanced Scorecard
Robert Kaplan & David Norton --
- Strategy evaluation & control technique
- Balance financial measures with
non-financial measures - Balance shareholder objectives
with customer & operational objectives
Marketing Dashboard
Easy-to-use analytics
and reporting tool
Types of Strategies
Vertical Integration Strategies
Gain Control Over --
- Distributors
- Suppliers
- Competitors
Forward Integration Strategies
Guidelines --
- Current distributors – expensive or unreliable
- Availability of quality distributors – limited
- Firm competing in industry expected to grow markedly
- Firm has both capital & HR to manage new business of distribution
- Current distributors have high profit margins
Gain Control Over --
- Distributors
- Retailers
Backward Integration Strategies
Guidelines --
- Current suppliers – expensive or unreliable
- # of suppliers is small; # of competitors is large
- High growth in industry sector
- Firm has both capital & HR to manage new business
- Stable prices are important
- Current suppliers have high profit margins
Ownership or Control --
Firm’s suppliers
Horizontal Integration Strategies
Guidelines --
- Gain monopolistic characteristics
w/o federal government challenge - Competes in growing industry
- Increased economies of scale – major competitive advantages
- Faltering due to lack of managerial expertise or need for particular resource
Ownership or Control --
Firm’s competitors
Types of Strategies
Intensive Strategies
Intensive Efforts --
- Improve competitive position with existing products
Market Penetration Strategies
Increased Market Share --
- Present products/services
- Present markets
- Greater marketing efforts
Guidelines --
- Current markets not saturated
- Usage rate of present customers can be increased significantly
- Shares of competitors declining; industry sales increasing
- Increased economies of scale provide major competitive advantage
Market Development Strategies
New Markets --
- Present products/services
to new geographic areas
Guidelines --
- New channels of distribution
– reliable, inexpensive, good quality - Firm is successful at what it does
- Untapped/unsaturated markets
- Excess production capacity
- Basic industry rapidly becoming global
http://www.letvc.com/product/217/the-history-of-apple-company
History of Apple
Product Development Strategies
Increased Sales --
- Improving present products/services
- Developing new products/services
- Products in maturity stage of life cycle
- Industry characterized by rapid technological development
- Competitors offer better-quality products @ comparable prices
- Compete in high-growth industry
- Strong R&D capabilities
Guidelines --
http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce.htm
Malcolm Gladwell
Types of Strategies
Diversification
- Related – When their value chains posses competitively valuable cross-business strategic fits
- Unrelated – When their value chains are so dissimilar that no competitively valuable cross-business relationships exist
http://www.youtube.com/watch?v=AUX4As-QpdM
Post it Notes
Related Diversification Preferred
To Capitalize on:
- Transferring competitively valuable expertise
- Combining the related activities of separate businesses into a single operation to lower costs
- Exploiting common use of a well-known brand name
- Cross-business collaboration to create
competitively valuable resource
strengths and capabilities
Diversification Strategies
Less Popular --
- More difficult to manage diverse business activities
However --
- The greatest risk of being in a single industry is having all your eggs in one basket
Related Diversification May be Effective When:
- An organization competes in a no-growth or a slow growth industry
- Adding new, but related, products would significantly enhance the sales of current products
- New, but related products could
be offered at highly competitive prices
Related Diversification May be
Effective When:
- New, but related, products have seasonal sales levels that counterbalance an organization’s existing peaks and valleys
- An organization’s products are
currently in the declining stage
of the product’s life cycle
- An organization has a strong
management team
Conglomerate Diversification Strategies
Guidelines --
- Declining annual sales & profits
- Capital & managerial ability
to compete in new
industry - Financial synergy between acquired and
acquiring firms - Current markets for present products - saturated
Unrelated Diversification
- Favors capitalizing on a portfolio of businesses that are capable of delivering excellent financial performance
- Entails hunting to acquire companies:
- Whose assets are undervalued
- That are financially distressed
- With high growth potential but are
short on investment capital
Unrelated Diversification May be Effective When:
- Revenues derived from an organization’s current products or services would increase by adding new unrelated products
- An organization competes in
a highly competitive or a
no growth industry
- An organization’s current distribution channels can be used to market new products to existing customers
Unrelated Diversification May be Effective When:
- New products have counter-cyclical sales patterns
- An organization’s basic industry is experiencing declining annual sales and profits
- An organization has the capital and managerial
talent to compete successfully in a new industry
Unrelated Diversification May be Effective When:
- An organization has the opportunity to purchase an unrelated business as an attractive investment opportunity
- There exists financial synergy
between the acquired and acquiring firm
- Existing markets for the present products are saturated
- Antitrust action could be charged against a company
Blue Ocean Strategy
What are the advantages of competing with a Blue Ocean Strategy as compared with competitors in a Red Ocean environment?
