Strategic Management ( 6 questions)
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strategic_management_6.pptStrategic Management #6
Types of Strategies
Adapting to Social Media
Retrenchment Strategies
Retrenchment --
- Cost & asset reduction to reverse declining sales & profit
Bankruptcy
- Chapter 7 – Liquidation
- Chapter 9 – Municipalities
- Chapter 11 – Reorganization for Corporations
- Chapter 12 – Family Farmers
- Chapter 13 – Reorganization for Small Businesses and Individuals
Retrenchment Strategies
Guidelines --
- Failed to meet objectives & goals consistency; has distinctive competencies
- Firm is one of weaker competitors
- Inefficiency, low profitability, poor employee morale, pressure for stockholders
- Strategic managers have failed
- Rapid growth in size; major internal reorganization necessary
Divestiture Strategies
- Selling a division or part of an organization
Divestiture Strategies
Guidelines --
- Retrenchment failed to attain improvements
- Division needs more resources than are available
- Division responsible for firm’s overall poor performance
- Division is a mis-fit with organization
- Large amount of cash is needed and cannot be raised through other sources
Liquidation Strategies
Guidelines --
- Retrenchment & divestiture failed
- Only alternative is bankruptcy
- Minimize stockholder loss by selling firm’s assets
Selling company’s assets, in parts,
for their tangible worth
Michael Porter’s Generic Strategies
Cost Leadership Strategies
Differentiation Strategies
Focus Strategies
Generic Strategies
- In conjunction with differentiation
- Economies or diseconomies of scale
- Capacity utilization achieved
- Linkages w/ suppliers & distributors
Cost Leadership
Cost Leadership
- Ways of ensuring total costs across value chain are lower than competitors’ total costs
Perform value chain activities more efficiently than rivals and control factors that drive costs
Revamp the firm’s overall value chain to eliminate or bypass some cost-producing activities
Cost Leadership
- Can be especially effective when:
Price competition among rivals is vigorous
Rival’s products are identical and supplies are readily available
There are few ways to achieve differentiation
Most buyers use the product in the same way
Buyers have low switching costs
Buyers are large and have significant power
Industry newcomers use low prices to attract buyers
Generic Strategies
- Many price-sensitive buyers
- Few ways of achieving differentiation
- Buyers not sensitive to brand differences
- Large # of buyers with bargaining power
Really Low Cost Producer Advantage
Generic Strategies
- Greater product flexibility
- Greater compatibility
- Lower costs
- Improved service
- Greater convenience
- More features
Differentiation
Differentiation
Can be especially effective when:
There are many ways to differentiate and many buyers perceive the value of the differences
Buyer needs and uses are diverse
Few rival firms are following a similar differentiation approach
Technology change is fast paced and competition revolves around evolving product features
Generic Strategies
- Industry segment of sufficient size
- Good growth potential
- Not crucial to success of major competitors
Focused Strategies
Focused Strategy
- Can be especially effective when:
- The target market niche is large, profitable,
and growing
- Industry leaders do not consider the niche crucial
- Industry leaders consider the niche too costly or difficult to meet
- The industry has many different niches and segments
- Few, if any, other rivals are attempting to specialize in the same target segment
Means for Achieving Strategies
Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity
Joint Venture/Partnering -
Reasons why Mergers and Acquisitions Fail
- Integration difficulties
- Inadequate evaluation of target
- Large or extraordinary debt
- Inability to achieve synergy
AOL & Time Warner
Means for Achieving Strategies
- R&D partnerships
- Cross-distribution agreements
- Cross-licensing agreements
- Cross-manufacturing agreements
- Joint-bidding consortia
Cooperative Arrangements -
Means for Achieving Strategies
- Managers who must collaborate daily;
not involved in developing the venture
- Benefits the company not the customers
- Not supported equally by both partners
- May begin to compete with one of the partners
Why Joint Ventures Fail -
Joint Ventures
Guidelines --
- Synergies between private and publicly held
- Domestic with foreign firm, local management can reduce risk
- Complementary distinctive competencies
- Resources & risks where project is highly profitable (e.g. Alaska Pipeline)
- Two or more smaller firms competing with a larger firm
- Need to introduce new technology quickly
Reasons why Mergers and Acquisitions Fail
- Too much diversification
- Managers overly focused on acquisition
- Too large an acquisition
- Difficult to integrate different organizational
cultures - Reduced employee moral due to layoffs and relocations
Means for Achieving Strategies
- Provide improved capacity utilization
- Better use of existing sales force
- Reduce managerial staff
- Gain economies of scale
- Smooth out seasonal trends in sales
- Gain new technology
- Access to new suppliers, distributors, customers, products, creditors
Mergers & Acquisitions
First Mover Advantages
Benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms
First Mover Advantages
- Securing access to rare resources
- Gaining new knowledge of key factors & issues
- Carving out market share
- Easy to defend position & costly for rival firms to overtake
Potential Advantages
Outsourcing
- Companies taking over the functional operations of other firms
Business-process outsourcing (BPO)
- Less expensive
- Allows firm to focus on core business
- Enables firm to provide better services
Benefits
