Strategies in Action: Strategic Management: Concepts & Cases 12 Edition Fred David

Chapter 5
Strategies in Action
Strategic Management:
Concepts & Cases
12th Edition
Fred David
Ch 5 -1
Strategies in Action
Alice said, "Would you tell me, please,
which way I ought to go from here?"
"That depends a good deal on where you

want to get to," said the Cat.
LEWIS CARROLL
Even if you’re on the right track, you’ll get

run over if you just sit there.
WILL ROGERS
Ch 5 -2
Long-Term Objectives
Long Term Objectives represent the results expected from perusing
certain strategies.
Strategies represent the actions to be taken to accomplish long-term
objectives.
Time frame for objectives and strategies should be consistent, usually
from 2-5 years.
Objectives –
Quantifiable
Measurable
Realistic
Understandable
Challenging Ch 5 -3
Long-Term Objectives
Objectives –
Hierarchical
Obtainable
Congruent
Timeline
Benefits include: Reduce uncertainty
Provide Direction Minimize conflicts
Allow Synergy Aid in allocation of
resources
Aid in evaluation
Stimulate exertion
Establish priorities
Ch 5 -4
Varying Performance Measures
by Organizational Level
Ch 5 -5
Financial vs. Strategic Objectives
Financial Objectives
Growth in revenues
Growth in earnings
Higher dividends
Higher profit margins
Higher earnings per share
Improved cash flow
Strategic Objectives
Larger market share
Quicker on-time delivery than rivals
Shorter design-to-market time than rivals
Lower cost than rivals
Achieving technological leadership
Ch 5 -6
An educator once said, “If you think education is
expensive, try ignorance.”
Strategists should avoid the following alternative ways to
“Not Managing by Objective”.
“Not Managing by Objective”

Managing by Extrapolation – “If it ain’t broke, don’t 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
first you don’t succeed, then you may on the second or
third try.
Ch 5 -7
The Balanced Scorecard
Robert Kaplan & David Norton –
Strategy evaluation & control technique

Balance financial measures with nonfinancial
measures
Balance shareholder objectives with customer
& operational objectives
Ch 5 -8
Ch 5 -9
Types of Strategies
A Large Company
Ch 5 -10
Types of Strategies
A Small Company
Ch 5 -11
Types of Strategies
Forward
Integration
Vertical Backward
Integration Integration
Strategies
Horizontal
Integration
Ch 5 -12
Types of Strategies
Market
Penetration
Intensive Market
Strategies Development
Product
Development
Ch 5 -13
Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
Ch 5 -14
Types of Strategies
Retrenchment
Defensive Divestiture
Strategies
Liquidation
Ch 5 -15
Natural Environment Perspective
Songbirds and Coral Reefs in Trouble
 Songbirds – 76 songbird species have

dramatically declined in numbers
 Coral Reefs – Trawl fishing destroys
coral reefs
 Total area of fully protected
marine habitats in the US is only
50 square miles (93 million acres
of national wildlife refuges and
national parks)
Ch 5 -16
2007 Examples
Forward Southwest Airlines selling tickets

Integration through Galileo
Backward Hilton Hotels could acquire a large

Integration furniture manufacturer
Horizontal Huntington Bancshares and Sky

Integration Financial Group merged
Ch 5 -17
2007 Examples
McDonald’s selling millions of

Market
“Shrek the Third” items to a
Penetration healthier image
Market Burger King opened its first

Development restaurant in Japan
Google introduced “Google

Product
Presents” to compete with
Development PowerPoint
Ch 5 -18
2007 Examples
Related MGM Mirage is opening its first non-

Diversification casino luxury hotel
Unrelated
Ford Motor Company entered the
Diversification industrial bank business
Discovery Channel closed 103 mall-

Retrenchment based and stand-alone stores
Ch 5 -19
2007 Examples
Whirlpool sold its struggling Hoover

Divestiture
floor-care business to Techtronic
Industries
Follow Me Charters sold all of its

Liquidation assets and ceased doing business
Ch 5 -20
Michael Porter’s Generic Strategies
Cost Leadership Strategies

(Low-Cost & Best-Value)
Differentiation Strategies
Focus Strategies
(Low-Cost Focus &
Best-Value Focus)
Ch 5 -21
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
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
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
Ch 5 -25
Ch 5 -26
Means for Achieving Strategies
 Joint venture / partnering

 Merger / Acquisition
 Private-Equity Acquisitions
 First mover advantages
 Outsourcing
Ch 5 -27
Ch 5 -28
First Mover Advantages
 Benefits a firm may achieve by entering a

new market or developing a new product or
service prior to rival firms
Ch 5 -29
Outsourcing
Business-Process Outsourcing
(BPO)
 Companies taking over the functional

operations of other firms
Ch 5 -30
Global Perspective
Joint Ventures Mandatory for All Foreign Firms in India
 India’s experiencing fastest growth in over 18 years

 Second fastest (behind China) growth rate at 10.7%
 Also experiencing 6.6% inflation
 Gap between rich and
poor widening
 Joint venture mandatory
 Vast majority of joint
ventures fail
 Tourism also growing
Ch 5 -31
Strategic Management in Nonprofit and
Governmental Organizations
Educational Institutions
Medical Organizations
Governmental Agencies and Departments
Ch 5 -32
Strategic Management in Small Firms
As vital as for large corporations

Even if conducted informally or by single owner, can
enhance small firm’s growth and prosperity
Numerous magazines and articles have focused on
applying strategic management concepts to small firms
Firms that do engage in strategic management
outperform that do not.
Ch 5 -33

Strategies in Action: Strategic Management: Concepts & Cases 12 Edition Fred David

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Strategies in Action: Strategic Management: Concepts & Cases 12 Edition Fred David

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Chapter 5

"That depends a good deal on where you

Even if you’re on the right track, you’ll get

“Not Managing by Objective”

Robert Kaplan & David Norton –

Strategy evaluation & control technique

 Songbirds – 76 songbird species have

Forward Southwest Airlines selling tickets

Backward Hilton Hotels could acquire a large

Horizontal Huntington Bancshares and Sky

McDonald’s selling millions of

Market Burger King opened its first

Google introduced “Google

Related MGM Mirage is opening its first non-

Discovery Channel closed 103 mall-

Whirlpool sold its struggling Hoover

Follow Me Charters sold all of its

Cost Leadership Strategies

 Vigorous price competition

 Many ways to differentiate and buyers

 Large, profitable, and growing target market

 Joint venture / partnering

 First mover advantages

 Benefits a firm may achieve by entering a

 Companies taking over the functional

 India’s experiencing fastest growth in over 18 years

As vital as for large corporations

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