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    Lecture 5

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    Bilal Zaheer

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    © All Rights Reserved
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    Lecture 5

    Uploaded by

    Bilal Zaheer
    2 views33 pages

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    lecture 5

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    Copyright:

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    Download as ppt, pdf, or txt
    2 views33 pages

    Lecture 5

    Uploaded by

    Bilal Zaheer

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 33

    CHAPTER 5

    STRATEGIES IN ACTION
    Long-Term Objectives

    Objectives --

    Quantifiable
    Measurable
    Realistic
    Understandable
    Challenging
    Long-Term Objectives

    Objectives --

    Hierarchical
    Obtainable
    Congruent- match, fit, harmonious
    Time-line
    SMART
    BENEFITS OF OBJECTIVES
    • Direction
    • Allow synergy
    • Aid in evaluation
    • Establish priorities
    • Reduce uncertainty
    • Minimizing conflicts
    • Allocation of resources
    • Design of job
    Types of Strategies

    Forward
    Integration

    Vertical Backward
    Integration Integration
    Strategies

    Horizontal
    Integration
    FORWARD INTEGRATION
    • Gaining ownership or increased control over
    distributors or retailers
    • Online distribution
    • Guidelines:
    • Expensive/incapable/unreliable distributors
    • Distributor is not available
    • Rapid growth of organization
    • Own capability to manage the distribution
    • Advantages of stable production is high
    • High margins to distributors
    BACKWARD INTEGRATION
    • Seeking ownership or increased control on firm’s
    suppliers
    • Outsourcing
    • Guidelines
    • Expensive/incapable/unreliable suppliers
    • Small number of supplier with large number of
    competitors
    • Rapid growth of organization
    • Own capability to manage the supplies
    • Advantages of stable prices are important
    • High margins to suppliers
    • Need to acquire a resource quickly
    HORIZONTAL INTEGRATION
    • Seeking ownership or increased control over firms
    competitors
    • Mergers, acquisitions and takeovers
    • Guidelines
    • Can gain monopolistic condition
    • Competition in a growing industry
    • Increased economies of scale
    • Capability to expand
    • Competitors are faltering/pause/weaken
    EXAMPLES
    Forward
    PARCO opened PEARL
    Integration

    Backward Savours has its own supply


    Integration chain

    Horizontal Standard Chartered acquired


    Integration Union Bank
    Types of Strategies

    Market
    Penetration

    Intensive Market
    Strategies Development

    Product
    Development
    MARKET PENETRATION
    • Seek to increase the market share of present products
    or services in present market through marketing efforts
    • Guidelines
    • Market is not saturated
    • Usage rate could be increased
    • Market share of the competitor is declining but
    industry is increasing
    • High revenue with less expenditure
    • Economies of the scale and competitive edge
    MARKET DEVELOPMENT
    • Introduces existing products in new market or
    geographic area
    • Guidelines
    • Reliable, capable and inexpensive distribution
    channel
    • Successful actions of an organization
    • Untapped market exist
    • Capability to expand
    • Exceeded production capacity
    • Industry is growing
    PRODUCT DEVELOPMENT
    • Increase sales by modifying and/or improving present
    products.
    • Guidelines
    • Successful products at maturity stage
    • Rapid technological development in industry
    • Better quality competitive products at comparable
    price
    • Competition in high growth industry
    • Strong research and development capabilities
    EXAMPLES
    Market
    Mobile Operating Firms
    Penetration

    Market
    PIA is opening new routes
    Development

    Product
    Electronic Cars
    Development
    Types of Strategies

    Concentric
    Diversification

    Diversification Conglomerate
    Strategies Diversification

    Horizontal
    Diversification
    CONCENTRIC DIVERSIFICATION

    • Adding new, but related, products or services


    • Guidelines
    • When organization compete in no growth or slow
    growth industry
    • Opting strategy will enhance the sales of the current
    products
    • New products have high margins
    • Seasonal sales level to counterbalance the existing
    peak and valley
    • Declining stage of product life cycle
    • Strong management team
    HORIZONTAL DIVERSIFICATION

    • Adding new, unrelated products for present customers


    • Hospital business
    • Guidelines
    • Additional revenues
    • Highly competitive or no growth industry
    • Present channels for the new product distribution
    CONGLOMERATE DIVERSIFICATION
    • Adding new unrelated products to new market
    • Guidelines
    • Declines in sales and profits
    • Capability
    • Opportunity of purchase a new business
    • Financial synergies between acquired and acquiring
    firms
    • Existing market saturation
    EXAMPLES
    Concentric Google launches it mobile
    Diversification phone

    Conglomerate
    Diversification Fauji Foundation

    Horizontal
    Fuel Stations
    Diversification
    Types of Strategies

    Retrenchment

    Defensive Divestiture
    Strategies

    Liquidation
    RETRENCHMENT

    • Regrouping through cost and asset reduction to reverse


    declining sales and profits
    • Guidelines
    • Failed to meet objective with clear distinctive
    competencies
    • Weaker competitor
    • Inefficiency, low profitability, poor employee morale
    and pressure from stockholders
    • Failed to capitalize on SWOT
    DIVESTITURE

    • Selling a division or part of the organization


    • May be the part of the retrenchment strategy
    • Guidelines
    • Pursued a retrenchment strategy but failed
    • More resources required to be competitive
    • Division is responsible for organization overall poor
    performance
    • Division is misfit
    • Large amount of cash is needed
    LIQUIDATION
    • Selling all of a company assets, in parts, for their
    tangible worth
    • Guidelines
    • Failure of retrenchment and divestiture strategy
    • Only alternative is bankruptcy
    • Stockholder want to minimize losses by selling
    organization
    EXAMPLES
    America West Airlines closed
    Retrenchment its hub at Columbus, Ohio and
    layed off 390 employees

    Divestiture
    Telenor & Warid in Pakistan

    Liquidation Steel Mill of Pakistan


    Michael Porter’s Generic Strategies

    Cost Leadership Strategies

    Differentiation Strategies

    Focus Strategies
    COST LEADERSHIP STRATEGY
    • Emphasize on producing products at a very low
    per unit cost for a consumer who are price
    sensitive
    •Economies of scale
    •learning and experience curve
    •linkages with suppliers and distributors
    •Guidelines
    •Few ways to achieve differentiation
    •Many price sensitive buyers
    •No brand consciousness
    •Significant bargaining power
    DIFFERENTIATION STRATEGY

    • Emphasize on producing products


    considered unique industry wise for price
    insensitive customer
    •Guidelines
    •Imitation is difficult
    •Customer must value it as a high value product
    FOCUS STRATEGIES
    • Emphasize on producing products to fulfill the
    need of small amount of customers
    •Guidelines
    •Sufficient size of segment
    •High potential growth
    •Not crucial to the success of any competitor
    •Customer value a product as high as company
    requires
    •E.g. Local Flying Company
    JOINT VENTURE
    • Occurs when two or more companies form a
    temporary partnership or consortium for the
    propose of capitalizing on some opportunity.
    • less risky but with the chances of failure.

    •Guidelines
    •Privately and publicly owned organization
    •Domestic organization and foreign country organization
    •Project require overwhelming resources and share of
    risk
    •Small firm to compete with the large one
    •Launching of new technology quickly
    MERGER/ACQUISITION
    • Merger occurs when two organization of equal size
    unite to form one enterprise.
    •Acquisition occurs when an organization purchase
    another organization
    • less risky but with the chances of failure.

    •Guidelines
    •To provide improved quality products
    •To make better use of existing sales force
    •To reduce managerial staff
    •To gain economies of scale
    •To smooth seasonal trends in sales
    •To gain the access to new suppliers, distributors, customers products
    •To gain new technology
    EXAMPLES-MERGERS
    Acquiring Firm Acquired Firm
    IBM Rational Software Corp
    Yahoo Inktomi Corp
    U.S. Steel National Steel Corp
    Pfizer Pharmacia
    Krispy Kreme Montana Mills
    Doughnuts
    Oracle People Soft
    Palm Handspring
    Nike Converse
    First Mover Advantages

     Benefits a firm may achieve by entering a


    new market or developing a new product
    or service prior to rival firms.
    Outsourcing
    Business-process outsourcing
    (BPO)

     Companies taking over the functional


    operations of other firms

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