Chapter 5

Strategies in Action

Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Long Term Objectives

Quantitative Challenging

Measurable Hierarchical

Realistic Obtainable

Understandable Congruent
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Financial vs. Strategic Objectives
Financial Objectives
Growth in revenues
Growth in earnings
Higher dividends
Larger profit margins
Greater ROI
Higher earnings per share
Rising stock price
Improved cash flow
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Financial vs. Strategic Objectives
Strategic Objectives
Larger market share
Quicker on-time delivery than rivals
Shorter design-to-market times than rivals
Lower costs than rivals
Higher product quality than rivals
Wider geographic coverage than rivals
Achieving technological leadership
Consistently getting new or improved
products to market ahead of rivals
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Not Managing by Objectives
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 at first you don’t succeed,
then you may on the second or third try
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The Balanced Scorecard

Robert Kaplan & David Norton –

Strategy evaluation & control technique

Balance financial measures with
nonfinancial measures
Balance shareholder objectives with
customer & operational objectives
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Levels of Strategies –
Large Company

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Levels of Strategies –
Small Company

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Types of Strategies

Forward
Integration

Vertical Backward
Integration Integration
Strategies

Horizontal
Integration

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Vertical Integration Strategies
Forward Gaining ownership or increased
Integration control over distributors or retailers

Backward Seeking ownership or increased

Integration control of a firm’s suppliers

Horizontal Seeking ownership or increased

Integration control over competitors

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Types of Strategies

Market
Penetration

Intensive Market
Strategies Development

Product
Development

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Intensive Strategies
Seeking increased market share for
Market present products or services in
Penetration present markets through greater
marketing efforts

Market Introducing present products or

Development services into new geographic areas

Seeking increased sales by

Product
improving present products or
Development services or developing new ones

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Types of Strategies

Related
Diversification

Diversification
Strategies

Unrelated
Diversification

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Diversification Strategies

Related Adding new but related products or

Diversification services

Unrelated
Adding new, unrelated products or
Diversification services

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Types of Strategies

Retrenchment

Defensive Divestiture
Strategies

Liquidation

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Defensive Strategies
Regrouping through cost and asset
Retrenchment reduction to reverse declining sales
and profit

Divestiture Selling a division or part of an

organization

Selling all of a company’s assets, in

Liquidation parts, for their tangible worth

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Retrenchment Strategy

Bankruptcy types
Chapter 7 – liquidation
Chapter 9 – municipalities
Chapter 11 – reorganization
Chapter 12 – family farmers
Chapter 13 – small businesses

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Porter’s Five Generic Strategies

Type 1 Cost Leadership – Low cost

Type 2 Cost Leadership – Best value
Type 3 Differentiation
Type 4 Focus – Low cost
Type 5 Focus – Best value

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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
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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
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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
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Means for Achieving Strategies

Cooperation among competitors

Joint venture / partnering
Merger / acquisition
First mover advantages
Outsourcing

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Strategic Management in Nonprofit and
Governmental Organizations

Educational Institutions
Medical Organizations
Governmental Agencies and
Departments

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mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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