Chapter 5

Strategies in Action

Strategic Management:
Concepts & Cases
12th Edition
Fred David

Ch 5 -1
Long-Term Objectives

Objectives –

▪Quantifiable
▪Measurable
▪Realistic
▪Understandable
▪Challenging

Ch 5 -2
Long-Term Objectives

Objectives –

▪Hierarchical
▪Obtainable
▪Congruent
▪Timeline

Ch 5 -3
Varying Performance Measures by
Organizational Level

Ch 5 -4
Financial vs. Strategic Objectives

Financial Objectives
▪Growth in revenues
▪Growth in earnings
▪Higher dividends
▪Higher profit margins
▪Higher earnings per share
▪Improved cash flow

Ch 5 -5
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 -6
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 -7
Ch 5 -8
Types of Strategies
Corp
A Large Company Level

Division Level

Functional Level

Operational Level

Ch 5 -9
Types of Strategies

Forward
Integration

Vertical Backward
Integration Integration
Strategies

Horizontal
Integration

Ch 5 -10
Types of Strategies

Market
Penetration

Intensive Market
Strategies Development

Product
Development

Ch 5 -11
Types of Strategies

Related
Diversification

Diversification
Strategies

Unrelated
Diversification

Ch 5 -12
Types of Strategies

Retrenchment

Defensive Divestiture
Strategies

Liquidation

Ch 5 -13
 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 -14
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 -15
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 -16
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 -17
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 -18
Michael Porter’s Generic Strategies

Cost Leadership Strategies

(Low-Cost & Best-Value)

Differentiation Strategies

Focus Strategies
(Low-Cost Focus &
Best-Value Focus)

Ch 5 -19
Ch 5 -20
Ch 5 -21
Ch 5 -22
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 -23
Outsourcing
Business-Process Outsourcing (BPO)

▪ Companies taking over the functional

operations of other firms

Ch 5 -24
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 -25
Strategic Management in Nonprofit and
Governmental Organizations

▪Educational Institutions
▪Medical Organizations
▪Governmental Agencies and Departments

Ch 5 -26