Chapter 5

Strategies in Action
Long-Term Objectives

Objectives --

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

Objectives --

Hierarchical
Obtainable
Congruent
Time-line
Long-Term Objectives

Varying Performance Measures

by Organizational Level
Organizational Basis for Annual Bonus/Merit
Level Pay
75% on long-term objectives
Corporate
25% on annual objectives
50% on long-term objectives
Division
50% on annual objectives
25% on long-term objectives
Function
75% on annual objectives
Financial vs. Strategic
Objectives
Financial Objectives
Growth in revenues
Growth in earnings
Higher dividends
Higher profit margins
Higher Earnings per share
Improved cash flow
Types of Strategies
Corp
A Large Company Level

Division Level

Functional Level

Operational Level
The Balanced Scorecard

Robert Kaplan & David Norton --

Strategy evaluation & control technique

Balance financial measures with non-financial
measures
Balance shareholder objectives with customer
& operational objectives
Types of Strategies

Forward
Integration

Vertical Backward
Integration Integration
Strategies

Horizontal
Integration
Types of Strategies

Market
Penetration

Intensive Market
Strategies Development

Product
Development
Types of Strategies

Concentric
Diversification

Diversification Conglomerate
Strategies Diversification

Horizontal
Diversification
Types of Strategies

Retrenchment

Defensive Divestiture
Strategies

Liquidation
 2003 Examples
Doll maker & mail order firm,
Forward
Pleasant Co., opened a retail
Integration store in Manhattan

Backward McDonalds recently acquired a

Integration paper cup producer

Horizontal Callaway Golf recently acquired

Integration Top-Flite Golf Company
 2003 Examples
SABMiller Plc spent $500
Market
million in 2003 on marketing its
Penetration Miller brands of beer

Market JetBlue is adding dozens of

Development new routes

GM developing hydrogen
Product powered automobiles or Pfizer
Development developing a new antismoking
pill
 2003 Examples
Microsoft launched its first
Concentric
personal computers that double
Diversification as entertainment centers
The video-rental firm
Conglomerate
Blockbuster may acquire the
Diversification
DVD and music direct-
marketing firm Columbia House

Horizontal Viacom acquired Comedy

Diversification Central, from AOL
 2003 Examples
America West Airlines closing
Retrenchment its hub at Columbus, Ohio and
laying off 390 employees
ConocoPhillips recently sold its
Divestiture Circle K convenience store
chain to Alimentation Couche-
Tard, a Canadian firm

Sprint liquidated its Web-

Liquidation
hosting division
Michael Porter’s Generic Strategies

Cost Leadership Strategies

Differentiation Strategies

Focus Strategies
 Recent 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