Chapter 4: Types of Strategies Flashcards
Performance goals of an organization, intended to be achieved over a period of 5 years or more.
Long-Term Objectives
Without long-term objectives, an organization would _____
Without long-term objectives, an organization would drift aimlessly toward some unknown end
Provide the Varying Performance Measures by
Organizational Level
Organization Level: Corporate
Basis for Annual Bonus or MeritPay:
- 75% based on the long-term objectives
- 25% based on annual objectives
Organization Level: Division
Basis for Annual Bonus or MeritPay:
- 50% based on the long-term objectives
- 50% based on annual objectives
Organization Level: Function
Basis for Annual Bonus or MeritPay:
- 25% based on the long-term objectives
- 75% based on annual objectives
Provide a list of the Desired Characteristics
of Objectives
The Desired Characteristics
of Objectives
1. Quantitative
2. Measurable
3. Realistic
4. Understandable
5. Challenging
6. Hierarchical
7. Obtainable
8. Congruent across departments
What is the Nature of Long-Term Objectives?
Objectives
1. provide direction
2. allow synergy
3. assist in evaluation
4. establish priorities
5. reduce uncertainty
6. minimize conflicts
7. stimulate exertion (effort)
8. aid in both the allocation of resources and the
design of jobs
Define Financial objectives
Financial objectives include growth in revenues,
growth in earnings, higher dividends, larger profit
margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and so on.
This include growth in revenues, growth in earnings, higher dividends, larger profit
margins, greater return on investment, higher earnings per share, a rising stock price, improved cash flow, and
so on.
Financial objectives
Define Strategic objectives
Strategic objectives include a 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, and so on.
This include a 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, and so on.
Strategic objectives
Provide the list of Not Managing by Objectives:
AVOID!
Not Managing by Objectives:
AVOID!
1. Managing by Extrapolation
2. Managing by Crisis
3. Managing by Subjectives
4. Managing by Hope
What are the Types of Strategies?
- Forward Integration
- Backward Integration
- Horizontal Integration
- Market Penetration
- Market Development
- Product Development
- Related Diversification
- Unrelated Diversification
- Retrenchment
- Divesture
- Liquidation
Provide the figure of the Levels of Strategies with Persons Most Responsible
Check mo sa PPT
Define Forward Integration
Forward Integration involves gaining ownership or increased control over distributors or retailers
This involves gaining ownership or increased control over distributors or retailers
Forward Integration
This strategy of seeking ownership or increased
control of a firm’s suppliers
Backward Integration
Define Backward Integration
Backward Integration is a strategy of seeking ownership or increased
control of a firm’s suppliers
Define Horizontal Integration
Horizontal Integration is a strategy of seeking ownership of or increased control over a firm’s competitors
This is a strategy of seeking ownership of or increased control over a firm’s competitors
Horizontal Integration
What are the 3 Integration Strategies?
- Forward Integration
- Backward Integration
- Horizontal Integration
Provide the list of Forward Integration Guidelines
- When the availability of quality distributors is so limited as to offer a competitive advantage
- When an organization competes in an industry that is growing
- When an organization has both capital and human resources
to manage distributing their own products - When the advantages of stable production are
particularly high - When present distributors or retailers have high profit margins
Provide the list of Backward Integration Guidelines
- When an organization’s present suppliers are
especially expensive or unreliable - When the number of suppliers is small and the number of competitors is large
- When the organization competes in a growing industry
- When an organization has both capital and human resources
- When the advantages of stable prices are particularly important
- When present suppliers have high profit margins
- When an organization needs to quickly acquire a
needed resource
Provide the list of Horizontal Integration Guidelines
- When an organization competes in a growing
industry - When increased economies of scale provide
major competitive advantages - When an organization has both the capital and
human talent needed - When competitors are faltering due to a lack of
managerial expertise
What are the 3 Intensive Strategies?
- Market Penetration Strategy
- Market Development
- Product Development Strategy
Define Product Development Strategy
Product Development Strategy seeks increased sales by improving or modifying present products or services
This strategy seeks increased sales by improving or modifying present products or services
Product Development Strategy
This involves introducing present products or services into new geographic areas
Market Development
Define Market Development
Market Development involves introducing present products or services into new geographic areas
Define Market Penetration Strategy
This strategy seeks to increase market share for present products or services in present markets through
greater marketing efforts
This seeks to increase market share for present
products or services in present markets through
greater marketing efforts
Market Penetration Strategy
Provide the list of Market Penetration Guidelines
- When current markets are not saturated with a
particular product or service - When the usage rate of present customers could
be increased significantly - When the market shares of major competitors
have been declining while total industry sales
have been increasing - When increased economies of scale provide
major competitive advantages
Provide the list of Market Development Guidelines
- When new channels of distribution are available that are reliable, inexpensive, and of good quality
- When an organization is very successful at what it
does - When new untapped or unsaturated markets exist
- When an organization has the needed capital and human resources to manage expanded operations
- When an organization has excess production
capacity - When an organization’s basic industry is rapidly
becoming global in scope
Provide the list of Product Development Guidelines
- When an organization has successful products that are in the maturity stage of the product life cycle
- When an organization competes in an industry
characterized by rapid technological developments - When major competitors offer better-quality
products at comparable prices - When an organization competes in a high-growth
industry - When an organization has strong research and
development capabilities
what are the 2 Diversification Strategies?
- Related Diversification
- Unrelated Diversification
Define the Unrelated Diversification
adding new, unrelated products and services
Define the Related Diversification
adding new but related products and services
adding new, unrelated products and services
Unrelated Diversification
adding new but related products and services
Related Diversification
Provide the list of Synergies of Related Diversification
- Transferring competitively valuable expertise, technological know-how, or other capabilities from
one business to another - Combining the related activities of separate
businesses into a single operation to achieve lower
costs - Exploiting common use of a known brand name
- Using cross-business collaboration to create
strengths
Provide the list of Related Diversification Guidelines
- When an organization competes in a no-growth or a slow-growth industry
- When adding new, but related, products would
significantly enhance the sales of current products - When new, but related, products could be offered at highly competitive prices
- When new, but related, products have seasonal sales levels that counterbalance an organization’s existing peaks and valleys
- When an organization’s products are currently in the declining stage of the product’s life cycle
- When an organization has a strong management team
Provide the list of Unrelated Diversification
Guidelines
- When revenues derived from an organization’s current products would increase significantly by adding the new, unrelated products
- When an organization competes in a highly competitive or a no-growth industry, as indicated by low industry profit margins and returns
- When an organization’s present channels of distribution can be used to market the new products to current customers
- When the new products have countercyclical sales
patterns compared to present products - When an organization’s basic industry is experiencing declining annual sales and profits
- When an organization has the capital and managerial talent
needed to compete successfully in a new industry - When an organization has the opportunity to purchase an unrelated business that is an attractive investment
opportunity - When there exists financial synergy
- When existing markets for an organization’s present products are saturated
- When antitrust action could be charged against an organization that historically has concentrated on a single
industry
What are the 3 Defensive Strategies?
- Retrenchment
- Divestiture
- Liquidation
Define Liquidation
- Selling all of a company’s assets, in parts, for their tangible worth
- can be an emotionally difficult strategy
Selling all of a company’s assets, in parts, for their tangible worth
Liquidation
can be an emotionally difficult strategy
Liquidation
Define Divestiture
- Selling a division or part of an organization
- Often used to raise capital for further strategic acquisitions or investments
Selling a division or part of an organization
Divestiture
Divestiture often used to ______
Divestiture often used to raise capital for further strategic acquisitions or
investments
This often used to raise capital for further strategic acquisitions or
investments
Divestiture
Define Retrenchment
- Regroups through cost and asset reduction to reverse declining
sales and profits - occurs when an organization regroups
through cost and asset reduction to reverse
declining sales and profits - also called a turnaround or reorganizational
strategy - designed to fortify an organization’s basic
distinctive competence
Retrenchment also called _______
turnaround or reorganizational
strategy
This also called a turnaround or reorganizational
strategy
Retrenchment
Regroups through cost and asset reduction to reverse declining
sales and profits
Retrenchment
This designed to fortify an organization’s basic
distinctive competence
Retrenchment
Retrenchment is designed to _________
Retrenchment is designed to fortify an organization’s basic distinctive competence
This occurs when an organization regroups
through cost and asset reduction to reverse
declining sales and profits
Retrenchment
Provide the list of Retrenchment Guidelines
- When an organization has a distinctive competence but has failed consistently to meet its goals
- When an organization is one of the weaker competitors in a given industry
- When an organization is plagued by inefficiency,
low profitability, and poor employee morale - When an organization fails to capitalize on external opportunities and minimize external threats
- When an organization has grown so large so
quickly that major internal reorganization is needed
Provide the list of Divestiture Guidelines
- When an organization has pursued a retrenchment strategy and failed to accomplish improvements
- When a division needs more resources to be
competitive than the company can provide - When a division is responsible for an organization’s overall poor performance
- When a division is a misfit with the rest of an
organization - When a large amount of cash is needed quickly
- When government antitrust action threatens a firm
Liquidation can be _______
Liquidation can be an emotionally difficult strategy
Provide the list of Liquidation Guidelines
- When an organization has pursued both a
retrenchment strategy and a divestiture strategy, and neither has been successful - When an organization’s only alternative is bankruptcy
- When the stockholders of a firm can minimize
their losses by selling the organization’s assets
What are the Porter’s Five Generic Strategies? and draw the figure.
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
Define Cost Leadership
Cost Leadership emphasizes producing
standardized products at a very low per-unit
cost for consumers who are price-sensitive
Type 1
- low-cost strategy that offers products or services
to a wide range of customers at the lowest price available on the market
Type 2
- best-value strategy that offers products or
services to a wide range of customers at the best
price-value available on the market
Define Differentiation
(Type 3)
Differentiation is a strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive
This emphasizes producing
standardized products at a very low per-unit
cost for consumers who are price-sensitive
Cost Leadership
Provide the definition of Type 4: Focus - Low Cost
Type 4
- low-cost focus strategy that offers products or
services to a niche group of customers at the
lowest price available on the market
Provide the definition of Type 5: Focus - Best Value
Type 5
- best-value focus strategy that offers products or
services to a small range of customers at the best
price-value available on the market
Provide the list of Means for Achieving Strategies
- Cooperation Among Competitors
- Joint Venture/Partnering
- Merger/Acquisition
- Private-Equity Acquisitions
- First Mover Advantages
- Outsourcing/Reshoring
Provide the list of Key Reasons Why Many Mergers and Acquisitions Fail
- Integration difficulties
- Inadequate evaluation of target
- Large or extraordinary debt
- Inability to achieve synergy
- Too much diversification
- Managers overly focused on acquisitions
- Too large an acquisitions
- Difficult to integrate different organizational cultures
- Reduced employee morale due to layoffs and relocations
Provide the list of Potential Benefits of Merging With or Acquiring Another Firm
- To provide improved capacity utilization
- To make better use of the existing sales force
- To reduce managerial staff
- To gain economies of scale
- To smooth out seasonal trends in sales
- To gain access to new suppliers, distributors, customers, products, and creditors
- To gain new technology
- To gain market share
- To enter global markets
- To gain pricing power
- To reduce tax obligations
Provide the list of Benefits of a Firm Being the First Mover
- Secure access and commitments to rare resources
- Gain new knowledge of critical success factors and issues
- Gain new market share and position in the best locations
- Establish and secure long-term relationships with customers, suppliers, distributions, and investors
- Gain customer loyalty and commitments
This is an example of a:
Amazon began rapid delivery services in some U.S. cities
Forward Integration
Provide an example of a Forward Integration
Amazon began rapid delivery services in some U.S. cities
This is an example of:
Starbucks purchased a coffee farm
Backward Integration
Provide an example of a Backward Integration
Starbucks purchased a coffee farm
This is an example of:
BB&T acquired Susquehanna Bancshares
Horizontal Integration
Provide an example of a Horizontal Integration
BB&T acquired Susquehanna Bancshares
This is an example of:
Under Amour signed tennis champion Andy Murray to a 4-year, $23 million marketing deal
Market Penetration
Provide an example of a Market Penetration
Under Amour signed tennis champion Andy Murray to a 4-year, $23 million marketing deal
Provide an example of a Market Development
Gap opened its first five stores in China
This is an example of:
Gap opened its first five stores in China
Market Development
This is an example of:
Amazon just began offering its own line of baby diapers and wipes
Product Development
Provide an example of a Product Development
Amazon just began offering its own line of baby diapers and wipes
Provide an example of a Related Diversification
Facebook acquired the text-messaging firm
WhatsApps for $19 billon
This example is considered as:
Staples closed 250 stores and reduced by 50% the size of other stores
Retrenchment
This example is considered as:
Kroger and whole Foods Market are cooking meals, becoming restaurants
Unrelated Diversification
Provide an example of an Unrelated Diversification
Kroger and whole Foods Market are cooking meals, becoming restaurants
Provide an example of Retrenchment
Staples closed 250 stores and reduced by 50% the size of other stores
Provide an example of Diverstiture
Sears Holdings divested its Land’s End division to Sear’s shareholders
This example is considered as:
Sears Holdings divested its Land’s End division to Sear’s shareholders
Diverstiture
Provide an example of a Liquidation
The trump Taj Mahal in Atlantic City, New Jersey, faces liquidation
