Strategies In Action Flashcards
“Bonuses or merit pay for managers must be based to a greater extent on long-term objectives & strategies”
Arthur D. Little
Characteristics of Objectives
Quantitative, measurable, realistic, challenging, obtainable, understandable, hierarchical, congruent across departments
Benefits of Having Clear Objectives
synergy, direction, reduces conflicts, aids in allocation of resources, basis for evaluation, aids in job design, establishes priorities, reduces uncertainty, stimulates exertion
Financial Objectives
growth in ROI, growth in revenues, higher profit margin, higher stock price, higher EPS, higher dividends, growth in earnings, improved cash flow
Strategic Objectives
quicker on-time delivery than rivals, higher market share, lower costs, tech leadership, shorter design to market time, better product quality, wider geographical coverage, being ahead in new products than rivals
“If you think education is expensive, try ignorance.”
Derek Bok
Type of “not managing by objective”- “If it ain’t broke don’t fix it”
Managing by extrapolation
Type of “not managing by objectives”- true measure of a good strategist is ability to solve problems
Management by Crisis
Type of “not managing by objective”- Just do what you can to accomplish what you think should be done
Management by Subjectives
Type of “not managing by objective”- decisions predicated on hope that they will succeed; luck and good fortune
Management by Hope
strategic planning involves “choices that risk resources and tradeoffs that sacrifice opportunity”
Hansen and Smith
establishing websites to sell on
forward integration
franchising; food delivery/ own delivery system
forward integration
Starbucks buying own coffee farm
backward integration
negotiating with several outside suppliers
de-integration
“The trend toward horizontal distribution seems to reflect strategists’ misgivings about their ability to operate many unrelated businesses… direct competitors are more likely to create efficiencies than…between unrelated businesses… eliminating duplicate facilities and … more likely to understand the business of the target.”
Kenneth Davidson
GAP using same-sex couples in ads
market penetration
“Management found it couldn’t nanage the beast”; till today diversification is not so common
Michael Porter
“Companies are generally not very efficient diversifiers; investors usually can do a better job of that by purchasing stock in a variety of companies”
Barry Knap
What makes diversification difficult?
Rapidly appearing new tech, new products, fast-shifting buyer preferences
cost-cutting & asset reduction to reverse declining sales & profits; pruning product lines, laying people off; streamlining
retrenchment
a corporation splits into 2 or more parts; Fiat Chrysler & Ferrari
divestiture
Porter’s 5 Generic Strategies
COST LEADERSHIP Type 1- low-cost Type 2- best-value DIFFERENTIATION Type 3- for those relatively price insensitive FOCUS- small niche Type 4- low-cost Type 5- best-value
Cost leadership must be generally pursued along with _________
differentiation
When isit best to use cost leadership strategies?
- market composed of price sensitive buyers
- only few ways to achieve prod differentation
- buyers are not brand picky/choosy
- there are a large number of buyers w significant bargaining power
Consequences of Cost Leadership
high efficiency, low overhead, limited perks, intolerance of waste, intensive screening of budget requests, rewards for cost containment
Risks to Cost Leadership
competitors may imitate, tech nreakhroughs may make strategy ineffective, overall profits driven down, buyer interest swing to other differentiating features aside from price
Benefit of Differentiation
can charge higher price & gain customer loyalty
Risks to Differentiation
unique prod may not be as valued (thus go for cost leadership after), competitors may copy the innovation
____________ and ______ firms can only effectively pursue focus strategies in conjunction with _______ or ________ strategies
Midsize and large; differentiation & cost leadership
When are focus strategies most effective?
When consumers have distinctive preferences; when rival firms are not trying to specialize in same target segment
“Within a decade, most companies will be members of teams that compete against each other.”
Kathryn Harrigan
Why are joint ventures not always successful?
- managers involved in daily ops are not involved in forming/shaping the venture
- venture may benefit partner comps. but not the customers
- venture may not be supported equally by both partners
- venture may begin to compete more w one of the partners that the other
Benefits of joint ventures
globalization of ops, improved comms and networking, minimization of risk
“… Now the question is ‘Which joint ventures and cooperative arrangements are most appropriate for our needs and expectations?… “How do we manage these ventures most effectively?”
Kathryn Harrigan
outsourcing, info sharing, joint marketing & R&D
Other methods of strategic partnering
3 Reasons for the Trend towards Mergers/Acquisitions
- desire of diversified firms to spin off segments into sep companies then are acquired by other firms
- desire of firms to acquire similar comps in countries w lower tax rates
- desire of shareholders for firms to continually grow revs
9 Reasons Why Many Mergers & Acquisitions Fail
- integration difficulties
- inadequate eval of target
- large debt
- inability to achieve synergy
- too much diversification
- managers overly focused on acquisitions
- too large an acquisition
- diff to integrate diff org cultures
- reduced employee morale due to layoffs & relocations
when a corporation’s shareholders are bought by the company’s mgt and other private investirs using borrowed funds
leveraged buyout
11 Potential Benefits of Mergers & Acquisitions
improved capacity utilization decrease tax obligations gain economies of scale reduce managerial staff make use if existing sales force smooth out seasonal trends in sales new tech gain market share enter global markets gain pricing power gain access to new distributors, suppliers, customers, prods, creditors
PE to PE acquisitions
secondary buyouts
when PEs borrow money to fund dividend payouts to themselves
dividend recapitalization
3 Tactics to Facilitate Strategies
First mover advantages, outsourcing, reshoring
moving some manufacturing back to country of origin (after outsourcing)
reshoring
13 Potential Benefits of Outsourcing
cost savings reduce time to market tax benefit catalyst for change focus on core business cost restructuring- fixed costs move towards varcost; VC become more predictable improved quality knowledge contract- financial penalties & legal redress when partner doesnt do job access to talent operational expertise enhanced capacity for innovation risk management
