Chapter 5 Strategies in Action

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Chapter 5Strategies in Action
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Long-Term Objectives
Objectives --

• Quantifiable
• Measurable
• Realistic
• Understandable
• Challenging

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Long-Term Objectives
Objectives --

• Hierarchical
• Obtainable
• Congruent
• Time-line

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Long-Term Objectives
Varying Performance Measures by Organizational Level Varying Performance Measures by Organizational Level
Organizational Level Basis for Annual Bonus/Merit Pay
Corporate 75 on long-term objectives25 on annual objectives
Division 50 on long-term objectives50 on annual objectives
Function 25 on long-term objectives75 on annual objectives
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Financial vs. Strategic Objectives
Financial Objectives

• Growth in revenues
• Growth in earnings
• Higher dividends
• Higher profit margins
• Higher Earnings per share
• Improved cash flow

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Types of Strategies
Corp Level
A Large Company
Division Level
Functional Level
Operational Level
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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

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Types of Strategies
Forward Integration
Vertical IntegrationStrategies
BackwardIntegration
HorizontalIntegration
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Types of Strategies
MarketPenetration
IntensiveStrategies
MarketDevelopment
ProductDevelopment
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Types of Strategies
ConcentricDiversification
DiversificationStrategies
ConglomerateDiversification
HorizontalDiversification
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Types of Strategies
Retrenchment
DefensiveStrategies
Divestiture
Liquidation
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2003 Examples
ForwardIntegration Doll maker mail order firm, Pleasant Co., opened a retail store in Manhattan
BackwardIntegration McDonalds recently acquired a paper cup producer
HorizontalIntegration Callaway Golf recently acquired Top-Flite Golf Company
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2003 Examples
MarketPenetration SABMiller Plc spent 500 million in 2003 on marketing its Miller brands of beer
Market Development JetBlue is adding dozens of new routes
ProductDevelopment GM developing hydrogen powered automobiles or Pfizer developing a new antismoking pill
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2003 Examples
ConcentricDiversification Microsoft launched its first personal computers that double as entertainment centers
ConglomerateDiversification The video-rental firm Blockbuster may acquire the DVD and music direct-marketing firm Columbia House
HorizontalDiversification Viacom acquired Comedy Central, from AOL
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2003 Examples
Retrenchment America West Airlines closing its hub at Columbus, Ohio and laying off 390 employees
Divestiture ConocoPhillips recently sold its Circle K convenience store chain to Alimentation Couche-Tard, a Canadian firm
Liquidation Sprint liquidated its Web-hosting division
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Michael Porters Generic Strategies
Cost Leadership Strategies
Differentiation Strategies
Focus Strategies
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Recent Mergers
Acquiring Firm Acquired Firm
IBM Rational Software Corp
Yahoo Inktomi Corp
U.S. Steel National Steel Corp
Pfizer Pharmacia
Krispy Kreme Doughnuts Montana Mills
Oracle People Soft
Palm Handspring
Nike Converse
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First Mover Advantages

• Benefits a firm may achieve by entering a new
  market or developing a new product or service
  prior to rival firms.

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Outsourcing
Business-process outsourcing (BPO)

• Companies taking over the functional operations
  of other firms