1. Chapter 5
Strategies in Action
Strategic Management:
Concepts & Cases
13th Edition
Global Edition
Fred David
Copyright © 2011 Pearson Education Ch 5 -1

2. Copyright © 2011 Pearson Education Ch 5 -2

3. Long Term Objectives
 Quantitative  Challenging
 Measurable  Hierarchical
 Realistic  Obtainable
 Understandable  Congruent
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4. Copyright © 2011 Pearson Education Ch 5 -4

5. Copyright © 2011 Pearson Education Ch 5 -5

6. Financial vs. Strategic Objectives
Financial Objectives
Growth in revenues
Growth in earnings
Higher dividends
Larger profit margins
Greater ROI
Higher earnings per share
Rising stock price
Improved cash flow
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7. Financial vs. Strategic Objectives
Strategic Objectives
 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
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8. Not Managing by Objectives
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 at first you don’t succeed,
then you may on the second or third try
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9. The Balanced Scorecard
Robert Kaplan & David Norton –
Strategy evaluation & control technique
Balance financial measures with
nonfinancial measures
Balance shareholder objectives with
customer & operational objectives
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10. Levels of Strategies –
Large Company
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11. Levels of Strategies –
Small Company
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12. Types of Strategies
Forward
Integration
Vertical Backward
Integration Integration
Strategies
Horizontal
Integration
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13. Vertical Integration Strategies
Forward Gaining ownership or increased
Integration control over distributors or retailers
Backward Seeking ownership or increased
Integration control of a firm’s suppliers
Horizontal Seeking ownership or increased
Integration control over competitors
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14. Types of Strategies
Market
Penetration
Intensive Market
Strategies Development
Product
Development
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15. Intensive Strategies
Seeking increased market share for
Market present products or services in
Penetration present markets through greater
marketing efforts
Market Introducing present products or
Development services into new geographic areas
Seeking increased sales by
Product
improving present products or
Development services or developing new ones
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16. Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
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17. Diversification Strategies
Related Adding new but related products or
Diversification services
Unrelated
Adding new, unrelated products or
Diversification services
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18. Types of Strategies
Retrenchment
Defensive Divestiture
Strategies
Liquidation
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19. Defensive Strategies
Regrouping through cost and asset
Retrenchment reduction to reverse declining sales
and profit
Divestiture Selling a division or part of an
organization
Selling all of a company’s assets, in
Liquidation parts, for their tangible worth
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20. Retrenchment Strategy
 Bankruptcy types
 Chapter 7 – liquidation
 Chapter 9 – municipalities
 Chapter 11 – reorganization
 Chapter 12 – family farmers
 Chapter 13 – small businesses
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21. Porter’s Five Generic Strategies
 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
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22. Copyright © 2011 Pearson Education Ch 5 -22

23. Type 1 or 2 Cost Leadership Strategy
Conditions
 Vigorous price competition
 Plentiful supply of identical products
 Little product differentiation
 Products used in same ways
 Low cost to switch
 Large buyers with power
 Industry newcomers use low prices to attract
buyers
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24. Type 3 Differentiation Strategy
Conditions
 Many ways to differentiate and buyers
perceive the differences as having
value
 Diverse buyer needs and uses
 Few rival firms following similar
differentiation approach
 Fast paced technological change and
evolving product features
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25. Type 4 or 5 Focus Strategy
Conditions
 Large, profitable, and growing target market
niche
 Industry leaders do not consider the niche
crucial to their success
 Industry leaders consider it costly or difficult
to meet the needs of this niche
 Industry has many niches and segments
 Few rivals are specializing on this target
segment
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26. Means for Achieving Strategies
 Cooperation among competitors
 Joint venture / partnering
 Merger / acquisition
 First mover advantages
 Outsourcing
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27. Strategic Management in Nonprofit and
Governmental Organizations
Educational Institutions
Medical Organizations
Governmental Agencies and
Departments
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28. GROUP EXERCISE
 Estee Lauder Case Study
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29. Next Week
• Readings 9 & 10 Strategic Management
Supplement for Southern Africa
• Assurance of Learning exercise 5A –
Group exercise
• Read Business Report, www.busrep.co.za
• Read CNBC, www.cnbc.com
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