Professional Documents
Culture Documents
Strategies in Action
Strategic Management:
Concepts & Cases
12th Edition
Fred David
Ch 5 -1
Chapter Objectives
Ch 5 -2
Realistic
Understandable
Challenging
Hierarchical
Obtainable
Congruent
Timeline
Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 5 -3
Ch 5 -4
Higher dividends
Higher profit margins
Higher earnings per share
Improved cash flow
Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 5 -5
Ch 5 -6
Ch 5 -7
Ch 5 -8
Types of Strategies
Corp
Level
A Large Company
Division Level
Functional Level
Operational Level
Ch 5 -9
Types of Strategies
A Small Company
Corp
Level
Functional Level
Operational Level
Ch 5 -10
Types of Strategies
Forward Integration
Ch 5 -11
Forward Integration
Six guidelines when forward integration may be an especially effective
strategy:
When an organizations present distributors are especially
expensive or unreliable, or incapable of meeting firms distribution
needs.
When the availability of quality distributors is so limited as to offer a
competitive advantage to those firms that integrate forward.
When an organization competes in an industry that is growing and
expected to continue to grow markedly.
When an organization has both the capital and human resources
needed to manage the new business.
When the advantages of stable production are particularly high.
When present distributors have high profit margins
Ch 5 -12
Types of Strategies
Backward Integration
Backward integration is a strategy of seeking ownership or
increased control of a firms suppliers. This strategy can be
especially appropriate when a firms current suppliers are
unreliable, too costly, or cannot meet the firms needs.
Some industries in the United States (such as automotive and
aluminum industries) are reducing their historic pursuit of
backward integration. Instead of owning their suppliers,
companies negotiate with several outside suppliers.
Outsourcing, whereby companies use outside suppliers, shop
around, play one seller against another, and go with the best
deal is becoming widely practiced.
Ch 5 -13
Backward Integration
Seven guidelines for when backward integration may be especially
effective:
Ch 5 -14
Types of Strategies
Horizontal Integration
Ch 5 -15
Backward Integration
Five guidelines for when horizontal integration may be an
especially effective strategy:
When an organization can gain monopolistic
characteristics.
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 to successfully manage an expanded
organization.
When competitors are faltering due to lack of managerial
expertise or a need for particular resources that an
organization possesses.
Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 5 -16
Intensive Strategies
Market Penetration - seeks to increase market share for present
products or services in present markets through greater marketing
efforts.
Ch 5 -17
Intensive Strategies
Market Development - involves introducing present products or
services into new geographic areas.
The climate for international market development is becoming more
favorable. In many industries, such as airlines, it is going to be hard
to maintain a competitive edge by staying close to home.
Six guidelines for when this is may be effective:
Ch 5 -18
Intensive Strategies
Product Development - seeking increased sales by improving or
modifying present products or services. Product development
usually entails large research and development expenditures.
Five guidelines for when to use product development:
Ch 5 -19
Diversification Strategies
Related Diversification
Ch 5 -20
Diversification Strategies
Unrelated Diversification
Ch 5 -21
Defensive Strategies
Retrenchment - Retrenchment occurs when an
organization regroups through cost and asset
reduction to reverse declining sales and profits.
Sometimes called a turnaround or
reorganizational strategy, retrenchment is
designed to fortify an organizations basic
distinctive competence.
Bankruptcy can be an effective retrenchment
strategy.
Ch 5 -22
Defensive Strategies
Retrenchment - Retrenchment occurs when an
organization regroups through cost and asset
reduction to reverse declining sales and profits.
Divestiture - Selling a division or part of an
organization is called divestiture. Divestiture
often is used to raise capital for further strategic
acquisitions or investments.
Liquidation - Selling all of a companys assets, in
parts, for their tangible worth is called
liquidation. Liquidation is recognition of defeat
and consequently can be an emotionally difficult
strategy.
Ch 5 -23
Copyright 2009 Pearson Education, Inc.
Publishing as Prentice Hall
Types of Strategies
Forward
Integration
Vertical
Integration
Strategies
Backward
Integration
Horizontal
Integration
Ch 5 -24
Types of Strategies
Market
Penetration
Intensive
Strategies
Market
Development
Product
Development
Ch 5 -25
Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification
Ch 5 -26
Types of Strategies
Retrenchment
Defensive
Strategies
Divestiture
Liquidation
Ch 5 -27
Ch 5 -28
Ch 5 -29
Ch 5 -30
2007 Examples
Forward
Integration
Backward
Integration
Horizontal
Integration
Ch 5 -31
2007 Examples
Market
Penetration
Market
Development
Product
Development
Ch 5 -32
2007 Examples
Related
Diversification
Unrelated
Diversification
Retrenchment
Ch 5 -33
2007 Examples
Divestiture
Liquidation
Ch 5 -34
Differentiation Strategies
Focus Strategies
(Low-Cost Focus &
Best-Value Focus)
Ch 5 -35
Ch 5 -36
Ch 5 -37
Ch 5 -38
Ch 5 -39
Ch 5 -40
Joint Venture/Partnering
Merger/Acquisition
Private-Equity Acquisition
First Mover Advantages
Outsourcing
Ch 5 -41
Ch 5 -42
Outsourcing
Business-Process Outsourcing
(BPO)
Ch 5 -43
Global Perspective
Joint Ventures Mandatory for All Foreign Firms in India
Ch 5 -44
Ch 5 -45