Upload
-
View
224
Download
0
Embed Size (px)
Citation preview
7/30/2019 Strategic Management Ch 05 Pres
1/62
1
7/30/2019 Strategic Management Ch 05 Pres
2/62
2
PRESENTATION DATE
7/30/2019 Strategic Management Ch 05 Pres
3/62
3
First of all thanks to Allah Almighty who gave us
the spirit to complete this task, which was given
by Honorable Sir Prof.Ghulam Nabi,
Chairman Dept. of Business Administration
and thanks to our parents who supported us a
lot for all of this.
7/30/2019 Strategic Management Ch 05 Pres
4/62
4
GROUP INTRODUCTION
Name of
GroupMembers:
Wajahat Ali Ghulam (Group Leader),
Zill-e-Subhani, Majid Mehmood,Kamran Rasheed, Safdar Hussain.
Roll Nos. 01, 15, 23, 48,
Group NO. 01
FACULTY OF ADMINISTRATIVE SCEICNES
UNIVERSITY OF AZAD JAMMU & KASHMIR
DEPARTMENT OF BUSINESS ADMINISTRATION.
7/30/2019 Strategic Management Ch 05 Pres
5/62
5
PRESENTATION ON
Chapter Five
Strategic
Management
CONCEPTS &CASES
Thirteenth Edition
By FRED R. DAVID
7/30/2019 Strategic Management Ch 05 Pres
6/62
6
LONG TERM OBJECTIVES
Long Term Objective
Long Term objectives represent theresults expected from perusing certain
strategies.
Strategies represent the actions to betaken to accomplish long term
objectives.
7/30/2019 Strategic Management Ch 05 Pres
7/62
7
The Nature of Long Term Objectives
Objectives should be: -
Quantitative
Measurable
RealisticUnderstandable
Challenging
Hierarchical
Obtainable
Congruent
7/30/2019 Strategic Management Ch 05 Pres
8/62
8
1). Corporate Level
2). Divisional Level
3).Functional Level
They are important measure of managerial
Performance.
Long term Objectives are Needed:
7/30/2019 Strategic Management Ch 05 Pres
9/62
9
FINANCIAL VS. STRATEGIC OBJECTIVES
Two Types of objectives are especially
common in organizations: -
1) . Financial Objectives
2) . Strategic Objectives
7/30/2019 Strategic Management Ch 05 Pres
10/62
10
1). FINANCIAL OBJECTIVES
Financial objectives include those associated with
1) Growth in revenues
2) Growth in earning
3) Higher dividends
4) Larger profit margins
5) Greater return on investment
6) Higher earning per share7) A rising stock price
8) Improved cash cow, and so on;
7/30/2019 Strategic Management Ch 05 Pres
11/62
11
2). STRATEGIC OBJECTIVES
Strategic objectives include those associated with
1) Larger market share
2) Quicker on time delivery than rivals
3) Shorter design-to-market than rivals4) Lower costs than rivals
5) Higher product quality than rivals
6) Wider geographic coverage than rivals
7) Achieving technological leadership
8) Consistently getting new or improved products to
markets ahead of rivals, and so on
7/30/2019 Strategic Management Ch 05 Pres
12/62
12
NOT MANAGING BY OBJECTIVES
Strategists should avoid the following
alternatives ways to Not managing by
Objectives.
1). Managing by Extrapolation
2). Managing by Crisis
3). Managing by Subjectives
4). Managing by Hope
7/30/2019 Strategic Management Ch 05 Pres
13/62
13
1).Managing by Extrapolation:-Adheres to the principle
If it isn't broke, dont fix it. The idea is to keep on doing
about the same things in the same ways because things
are going well.2).Managing by Crisis:- Based on the belief that the true
measure of really good strategist is the ability to solve
problems.
3). Managing by Subjectives:- Built on the idea that there
is no general plan for which way to go and what to do; just
do the best you can accomplish what you think should be
done.4). Managing by Hope:- Based on the fact that the future is
laden with great uncertainty and that if we try and do not
succeed, then we hope our second (or third) attempt will.
7/30/2019 Strategic Management Ch 05 Pres
14/62
14
THE BALANCED SCORECARD It is a strategy evaluation and control technique.
An effective Balanced Scorecard contains a
carefully chosen combination of strategic and
financial objectives tailored to the company's business.
A Balanced Scorecard for a firm is simply a listing
of all key objectives to work toward, along with an
associated time dimension of when each objective is to
be accomplished.
It is also a primary responsibility or contact person,
department, or division for each objective.
7/30/2019 Strategic Management Ch 05 Pres
15/62
15
TYPES OF STRATEGIESTypes of strategies that a enterprise could peruse
can be categorized in to 11 action: -1) Forward Integration
2) Backward Integration
3) Horizontal Integration
4) Market Penetration
5) Market Development
6) Product Development
7) Related Diversification
8) Unrelated Diversification
9) Retrenchment
10) Divestiture
11) Liquidation.
7/30/2019 Strategic Management Ch 05 Pres
16/62
16
INTEGRATION STRATEGIESForward Integration, Backward Integration & Horizontal
Integration are sometimes collectively referred to asintegration strategies.
Vertical integration strategies allow a firm to gain control
over distributors, suppliers, and/ or competitors.
Forward Integration: -
It involves gaining ownership or increased control over
distributors or retailers.
Increasing numbers of manufacturers (suppliers) today arepursuing a forward integration strategy by establishing
Websites to directly sell products to consumers.
7/30/2019 Strategic Management Ch 05 Pres
17/62
17
Six Guidelines indicate when forward integration maybe an effective strategy: -
1. When an organizations present distributors are especially
expensive, or unreliable, or incapable of meeting the firmsdistribution needs.
2. When the availability of quality distributors is so limited as tooffer a competitive advantage to those firms that integrateforward.
3. When an organization competes in an industry that isgrowing and is expected to continue to grow markedly.
4. When an organization has both the capital and human
resources needed to manage the new business ofdistributing its own products.
5. When the advantages of stable production are particularlyhigh.
6. When present distributors or retailers have high profit
margins.
7/30/2019 Strategic Management Ch 05 Pres
18/62
18
BACKWARD INTEGRATION
Both manufacturers and retailers purchase
needed material from suppliers.
Backward integration is a strategy of seeking
ownership or increased control of a firmssuppliers.
This strategy can be especially appropriatewhen a firms current suppliers are unreliable,
too costly, or cannot meet the firms needs.
7/30/2019 Strategic Management Ch 05 Pres
19/62
19
Seven Guidelines indicate when backward integration maybe an effective strategy: -
1. When an organizations present suppliers areespecially expensive, or unreliable, or incapable of
meeting the firms distribution needs for parts,components, assemblies, or raw materials.
2. When the number of suppliers is small and the numberof competitors is large.
3. When an organization competes in an industry that isgrowing rapidly.
4. When an organization has both the capital and humanresources needed to manage the new business ofsupplying its own raw materials.
5. When the advantages of stable prices are particularlyimportant.
6. When present supplies have high profit margins.
7. When an organization needs to quickly acquire a
needed resources.
7/30/2019 Strategic Management Ch 05 Pres
20/62
20
HORIZENTAL INTEGRATION
Horizontal Integration refers to a
strategy of seeking ownership of or
increased control over firms
competitors.
Horizontal Integration is now a
significant trend in Strategic
Management.
7/30/2019 Strategic Management Ch 05 Pres
21/62
21
Five Guidelines indicate when Horizontal integration maybe an effective strategy: -
1) When an organization can gain monopolistic characteristicsin a particular area or region.
2) When an organization competes in a growing industry.
When increased economies of scale provide major
competitive advantages.
3) When an organization has both the capital and humancompetitive advantages.
4) When competitors are faltering due to a lack of managerialexpertise or a need for particular resources that anorganization possesses.
7/30/2019 Strategic Management Ch 05 Pres
22/62
22
INTENSIVE STRATEGIES
Market penetration, market development,
and product development are sometimes
referred to as intensive strategies becausethey require intensive efforts if a firms
competitive position with existing products is
to improve.
7/30/2019 Strategic Management Ch 05 Pres
23/62
23
MARKET PENETRATION
A Market penetration strategy seeks to increase marketshare for present products or services in present
market through greater marketing efforts.
A Market penetration includes increasing the number
of salespersons, increasing advertising expenditures,
offering extensive sales promotion items, or increasing
publicity efforts.
7/30/2019 Strategic Management Ch 05 Pres
24/62
24
Five Guidelines indicate when Market Penetration maybe an effective strategy: -
1). When current markets are not saturated with a
particular product or service.
2). When the usage rate of present customers could beincreased significantly.
3). When the market share of major competitors havebeen declining while total industry sales have beenIncreasing.
4). When the correlation between dollar sales and dollarmarketing expenditures historically has been high.When increased economics of scale provide majorcompetitive advantages.
7/30/2019 Strategic Management Ch 05 Pres
25/62
25
MARKET DEVELOPEMENTMarket development involves introducing products or services
into new geographic area.
1).When new channels of distribution are available that are
reliable, inexpensive, and of good quality.
2).When an organization is very successful at what it does.
3).When new untapped or unsaturated at what it does.
4).When an organization has the needed capital and human
resources to mange expanded operations.
5).When an organization has excess production capacity.
6).When an organization's basic industry is rapidly becoming
global in scope.
Six Guidelines indicate when Market Development maybe an effective strategy: -
O O
7/30/2019 Strategic Management Ch 05 Pres
26/62
26
PRODUCT DEVELOPEMENT
Product Development is a strategy that seeks
increased sales by improving or modifying present
products or services.
Product Development usually entails large researchand development expenditures.
7/30/2019 Strategic Management Ch 05 Pres
27/62
27
Six Guidelines indicate when Product Development maybe an effective strategy: -
1). When an organization has successful products that
are in the maturity stage of the product life cycle.
2). When an organization competes in an industry that ischaracterized by rapid technological developments.
3). When major competitors offer better-quality products atcomparable prices.
4). When an organization competes in an high growthindustry.
5). When an organization has especially strong researchand development capabilities.
7/30/2019 Strategic Management Ch 05 Pres
28/62
28
There are two general types of
diversification strategies: -
1). Related diversification strategies
2). Unrelated diversification strategies
DIVERSIFICATION STRATEGIES
7/30/2019 Strategic Management Ch 05 Pres
29/62
29
1). Businesses are said to be related when
their value chains posses competitively
valuable cross business strategic fits;
2). Businesses are said to be unrelated
when their value are so dissimilar that
no competitively valuable cross
business relationship exist.
1). Related Diversification &2). Unrelated Diversification
7/30/2019 Strategic Management Ch 05 Pres
30/62
30
1). When an organization competes in a no growth or aslow growth industry.
2). When adding new, nut related, products would
significantly enhance the sales or current products.3). When new, but related, products could be offered at
highly competitive prices.
4). When new, but related, products have seasonal saleslevels that counterbalance an organization's existing
peaks and valleys.
5).When an organizations products are currently in thedeclining stage of the products life cycle.
6). When an organization has a strong management team.
Six Guidelines indicate for when related diversificationmay be an effective strategy are as follows: -
7/30/2019 Strategic Management Ch 05 Pres
31/62
31
1). When revenues derived from an organizations current
products or services would increase significantly by
adding the new, related products.
2). When an organization competes in an highly
competitive and/or no growth industry.
3). When an organizations present channels of
distribution can be used to market the new products.
4).When the new products have countercyclical salespatterns compared to an organizations products.
5). When an organizations basic industry is experiencing
declining annual sales and profits
Ten Guidelines whenun - related diversification may be an especially
effective strategy are: -
7/30/2019 Strategic Management Ch 05 Pres
32/62
32
Six Guidelines indicate for when related diversificationmay be an effective strategy are as follows: -
6). When an organization has the capital andmanagerial talent needed to compete successfully
in a new industry.
7). When an organization has the opportunity to
purchase an unrelated business that is anattractive investment opportunity.
8). When there exists financial synergy between the
acquired and acquiring firm.
9). When the existing markets for an organization'spresent products are saturated.
10). When antitrust action could be charged against
an organization that historically has
concentrated on a single industry.
7/30/2019 Strategic Management Ch 05 Pres
33/62
33
In addition to integrative, intensive, and diversificationstrategies, organizations also could pursue
retrenchment, divestiture, or liquidation.
Retrenchment: -Retrenchment occurs when an organization regroups
through cost and asset reduction to reverse declining
sales and profits.
Sometimes called a turn round or reorganization
strategy, retrenchment is designed to fortify an
organizations basic distinctive competence.
DEFENSIVE STRATEGIES
7/30/2019 Strategic Management Ch 05 Pres
34/62
34
1). When an organization's has a clearly distinctivecompetence but has failed consistently to meet its
objectives and goals over time.
2). When an organization's is one of the weaker
competitors in given industry.
3). When an organizations is plagued by inefficiently, low
profitability, poor employee morale, and pressure from
stockholders to improve performance.
4). When an organization has failed to capitalize on
external opportunities, minimize external threats, take
advantage of internal strengths, and overcome internal
weaknesses overtime.
5). When an organization has grown so large so quickly
that major internal reorganization is needed.
Five Guidelines indicate for when retrenchment may bean especially effective strategy are as follows: -
7/30/2019 Strategic Management Ch 05 Pres
35/62
35
Selling a division or part of an organization is called
divestiture.
Divestiture is often used to raise capital for further
strategic acquisitions or investments. Divestiture can be part of an overall retrenchment
strategy to rid an organization of business that are
unprofitable, that require too much capital, or that do
not fit well with the firms other activities.
Divestiture has also become a popular strategy for
firms to focus on their core businesses and become
less diversified.
DIVESTITURE
7/30/2019 Strategic Management Ch 05 Pres
36/62
36
1). When an organization has pursued aretrenchment strategy and failed to accomplishneeded improvements.
2). When a division needs more resources to becompetitive than the company can provide.
3). When a division is responsible for anorganizations overall poor performance.
4). When a division is misfit with the rest of anorganization.
5). When a large amount of cash is need quickly andcannot be obtained reasonably from othersources.
6). When Government antitrust action threatens anorganization.
Six Guidelines indicate for when Divestiture may be anespecially effective strategy are as follows: -
7/30/2019 Strategic Management Ch 05 Pres
37/62
37
Selling all of companys assets, in parts,for their tangible worth is called liquidation.
Liquidation is a recognition of defeat andconsequently can be an emotionally
difficult strategy.
LIQUIDATION
7/30/2019 Strategic Management Ch 05 Pres
38/62
38
1). When an organization has pursued both a
retrenchment strategy and a divestiture
strategy, and neither has been successful.
2). When an organizations only alternative is
bankruptcy.
3). When the stakeholders of a firm can
minimize their losses by selling the
organization's assets.
Three Guidelines indicate for when Liquidation may bean especially effective strategy are as follows: -
7/30/2019 Strategic Management Ch 05 Pres
39/62
39
According to porter, strategy allow organizations
To gain competitive advantage from three different
bases:
1). Cost leadership
2). Differentiation
3). Focus
Porter called these bases Generic Strategies.
Michael Porters Five Generic
Strategies
7/30/2019 Strategic Management Ch 05 Pres
40/62
40
Cost leadership emphasizes producingstandardized products at a very low per
unit cost for consumers who are price
sensitive.Two alternative types of cost leadership
strategies can defined: -
1). TYPE 12). TYPE 2
COST LEADERSHIP
7/30/2019 Strategic Management Ch 05 Pres
41/62
41
TYPE 1 & TYPE 2
Type 1 is low cost strategy that offers
products or services to wide range of
customers at the lowest price available on
the market.Type 2is best value available on the
Market; the best value strategy aims tooffer customers a range of products or
services at the lowest price availablecompared to rivals products with similarattributes.
TYPE 1 & TYPE 2
7/30/2019 Strategic Management Ch 05 Pres
42/62
42
Porters Type 3 generic strategy is
differentiation, a strategy aimed at producing
products and services considered uniqueindustry wide and directed at consumers
who are relatively price insensitive.
TYPE 3 (Differentiation)
7/30/2019 Strategic Management Ch 05 Pres
43/62
43
Focus means producing products and
services that fulfill the needs of small groups
of consumers. Two alternative types of focusstrategies are: -
1). TYPE 42). TYPE5
FOCUSFOCUS
7/30/2019 Strategic Management Ch 05 Pres
44/62
44
Type 4is low cost focus strategy that offers productsor services to a small group niche group) of
customers at the lowest price available on the
market.
Type 5is best value available on the market.Sometimes called Focused Differentiation,
the best value focus strategy aims to offer a
niche group of customers products or services
that meet their tastes and requirements
better than rivals products do.
TYPE 4 & TYPE 5
7/30/2019 Strategic Management Ch 05 Pres
45/62
45
PORTERS GENERIC STRATEGIES
LARGE
SMALL
TYPE 1
TYPE 2
TYPE 3
TYPE 4TYPE 5
TYPE 3
Cost Leadership Differentiation Focus
7/30/2019 Strategic Management Ch 05 Pres
46/62
46
A primary reason for pursuing forward, backward and
horizontal integration strategies is to gain low cost or
best value cost leadership benefits. But cost leadership
generally must be pursued in conjunction withdifferentiation.
A number of cost elements affect the relative attractiveness
of generic strategies, including economics or diseconomiesof the scale achieved, learning experience curve effects, the
percentage of capacity utilization achieved, and linkages
with suppliers and distributors.
COST LEADERSHIP STRATEGIES (TYPE 1 & TYPE 2)
7/30/2019 Strategic Management Ch 05 Pres
47/62
47
1). When price competition among rival sellers is especiallyvigorous.
2).When the products of rival sellers are essentially identicaland suppliers are readily available from any of severaleager sellers.
3). When there are few ways to achieve productdifferentiation that have value to buyers.
4). When most buyers use the product in the same ways.
5). When buyers incur low costs in switching their purchases
from one seller to another.6). When buyers are large and have significant power to
bargain down prices.
7). When industry newcomers use introductory low prices toattract buyers and build a customer base.
Seven Guidelines indicate for when TYPE 1 & TYPE 2may be an especially effective strategy are as follows:
7/30/2019 Strategic Management Ch 05 Pres
48/62
48
Different strategies offer different degrees of
differentiation. Differentiation does not guarantee
competitive advantage, especially if standard products
sufficiently meet customer needs or if rapid imitation by
competitors is possible.
Durable products protected by barriers to quick copying
by competitors are best. Successful differentiation can
mean greater product flexibility, greater compatibility,lower costs, improved service, less maintenance, greater
convenience, or more features.
DIFFERENTIATION STRATEGIES (TYPE 3)
7/30/2019 Strategic Management Ch 05 Pres
49/62
49
1). When there are many ways to differentiate the productor service and many buyers perceive these differencesas having value.
2). When buyers needs and uses are diverse.
3). When few rival firms are following a similardifferentiation approach.
4). When technological change is fast paced andcompetition revolves around rapidly evolving productfeatures.
Four Guidelines indicate for when TYPE 3 may be anespecially effective strategy are as follows:
7/30/2019 Strategic Management Ch 05 Pres
50/62
50
A successful focus strategy depends on anindustry segment tat is of sufficient size, hasgood growth potential, and is not crucial to
the success of to other major competitors.Strategies such as market penetration andmarket development offer substantial
focusing advantages.
FOCUS STRATEGY (TYPE 4 & TYPE 5)
7/30/2019 Strategic Management Ch 05 Pres
51/62
51
1).When the target market niche is large, profitable, andgrowing.
2). When industry leaders do not consider the niche to be
crucial to their own success.
3). When an industry leaders consider it too difficult to meetthe specialized needs of target market niche while taking
care of their mainstream customers.
4). When the industry has many different niches and
segments, thereby allowing a focuser to pick a competitivelyattractive niche suited to its own resources.
5). When few, if any, other rivals are attempting to specialize in
the same target segment.
Four Guidelines indicate for when TYPE 4 & TYPE 5may be an especially effective strategy are as follows:
7/30/2019 Strategic Management Ch 05 Pres
52/62
52
The World is changing more and more rapidly, and
consequently industries and firms themselves are changing
faster than ever.
Some industries are changing so fast that researchers call
them turbulent, high velocity markets, such as
telecommunications, medical, biotechnology,
pharmaceuticals, computer hardware, software, and
virtually all internet based industries.
Strategies for competing in Turbulent, High VelocityMarkets
7/30/2019 Strategic Management Ch 05 Pres
53/62
53
Strategy that stress cooperation among competitors are
being used more. For collaboration between competitors
to succeed, both firms must contribute something
distinctive, such as technology ,distribution, basic
research, or manufacturing capacity.
But a major risk is that unintended transfers of important
skills or technology may occur at organizational levels
below where the deal was signed.
Means For Achieving StrategiesCooperation Among Competitors
7/30/2019 Strategic Management Ch 05 Pres
54/62
54
Joint venture is popular strategy that occurs when two or
more companies form a temporary partnership or
consortium for the purpose of capitalizing on some
opportunity.
Often the two or more sponsoring firms form a separate
organization and have shared equity ownership in the new
entity.
JOINT VENTURE/PARTNERING
7/30/2019 Strategic Management Ch 05 Pres
55/62
55
1). Managers who must collaborate daily in operating theventure are not involved in forming or shaping theventure.
2). The Venture may benefit the partnering companies butmay not benefit customers, who then complain aboutpoorer service or criticize that companies in other ways.
3). The venture may not be supported equally by both
partners. If supported unequally, problem arise.
4). The venture may begin to compete more with one of thepartners than the other.
A few common problems that cause joint ventures tofail are as follows:
7/30/2019 Strategic Management Ch 05 Pres
56/62
56
1).When a private owned organization is forming a jointventure with a publicity owned organization; there are someadvantages to being privately held, such as closed
ownership.
2). When a domestic organization is forming a joint venturewith a foreign company.
3). When the distinct competencies of two or more firmscomplement each other especially well.
4). When the project is potentially very profitable but requiresoverwhelming resources and risks.
5). When two or more smaller firms have trouble competingwith a large firm.
6). When there exists a need to quickly introduce a new
technology.
Six Guidelines indicate for when Joint Venture may bean especially effective means for pursuing strategies:
7/30/2019 Strategic Management Ch 05 Pres
57/62
57
Merger and acquisition are two commonly used ways to
pursue strategies .A merger occurs when two organizations
of about equal size unite to form one enterprise.
An Acquisition occurs when a large organization purchases
(Acquires) a smaller firm, or vice versa.
MERGER/AQUISTION
7/30/2019 Strategic Management Ch 05 Pres
58/62
58
First mover advantage refer the benefits a firm may
achieve by entering a new market or developing a new
product or service prior to rival firms.
Strategic management research indicates that first mover
advantage tend to be greatest when competitors are
roughly than same size and possess similar resources.
FIRST MOVER ADVANTAGES
7/30/2019 Strategic Management Ch 05 Pres
59/62
59
Business process outsourcing (BPO) is rapidly growing
new business that involves companies taking over the
Functional operations
such as human resources
information systems,
payroll, accounting,
customer service,
and even marketing of other firms.
OUTSOURCING
7/30/2019 Strategic Management Ch 05 Pres
60/62
60
1). It is less expensive
2). It allows the firm to focus on its core businesses
3). It enables the firm to provide better services.
Other advantages of outsourcing are that the strategy:
1). Allows the firm to align itself with Best inWorld.
Suppliers who focus on performing the special task.
2). Provides the firm flexibility should customer needs shift
unexpectedly.3). Allows the firm to concentrate on other internal value
chain activities critical to sustaining competitive
advantage.
Companies are choosing to outsource their functional
operations more and more for several reasons: -
7/30/2019 Strategic Management Ch 05 Pres
61/62
61
7/30/2019 Strategic Management Ch 05 Pres
62/62