Chapter 5: Strategies in Action

Chapter 7 bankruptcy

a liquidation procedure used only when a corporation sees no hope of being able to operate successfully or to obtain the necessary creditor agreement

joint venture

a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity

business-process outsourcing (BPO)

a 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

Chapter 13 bankruptcy

a reorganization plan similar to Chapter 11, but it is available only to small businesses owned by individuals with unsecured debts of less than $100,000 and secured debts of less than $350,000

differentiation

a strategy aimed at producing products and services considered unique industrywide and directed at consumers who are relatively price-insensitive

backward integration

a strategy of seeking ownership or increased control of a firm's suppliers

product development

a strategy that seeks increased sales by improving or modifying present products or services

managing by extrapolation

adheres to the principle "if it ain't broke, don't fix it"; the idea is to keep on doing about the same things in the same ways because things are going well

Chapter 11 bankruptcy

allows organizations to reorganize and come back after filing a petition for protection

franchising

an effective means of implementing forward integration

Chapter 9 bankruptcy

applies to municipalities

managing by crisis

based on the belief that the true measure of a really good strategist is the ability to solve problems

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 succeed

Chapter 12 bankruptcy

became effective in 1987 and provides special relief to family farmers with debt equal to or less than $1.5 million

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 to accomplish what you think should be done

bankruptcy

can allow a firm to avoid major debt obligations and to void union contracts

combination strategy

can be exceptionally risky if carried too far

balanced scorecard

derives its name from the perceived need of firms to "balance" financial measures that are oftentimes used exclusively in strategy evaluation and control with non financial measures such as product quality and customer service

cost leadership

emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive

integration strategies

forward integration, backward integration, and horizontal integration

cooperative arrangements

include research and development partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing agreements, and joint-bidding consortia

turbulent, high-velocity markets

industries that are changing so fast

forward integration

involves gaining ownership or increased control over distributors or retailers

market development

involves introducing present products or services into new geographic areas

de-integration

makes sense in industries that have global sources of supply

intensive strategies

market penetration, market development, and product development; they require intensive efforts if a firm's competitive position with existing products is to improve

leveraged buyout (LBO)

occurs when a corporation's shareholders are bought by the company's management and other private investors using borrowed funds

acquisition

occurs when a large organization purchases (acquires) a smaller firm, or vice versa

retrenchment

occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits

merger

occurs when two organizations of or about equal size unite to form one enterprise

focus

producing products and services that fulfill the needs of small groups of consumers

white knight

refers to a firm that agrees to acquire another firm when the other firm is facing a hostile takeover by some company

horizontal integration

refers to a strategy of seeking ownership of or increased control over a firm's competitors

diversification strategies

related and unrelated

long-term objectives

represent the results expected from pursuing certain strategies

market penetration

seeks to increase market share for present products or services in present markets through greater marketing efforts

divestiture

selling a division or part of an organization

liquidation

selling all of a company's assets, in parts, for their tangible worth

generic strategies

strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and focus

vertical integration

strategies that allow a firm to gain control over distributors, suppliers, and/or competitors

friendly merger

the acquisition is desired by both firms

first mover advantages

the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms

hostile takeover

when a merger or acquisition is not desired by both parties

takeover

when a merger or acquisition is not desired by both parties

related diversification

when their chains posses completely valuable cross-business strategic fits

unrelated diversification

when their value chains are so dissimilar that no competitively valuable cross-business relationships exist