Chapter 5 - Strategies in Action

friendly merger

if the merger/acquisition is desired by both firms

hostile takeover

if the merger/acquisition is not desired by both firms

financial objectives

include desired results growth in revenues, growth in earnings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock prices, improved cash flow and so on

integration strategies

includes forward integration, backward integration, and horizontal integration (sometimes collectively referred to as vertical integration strategies)

intensive strategies

includes market development, market penetration, and product development

product development

increased sales by improving or modifying present products or services

market penetration

increasing market share for present products or services in present markets through greater marketing efforts

market development

introducing present products or services into new geographic areas

differentiation

one of Michael Porter's strategy dimensions that involves a firm producing products and services considered unique industrywide and directed at consumers who are relatively price insensitive

focus

one of Michael Porter's strategy dimensions that involves a firm producing products and services that fulfill the needs of small groups of consumers

cost leadership

one of Michael Porter's strategy dimensions that involves a firm producing standardized products at a very low per-unit cost for consumers who are price sensitive

de-integration

reducing the pursuit of backward integration instead of owning suppliers, companies negotiate with several outside suppliers

reshoring

refers to US companies working offshore but planning to move some other manufacturing back to the US

outsourcing

refers to the practice of firms using/paying other firms to perform certain activities, such as managing payroll, call centers, or even R&D

divestiture

selling a division or part of an organization

liquidation

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

long term objectives

specific results that an organization seeks to achieve (in more than one year) in pursuing its basic vision/mission/strategy

first mover advantages

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

combination strategy

the pursuit of two or more strategies simultaneously

related diversification

when a firm acquires a new business whose value chain possesses competitively valuable cross-business strategic fits

unrelated diversification

when a firm acquires a new business whose value chains are so dissimilar that no competitively valuable cross-business relationship exists

diversification strategies

when a firm enters a new business/industry, either related and unrelated to its existing business/industry; related is when the old versus new business value chains possess competitively valuable cross business strategic fits; unrelated is when the old versus new business value chains are so dissimilar that no competitively valuable cross business relationships exist

acquisition

when a large organization purchases a smaller firm; a merger

retrenchment

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

dividend recapitalizations

when especially private equity firms, but other firms also, borrow money to fund dividend payouts to themselves

secondary buyouts

when private-equity firms buy companies from other private-equity firms

leveraged buyout (LBO)

when the outstanding shares of a corporation are bought by the company's management and other private investors using borrowed funds

merger

when two organizations of about equal size unite to form one enterprise; an acquisition

generic strategies

Michael Porter's strategy breakdown; consists of three strategies: cost leadership, differentiation, and focus

vertical integration

a combination of three strategies: backward, forward, and horizontal integration, allowing a firm to gain control over distributors, suppliers, and/or competitors respectively

bankruptcy

a legal document that allows a firm to avoid major debt obligations and void union contracts in order to survive and regroup as a firm; there are five major types: Chapter 7, Chapter 9, Chapter 11, Chapter 12, and Chapter 13

backward integration

a strategy seeking ownership or increased control of a firm's suppliers, such as a manufacturer acquiring its raw material source firm

forward integration

a strategy that involves gaining ownership or increased control over distributors or retailers, such as a manufacturer opening its own chain of stores

joint venture

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

horizontal integration

acquiring a rival firm

franchising

an effective means of implementing forward integration whereby a franchisee purchases the right to own one or more stores/restaurants of a chain firm

deliberate practice

an intense focusing on all aspects related to a subject matter or business idea; goes well beyond hard work that even the most successful entrepreneurs cannot engage in it for more than a few hours each day; includes examining yourself as a person, your competition, and a wide array of factors related to the entrepreneurial endeavor at hand; several antecedents include strong motivation, self efficacy, self discipline, delayed gratification, and self control; other factors are determination, strong work ethic, goal oriented, dedication, time management, being on a mission; entails working hard and smart simultaneously

strategic objectives

desired results such as a 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, and consistently getting new or improved products to market ahead of rivals