strategic management chapter 5
two alternative types of focus strategies are
Type 4 is a low cost Focus strategy that offers products or services to a small range Niche group of customers at the lowest price available on the market top 5 is it best value Focus strategy that offers products or services to a small range of customers at the best price valuable on the market sometimes called focused differentiation
tactics to facilitate strategies include
first-mover advantages, Outsourcing, and reshoring
strategic objectives
include things 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, consistently getting new or improved products to Market ahead of Rivals
Financial objectives
include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, greater return on investment, higher earnings per share, a rising stock price, improves cash flow, and so on
vertical and horizontal actions by firms are broadly referred to as
integration strategies
Market penetration, Market development, and product development are sometimes referred to as
intensive strategies because they require intensive efforts of a firm's competitive position with existing products is to improve
Market development
introducing present products or services in a new geographic area
Outsourcing
involves companies hiring other companies to take over various parts of their functional operations such as human resources Information Systems payroll accounting customer service and even marketing
forward integration
involves gaining ownership or increased control over distributors or retailers
Market development
involves introducing present products or services in the new Geographic areas
Chapter 7 bankruptcy
is a liquidation procedure used only when a corporation sees no hope of being able to operate successfully or to obtain the necessary credit agreement. All the organization's assets are sold and parts for their tangible words. Several hundred thousand companies declare this bankruptcy annually
joint venture
is a popular strategy that occurs when two or more companies for my temporary partnership or Consortium for the purpose of capitalizing on some opportunity
chapter 13 bankruptcy
is a reorganization plan similar to chapter 11 but it is available only to small businesses owned by individuals with unsecured debt of less than $100,000 unsecured debts of less than $350,000
backward integration
is a strategy of seeking ownership or increased control of a firm's suppliers
product development
is a strategy that seeks increased sales by improving or modifying present products or services
strategist in governmental organizations operate with
less autonomy than their counterparts in private firms
diversification strategies are becoming
less popular because organizations are finding it more difficult to manage diverse business activities
selling all of the company's assets, and parts, for their tangible worth is called
liquidation which is associated with Chapter 7 bankruptcy
examples of not managing by objectives
managing by extrapolation, managing by crisis, managing by objectives, managing by hope
horizontal integration
refers to gaining ownership and or control over competitors
retrenchment
regrouping through cost and asset reduction to reverse declining sales and profit
the two general types of diversification strategies are
related diversification and unrelated diversification
long-term objectives
represent the results expected from pursuing certain strategies
Strategies
represents the actions to be taken to accomplish long-term objectives
defensive strategies include
retrenchment, divestiture, or liquidation
Market penetration
seeking increase market share for present products or services in present markets through greater marketing efforts
product development
seeking increase sales by improving present products or services or developing new ones
backward integration
seeking ownership or increased control of a firm's suppliers
Market penetration strategy
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 the company's assets, and parts, for their tangible worth
horizontal integration
taking ownership or increased control over competitors
forward integration and backward integration are sometimes collectively referred to as
vertical integration
chapter 12 bankruptcy
was created by the family farmer bankruptcy Act of 1986. This law provides special relief to family Farmers with debt equal to or less than 1.5 million
dividend recapitalization
when firms borrow money simply to Fund dividend payouts to themselves this is a controversial practice
five guidelines that indicate when horizontal integration may be an especially effective strategy
1. An organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for tending substantially to reduce competition 2. An organization competes in a growing industry 3. Increased economies of scale provide major competitive advantages 4. An organization has both the capital and human Talent needed to successfully manage an expanded organization 5. Competitors are faltering as a result of a lack of managerial expertise or a need for particular resources that an organization possesses note that horizontal integration would not be appropriate if competitors are doing poorly because in that case overall industry sales are declining
6 guidelines for when related diversification may be an effective strategy
1. An organization competes in a no-growth or a slow growth industry 2. Adding new, but related, products would significantly enhance the sales of current products 3. New, but related, products could be offered at highly competitive prices 4. New, but related, products have seasonal sales levels that counterbalance an organization's existing Peaks and valleys 5. An organization's products are currently in the declining stage at the product's lifecycle 6. An organization has a strong management team
five guidelines for when retrenchment may be an especially effective strategy
1. An organization has a clearly distinctive competence but has failed consistently to meet its objectives and goals overtime 2. An organization is one of the weaker competitors in a given industry 3. An organization is plagued by inefficiency, low probability, poor employee morale, and pressure from stockholders to improve performance 4. An organization has failed to capitalize on external opportunities, minimize external threats, take advantage of internal strength, and overcome internal weaknesses overtime 5. An organization has grown so large so quickly that major internal reorganization is needed
six guidelines for when divestiture may be an especially effective strategy
1. An organization has pursued a retrenchment strategy and fail to accomplish needed improvements 2. To be competitive, a division needs more resources than the company can provide 3. A division is responsible for an organization's overall poor performance 4. A division is a misfit with the rest of an organization this can result from radically different markets, customers, managers, employees, values, or needs 5. A large amount of cash is needed quickly and cannot be obtained reasonably from other sources 6. Government antitrust action threatens an organization
five guidelines that indicate when product development may be an especially effective strategy to pursue
1. An organization has successful products that are in the maturity stage of the product life cycle the idea here is to attract satisfied customers to try new and improved products as a result of their positive experience with the organization's present products or services 2. An organization competes in an industry that is characterized by rapid technological development 3. Major competitors offer better quality products at comparable prices 4. An organization competes in a high-growth industry 5. An organization has especially strong research and development capabilities
bankruptcy
can allow a firm to avoid major debt obligations and to void Union contracts
what are the five types of bankruptcy
chapter 7, chapter 9, chapter 11, chapter 12, and chapter 13
in small firms, what are the three levels of strategies
company, functional, and operational
in large firms, what are the four levels of strategies
corporate, divisional, functional, and operational
what are Michael Porter's generic strategies
cost leadership, differentiation, and focus
sewing a division or part of an organization is called
divestiture
cost leadership
emphasizes producing standardized products at a low per unit cost for consumers who are price-sensitive
six guidelines that indicate when forward integration may be an especially effective strategy
1. An organization's present Distributors are especially expensive, unreliable, or incapable of meeting the firm's distribution needs. 2. The availability of quality Distributors is so limited as to offer a competitive advantage to those firms that promote forward integration 3. An organization competes in an industry that is growing and is expected to continue to grow markedly this is a factor because forward integration reduces an organization's ability to diversify if it's basic industry falters 4. An organization has both the capital and human resources needed to manage the new business of Distributing its own products 5. The advantages of stable production are particularly high this is a consideration because an organization can increase the predictability of the demand for its output through forward integration 6. Present distributors or retailers have high profit margins this situation suggests that a company could profitably distribute its own products and price them more competitively by integrating forward
7 guidelines when backward integration may be an especially effective strategy
1. An organization's present suppliers are especially expensive, unreliable, or incapable of meeting the firm's needs for parts, components, assemblies, or raw materials 2. The number of suppliers is small and then number of competitors is large 3. An organization competes in an industry that is growing rapidly this is a factor because integrative type strategies such as forward backward and horizontal reduce an organization's ability to diversify in a declining industry 4. An organization has both capital and human resources to manage the new business of supplying its own raw materials 5. The advantages of stable prices are particularly important this is a factor because an organization can stabilize the cost of its raw materials and the associated price of its products through backward integration 6. Present suppliers have high profit margins which suggests that the business of supplying products or services in a given industry is a worthwhile venture 7. An organization needs to quickly acquire a needed resource
five guidelines that indicate when Market penetration may be an especially effective strategy
1. Current markets are not saturated with a particular product or service 2. The usage rate of present customers could be increased significantly 3. The market shares of major competitors have been declining while total industry sales have been increasing 4. The correlation between dollar sells and dollar marketing expenditures historically has been high 5. Increased economies of scale provide major competitive advantages
four primary reason joint ventures are not successful
1. Managers who must collaborate daily in operating The Venture are not involved in forming or shaping The Venture 2. The Venture May benefit The Partnering companies but may not benefit customers, who then complain about poor service or criticize the companies in other ways 3. The Venture may not be supported equally by both Partners. It was supported unequally, problems arise 4. The Venture May begin to compete more with one of the partners than the other
6 guidelines that indicate when Market development may be an especially effective strategy
1. New channels of distribution are available that are reliable, and expensive, and a good quality 2. An organization is successful at what it does 3. New untappd or unsaturated markets exist 4. An organization has the needed capital and human resources to manage expanded operations 5. An organization has excess production capacity 6. An organization's basic industry is rapidly becoming Global in scope
10 guidelines when unrelated diversification may be an especially effective strategy
1. Revenues derived from an organization's current products or Services would increase significantly by adding the new, unrelated products 2. An organization competes in a highly competitive or a no growth industry, as indicated by low industry profit margins and returns 3. An organization's present channels of distribution can be used to market the new products to current customers 4. New products have countercyclical sales patterns compared to an organization's present products 5. An organization's basic industry is experienced declining annual sales and profits 6. An organization has the capital and managerial Talent needed to compete successfully and a new industry 7. An organization has the opportunity to purchase an unrelated business that is an attractive investment opportunity 8. Financial Synergy exists between the Acquired and acquiring firms 9. Existing markets for an organization's present products are saturated 10. Antitrust action could be charged against an organization that historically has concentrated on a single industry
diversification strategies companies can capitalize on for synergy examples
1. Transferring competitively valuable expertise, technological know-how, or other capabilities from one business to another 2. Combining the related activities of separate businesses into a single operation to achieve lower costs 3. Exporting common use of a well-known brand name 4. Cross business collaboration to create competitively valuable resources strengths and capabilities
three guidelines that indicate when liquidation may be an especially effective strategy
1. an organization organisation has pursued both a retrenchment strategy and a divestiture strategy, and neither has been successful 2. An organization's only alternative is bankruptcy. Liquidation represents an orderly and planned means of obtaining the greatest possible amount of cash for an organization's assets. A company can legally declare bankruptcy first and then liquidate various divisions to raise needed Capital 3. The stockholders of a firm can minimize their losses by selling the organization's assets
what is the time frame for objectives
2 to 5 years
how many franchise businesses are in the United States
800,000
De-integration
Makes sense in industries that have global sources of supply
differentiation
a strategy aimed at producing products and services considered unique to the industry and directed at consumers who are relatively price insensitive
approximately how many companies in about how many different Industries in the United States use franchising to distribute their products or services
about 2,000 companies in about 50 different Industries
product diversification
adding new but related products or services
unrelated diversification
adding new, unrelated products or services
vertical integration strategies
allow a firm to gain control over Distributors and suppliers
chapter 11 bankruptcy
allows organizations to reorganize and come back after filing a petition for protection
in some cases, declaring what can be an effective retrenchment strategy
bankruptcy
both financial and strategic objectives should include
both annual and long-term performance
examples of alternative strategies
forward integration, backward integration, horizontal integration, Market penetration, Market development, product development, related diversification, unrelated diversification, retrenchment, divestiture, liquidation
an effective means of implementing forward integration is
franchising
most mergers are considered to be
friendly but the number of hostile takeovers is on the rise
forward integration
gaining ownership or increased control over distributors or retailers
when seeking ownership of or control over a firm's competitors, what strategy is arguably the most common
horizontal integration
if a merger or acquisition is not desire by both parties it is called a
hostile takeover as opposed to a friendly merger
Focus
means producing products and services that fulfill the needs of small groups of consumers
chapter 9 bankruptcy
municipalities
what are the two major differences of nonprofits compared to for-profit companies
nonprofits do not pay taxes and nonprofits do not have shareholders to provide capital
leveraged buyout
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 or requires a smaller firm or vice versa
retrenchment
occurs when an organization recruits their cost an asset reduction to reverse declining sales and profits sometimes called a turn around or ree organizational strategy, retrenchment is designed to fortify an organization's basic distinctive competence
merger
occurs when two organizations of about equal size unite to form one Enterprise
13 potential benefits of Outsourcing
one. Cost savings 2. Focus on Core Business three. Cost restructuring 4. Improve quality five. Knowledge six. Contract 7. Operational expertise 8. Access to Talent non. Catalyst for change 10. Enhance capacity for Innovation 11. Reduce time-to-market 12. Risk management 13. Tax benefit
9 reasons why many mergers and Acquisitions fail
one. Integration difficulties to. Inadequate evaluation of Target 3. Large or extraordinary debt for. Inability to achieve Synergy five. Too much diversification six. Managers overly focused on acquisitions sudden. Too large and acquisition 8. Difficult to integrate different organizational cultures 9. Reduced employee morale do the layoffs and relocations
11 potential benefits of merging with acquiring another firm
one. Provide improved capacity utilization 2. To make better use of the existing Salesforce three. To reduce managerial staff four. To gain economies of scale five. To smooth out seasonal Trends and sells six. To gain access to new suppliers Distributors customers products and creditors seven. To get a new technology 8th. To gain market share non. Inter Global markets Tim. The game pricing power 11. To reduce tax obligations
5 benefits of a firm being the first mover
one. Secure access and commitments to rare resources 2. Gain new knowledge of critical success factors and issues 3. Gain market share a position in the best locations 4. Establish and secure longterm relationships with customers suppliers Distributors and investors five. Gain customer loyalty and commitment
7 benefits of reshoring back into the United States
one. Stable wages two. Reduced gas and electricity costs three. Excellent security to protect designs from overseas copycats 4. Enable closer tabs on quality control and supply chain five. Excellent economy with consumers purchasing more 6. Less shipment cost with consumers nearby 7. Excellent human rights, education, legal, and political system that promote freedom and opportunity for citizens
10 benefits of having clear objectives
provide Direction by revealing expectations, allow Synergy, assist in evaluation by serving as standards, establish priorities, reduce uncertainty, minimize conflicts, stimulate exertion, Aid in and allocation of resources, Aid in design of jobs, provide basis for consistent decision-making
what are the eight desired characteristics of objectives
quantitative, measurable, realistic, understandable, challenging, hierarchical, attainable, congruent across departments
first-mover advantages
refer to the benefits at Fermi achieve by entering a new market or developing a new product or service prior to rival firms
Reshoring
the new term that refers to us companies planning to move some of their manufacturing back to the United States
businesses are said to be unrelated when
their value chains are so dissimilar that no competitively valuable cross business relationships exist
businesses are said to be related when
their value chains possess competitively valuable cross-business relationships that present opportunities to transfer resources from one business to another, combine similar activities and reduce costs, share use of a well-known brand name, and/or create mutually useful resource strengths and capabilities.
what are the two alternative types of cost leadership
type one is a low-cost strategy that offers products or services to a wide range of customers at the lowest price available on the market. Type 2 is a best value strategy that offers products or services to a wide range of customers at the best price value available on the market
Porter's five generic strategies explained
type one is cost leadership at a low cost. Type 2 is cost leadership at best value. Type 3 is differentiation. Type 4 is focus with low-cost. Type 5 is focus with best value