BUS 496 Strategic Management Ch. 5

Chapter 12 Bankruptcy

Created by the Family Farmer Bankruptcy Act of 1986 and provides special relief to family farmers with debt equal to or less than $1.5 million

Types of strategies

Forward integration, backward integration, horizontal integration, market penetration, market development, product development, related diversification, unrelated diversification, retrenchment, divestiture, & liquidation

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, etc.

Turbulent, High Velocity Markets

Industries that are changing rapidly

Business-Process Outsourcing (BPO)

Involves companies hiring other companies to take over various parts of their functional operations, such as human resources, IS, payroll, accounting, customer service, and marketing

Forward Integration

Involves gaining ownership or increased control over distributors or retailers

Market Development

Involves introducing present products or services into new geographic areas.

Chapter 7 Bankruptcy

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

Strategies represent the actions to be taken to accomplish:

Long-term objectives

Type 4 Focus

Low-cost strategy that offers products or services to a small range (niche group) of customers at the lowest price available on the market

Type 1 Cost Leadership

Low-cost strategy that offers products or services to a wide range of customers at the lowest price available on the market

Strategist should avoid:

Managing by extrapolation, managing by crisis, managing by subjectives, & managing by hope

Intensive Strategies

Market penetration, market development, & product development; 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 & 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 & asset reduction to reverse declining sales and profits

Joint Venture

Occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity

Merger

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

Focus

Producing products & services that fulfill the needs of small groups of consumers

Benefits of having clear objectives

Provide direction by revealing expectations, allow synergy, aid in evaluation by serving as standards, establish priorities, reduce uncertainty, minimize conflicts, stimulate exertion, aid in allocation of resources, aid in design of jobs, & provide basis for consistent decision making

Objectives should be:

Quantitative, measurable, realistic, understandable, challenging, hierarchical, obtainable, & congruent among organizational units

Cooperative Arrangements

R&D partnerships, cross-distribution agreements, cross-licensing agreements, cross-manufacturing agreements, & joint-bidding consortia

White Knight

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

Types of Diversification Strategies

Related diversification & unrelated diversification

Chapter 13 Bankruptcy

Reorganization plan similar to Chapter 11, but is available only to small businesses owned by individuals with unsecured debts of less than $100,000 & secured debt of less than $350,000

Long-Term Objectives

Represent the results expected from pursuing certain strategies; 3-5 years

Defensive Strategies

Retrenchment, divestiture, & liquidation

Product Development

Seeks increased sales by improving or modifying present products or services

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

Combination Strategy

Simultaneously pursuing two or more strategies is exceptionally risky

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

Alternative names for retrenchment

Turnaround & reorganizational strategy

Reshoring

US companies planning to move some of their manufacturing back to the US

Unrelated Diversification

Value chains are so dissimilar that no competitively valuable cross-business relationship exists

Related Diversification

Value chains possess competitively valuable cross-business strategic fits

Friendly Merger

When a acquisition is desired by both parties

Takeover or Hostile Takeover

When a merger or acquisition is not desired by both parties

Differentiation (Type 3)

A strategy aimed at producing products & services considered unique industry wide & directed at consumers who are relatively price-insensitive

Horizontal Integration

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

Backward Integration

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

Vertical Integration

Allow a firm to gain control over distributors, suppliers, or competitors; collection of forward, backwards, and horizontal integrations

Porter's Generic Strategies

Allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, & focus

Bankruptcy

Allows a firm to avoid major debt obligations & to void union contracts

Chapter 11 Bankruptcy

Allows organizations to recognize & come back after filing a petition for protection

Franchising

An effective means of implementing forward integration

Chapter 9 Bankruptcy

Applies to municipalities

Financial Objectives

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, improved cash flow, etc

Type 5 Focus

Best-value strategy that offers products or services to a small group of customers at the best price-value available on the market

Type 2 Cost Leadership

Best-value strategy that offers products or services to a wide range of customers at the best price-value available on the market

Levels of Strategies - Small Company

Company level, functional level, & operational level

Levels of Strategies - Large Company

Corporate level, division level, functional level, & operational level

Cost Leadership

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