Chapter 5
Give specific guidelines when market penetration, market development, and product development are especially effective strategies.
market penetration When current markets are not saturated with a particular product or service When the correlation between dollar sales and dollar marketing expenditures historically has been high When increased economies of scale provide major competitive advantages market development: When new untapped or unsaturated markets exist When an organization is very successful at what it does When an organization has excess production capacity Product development: When major competitors offer better-quality products at comparable prices When an organization competes in a high-growth industry When an organization has strong research and development capabilities
Explain when diversification is an effective business strategy.
Related: When an organization's products are currently in the declining stage of the product's life cycle When an organization has a strong management team When an organization competes in a no-growth or a slow-growth industry Unrelated: When an organization's present channels of distribution can be used to market the new products to current customers When the new products have countercyclical sales patterns compared to present products When an organization's basic industry is experiencing declining annual sales and profits
List guidelines for when retrenchment, divestiture, and liquidation are especially effective strategies.
Retrenchment When an organization is plagued by inefficiency, low profitability, and poor employee morale When an organization fails to capitalize on external opportunities and minimize external threats When an organization has grown so large so quickly that major internal reorganization is needed Divestiture When a division is a misfit with the rest of an organization When a large amount of cash is needed quickly When government antitrust action threatens a firm Liquidation When an organization has pursued both a retrenchment strategy and a divestiture strategy, and neither has been successful When an organization's only alternative is bankruptcy When the stockholders of a firm can minimize their losses by selling the organization's assets
Identify and discuss eight characteristics of objectives and ten benefits of having clear objectives.
1. Quantitative 2. Measurable 3. Realistic 4. Understandable 5. Challenging 6. Hierarchical 7. Obtainable 8. Congruent across departments 10 Benefits: 1. Provide direction 2. allow synergy 3. assist in evaluation 4. establish priorities 5. reduce uncertainty 6. minimize conflicts 7. stimulate exertion 8. aid in both allocation of resources 9. design of jobs
Identify and discuss Porter's five generic strategies.
Cost Leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive Type 1 low-cost strategy that offers products or services to a wide range of customers at the lowest price available on the market Type 2 best-value strategy that offers products or services to a wide range of customers at the best price-value available on the market Type 3 Differentiation is a strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive Type 4 low-cost focus strategy that offers products or services to a niche group of customers at the lowest price available on the market Type 5 best-value focus strategy that offers products or services to a small range of customers at the best price-value available on the market
Discuss tactics to facilitate strategies, such as (a) being a first mover, (b) outsourcing, and (c) reshoring.
First mover advantages refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms. 1.) builds firm's image and reputation to buyers, 2.) produce cost advantages over rivals, 3. create strong loyalty customers, 4. imitation is difficult 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. 1. cost savings access lower wages in foreign countries 2. allows company to focus on core business, 3.) improves quality through specialists reshoring is the practice of transferring a business operation that was moved overseas back to the country from which it was originally relocated. 1.) stable wages 2.) reduced gas / electricity costs 3. excellent security from overseas copycats 4. less shipment costs
Compare (a) cooperation among competitors, (b) joint venture and partnering, and (c) merger/acquisition as key means for achieving strategies.
For collaboration between competitors to succeed, both firms must contribute something distinctive, such as technology, distribution, basic research, or manufacturing capacity. Joint venture is a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity. 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.
Identify and discuss the three types of "Integration Strategies."
Integration 1. Forward Integration - gaining ownership or increased control over distributors or retailers (example is amazon began rapid delivery services in some U.S. cities) a. occurs when an organization's present distributors are especially expensive b. quality distributors are limited c. when an organization competes in a growing industry 2. Backward Integration-seeking ownership or increased control of a firm's suppliers (example starbucks purchased a coffee farm) a. When an organization's present suppliers are especially expensive or unreliable b. When the number of suppliers is small and the number of competitors is large c. When the organization competes in a growing industry 3. Horizontal Integration - seeking ownership or increased control over competitors (example BB&T acquired a competitor company) When an organization competes in a growing industry When increased economies of scale provide major competitive advantages When an organization has both the capital and human talent needed
Define and give an example of eleven types of strategies:
Integration 1. Forward Integration - gaining ownership or increased control over distributors or retailers (example is amazon began rapid delivery services in some U.S. cities) 2. Backward Integration-seeking ownership or increased control of a firm's suppliers (example starbucks purchased a coffee farm) 3. Horizontal Integration - seeking ownership or increased control over competitors (example BB&T acquired a competitor company) 4. Market Penetration- seeking increased market share for present products or services in present markets through greater marketing efforts (example under armour signed tennis champion andy murray to a 40year $23 million marketing deal) 5. market development - introducing present products or services into new geographic area (example gap opened its first five stores in china) 6. Product development - seeking increased sales by improving present products or services or developing new ones (example amazon just began offering its own line of baby diapers and wipes) 7. Related Diversification- adding new but related products or services (example facebook acquired text-messaging firm whatsapp for $19 billion) 8. unrelated diversification - adding new, unrelated products or services (Kroger and Whole Foods Market are cooking meals, becoming restaurants 9. retrenchment- regrouping through cost and asset reduction to reverse declining sales and profit (exampled Staples closed 250 stores and reduced by 50% the size of other stores) 10. Divestiture- selling a division or part of an organization (Sears holdings divested its land's end division to Sears shareholders) 11. Liquidation - selling all of a company's assets, in parts, for their tangible worth (the trump taj mahal in atlantic city, new jersey, faces liquidation)
Explain how strategic planning differs in for-profit, not-for-profit, and small firms.
not for proft - do no pay taxes, do not have shareholders to provide capital, may be totally dependent on outside money so must be smarter with their money. mostly the same though. vital to all 3 small firms - sometimes conducted informally by a single owner. lack of strategic management knowledge is a serious obstacle. often used for day to day operations