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