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
