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