TIM 431 Chapter 5

objectives are commonly stated in terms such as

growth in assets, growth in sales, profitability, market share, degree and nature of diversification, degree and nature of vertical integration, earnings per share, and social responsibility.

Strategic Objectives

include 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, consistently getting new or improved products to market ahead of rivals, and so on.

vertical and horizontal actions by firms are broadly referred to as

integration strategies

forward integration

involves gaining ownership or increased control over distributors or retailers

market development

involves introducing present products or services into new geographic areas

intensive strategies

market penetration, market development, product development

Horizontal Integration

refers to gaining ownership and/or control over competitors

Long-term objectives

represent the results expected from pursuing certain strategies

backward integration

seeking ownership or increased control of a firm's suppliers

market penetration

seeks to increase market share for present products or services in present markets through greater marketing efforts.

product development

strategy that seeks increased sales by improving or modifying present products or services

forward and backward integration collectively referred to as

vertical integration

objectives should be associated with

a timeline

Vertical Integration Strategy

allow a firm to gain control over distributors and suppliers

8 desired characteristics of objectives

1. Quantitative 2. Measurable 3. Realistic 4. Understandable 5. Challenging 6. Hierarchical 7. Obtainable 8. Congruent across departments

10 benefits of objectives

1. provide direction by revealing expectations 2. allow synergy 3. assist in evaluation by serving as standards 4. establish priorities 5. reduce uncertainty 6. minimize conflicts 7. stimulate exertion 8. aid in both the allocation of resources 9. aid in design of jobs 10. provide basis for consistent decision making

% based on long-term and annual objectives corporate division function

75% based on long-term objectives 25% based on annual objectives 50% based on long-term objectives 50% based on annual objectives 25% based on long-term objectives 75% based on annual objectives

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

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.

Financial Objectives

Associated with growth in revenues, earnings, higher dividends, larger profit margins, greater ROI, higher EPS, rising stock price, cash flow, etc.

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.

Managing by Crisis

based on the belief that the true measure of a really good strategist is the ability to solve problems

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; "do your own thing, the best way you know how"

combination strategy

combining two or more strategies simultaneity

objectives provide a basis for

consistent decision making by managers who's values and attitudes differ.