Business Policy and Strategy Chapter 5

leverage

An LBO takes a public company private.

Levels of Strategies

Corporate, division, functional, and operational Level

Focus

means producing products and services that fulfill the needs of small groups of consumers. Type 4 is a low-cost focus strategy that offers products or services to a small range (niche group) of customers at the lowest price available on the market. Type 5 is a best-value focus strategy that offers products or services to a small range of customers at the best price-value available on the market.

Reasons for Market Development

new channels of distribution are available that are reliable, inexpensive, and of good quality. an organization has the needed capital and human resources to manage expanded operations. an organization's basic industry is becoming rapidly global in scope.

Differentiation

Type 3) is a strategy aimed at producing products and services considered unique industrywide and directed at consumers who are relatively price insensitive.

Unrelated

Unrelated - When their value chains are so dissimilar that no competitively valuable cross-business relationships exist.

Chapter 11 bankruptcy

allows organizations to reorganize and come back after filing a petition for protection.

Reasons for Horizontal Integration

an organization can gain monopolistic characteristics in a particular area or region without being challenged by the feds. an organization competes in a growing industry.

Chapter 9 bankruptcy

applies to municipalities.

buyout

by the company's management and other private investors using borrowed funds

long term objectives are needed at the:

corporate, divisional, and functional levels of an organization

Michael Porter's Generic Strategies

cost leadership, differentiation, focus

The balanced Scorecard

strategy evaluation and control technique. Seeks to balance financial measures with non-financial. Comprises a list of key objectives, assciiated time deimension, a primary responsible contact person/department

Cost leadership

emphasizes producing standardized products at a very low per-unit cost for consumers who are price sensitive. Type 1 is a low-cost alternative that offers products or services to a wide range of customers at the lowest price available on the market. Type 2 is a best-value strategy that offers products or services to a wide range of customers at the best price-value available on the marker.

Forward Integration

gaining ownership or increased control over distributors or retailers. Ex. - Franchising, establishing websites to sell products directly to consumers

Financial Objectives are

growth in revenues, growth in earnings, higher dividends, higher profit margins, higher earnings per share, improved cash flow

Business-process outsourcing (BPO)

involves companies taking over the functional operations (e.g., marketing or payroll) of other firms.

Chapter 7 bankruptcy

is a liquidation procedure used only when a corporation sees no hope of being able to operate successfully or to obtain the necessary creditor agreements. All the organization's assets are sold in parts for their tangible worth.

Chapter 13 bankruptcy

is 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.

Strategic objectives are

larger market share, lower costs than rivals, higher product quality, quicker on-time deliver than rivals

Not Managing by Objectives

managing by extrapolation, crisis, subjectives, and by hope

Divestiture

Selling a division or part of an organization Divestiture can be part of an overall retrenchment strategy to rid an organization of businesses that are unprofitable that require too much capital that do not fit well with the firm's other activities

Liquidation

Selling all of a company's assets, in parts, for their tangible worth

Backward Integration

Strategy of seeking ownership or increased control of a firm's suppliers

Joint Venture/Partnering

A joint venture occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity.

Integration Strategies

Forward, Backward, horizontal, also referred to as vertical integration, allow a firm to gain control over distributors, suppliers and/or competitors.

Market Penetration

Increase market share for present products or services in present markets through greater marketing efforts. Ex. - increasing # of salespeople, increasing advertising expenditures

Market Development

Involves introducing present products or services into new geographic areas.

Intensive Strategies

Market penetration, market development, product development. Typically require intensive efforts if a firm's compeitive position with exisitng products is to improve

A leveraged buyout (LBO

occurs when a corporation's shareholders' stock is bought

acquisition

occurs when a large organization purchases (acquires) a smaller firm, or vice versa.

takeover or hostile takeover

occurs when a merger or acquisition is not desired by the party being acquired or purchased

Retrenchment

occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits.

Merger

occurs when two organizations, usually about the same size, unite to form one new enterprise

Reasons for Forward Integration

present distributors are expensive or unreliable, the availabiltity of quality distributors is limited ,competes in an industry that is growing and is expected to continue to grow markedly

Reasons for Backward integration

present suppliers are especially expensive, unreliable,the number of suppliers is small and the number of competitors is large.

Clearly established objectives offer several benefits:

provide direction, allow synergy, aid in evaluation, establish priorities, reduce uncertainty, minimize conflicts, aid in resource allocation, aid in job design

Chapter 12 bankruptcy

provides special relief to family farmers & ranchers with debt equal to or less than $1.5 million.

Objectives should be:

quantitative, measurable, realistic, understandable, challenging, obtainable, congruent among organizational units, associated with a time line

Horizontal Integration

refers to a strategy of seeking ownership of or increased control over a firm's competitors. Often used as a growth Strategy

First mover advantage

refers to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.

Two types of Diversification Strategies

related and unreleated

Long-term Objectives

represent the results expected from pursuing certain strategies

Defensive strategies

retrenchment, divestiture, liquidation

Product Development

seeks to increase sales by improving or modifying present products or services

Strategies

the actions to be taken to accomplish long-term objectives

Related

when their value chains possess competitively valuable cross-business strategic fits