strategic management chapter 5

two alternative types of focus strategies are

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 top 5 is it best value Focus strategy that offers products or services to a small range of customers at the best price valuable on the market sometimes called focused differentiation

tactics to facilitate strategies include

first-mover advantages, Outsourcing, and reshoring

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, higher product quality than Rivals, wider Geographic coverage than Rivals, achieving technological leadership, consistently getting new or improved products to Market ahead of Rivals

Financial objectives

include those 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, improves cash flow, and so on

vertical and horizontal actions by firms are broadly referred to as

integration strategies

Market penetration, Market development, and product development are sometimes referred to as

intensive strategies because they require intensive efforts of a firm's competitive position with existing products is to improve

Market development

introducing present products or services in a new geographic area

Outsourcing

involves companies hiring other companies to take over various parts of their functional operations such as human resources Information Systems payroll accounting customer service and even marketing

forward integration

involves gaining ownership or increased control over distributors or retailers

Market development

involves introducing present products or services in the new Geographic areas

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 credit agreement. All the organization's assets are sold and parts for their tangible words. Several hundred thousand companies declare this bankruptcy annually

joint venture

is a popular strategy that occurs when two or more companies for my temporary partnership or Consortium for the purpose of capitalizing on some opportunity

chapter 13 bankruptcy

is a reorganization plan similar to chapter 11 but it is available only to small businesses owned by individuals with unsecured debt of less than $100,000 unsecured debts of less than $350,000

backward integration

is a strategy of seeking ownership or increased control of a firm's suppliers

product development

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

strategist in governmental organizations operate with

less autonomy than their counterparts in private firms

diversification strategies are becoming

less popular because organizations are finding it more difficult to manage diverse business activities

selling all of the company's assets, and parts, for their tangible worth is called

liquidation which is associated with Chapter 7 bankruptcy

examples of not managing by objectives

managing by extrapolation, managing by crisis, managing by objectives, managing by hope

horizontal integration

refers to gaining ownership and or control over competitors

retrenchment

regrouping through cost and asset reduction to reverse declining sales and profit

the two general types of diversification strategies are

related diversification and unrelated diversification

long-term objectives

represent the results expected from pursuing certain strategies

Strategies

represents the actions to be taken to accomplish long-term objectives

defensive strategies include

retrenchment, divestiture, or liquidation

Market penetration

seeking increase market share for present products or services in present markets through greater marketing efforts

product development

seeking increase sales by improving present products or services or developing new ones

backward integration

seeking ownership or increased control of a firm's suppliers

Market penetration strategy

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 the company's assets, and parts, for their tangible worth

horizontal integration

taking ownership or increased control over competitors

forward integration and backward integration are sometimes collectively referred to as

vertical integration

chapter 12 bankruptcy

was created by the family farmer bankruptcy Act of 1986. This law provides special relief to family Farmers with debt equal to or less than 1.5 million

dividend recapitalization

when firms borrow money simply to Fund dividend payouts to themselves this is a controversial practice

five guidelines that indicate when horizontal integration may be an especially effective strategy

1. An organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for tending substantially to reduce competition 2. An organization competes in a growing industry 3. Increased economies of scale provide major competitive advantages 4. An organization has both the capital and human Talent needed to successfully manage an expanded organization 5. Competitors are faltering as a result of a lack of managerial expertise or a need for particular resources that an organization possesses note that horizontal integration would not be appropriate if competitors are doing poorly because in that case overall industry sales are declining

6 guidelines for when related diversification may be an effective strategy

1. An organization competes in a no-growth or a slow growth industry 2. Adding new, but related, products would significantly enhance the sales of current products 3. New, but related, products could be offered at highly competitive prices 4. New, but related, products have seasonal sales levels that counterbalance an organization's existing Peaks and valleys 5. An organization's products are currently in the declining stage at the product's lifecycle 6. An organization has a strong management team

five guidelines for when retrenchment may be an especially effective strategy

1. An organization has a clearly distinctive competence but has failed consistently to meet its objectives and goals overtime 2. An organization is one of the weaker competitors in a given industry 3. An organization is plagued by inefficiency, low probability, poor employee morale, and pressure from stockholders to improve performance 4. An organization has failed to capitalize on external opportunities, minimize external threats, take advantage of internal strength, and overcome internal weaknesses overtime 5. An organization has grown so large so quickly that major internal reorganization is needed

six guidelines for when divestiture may be an especially effective strategy

1. An organization has pursued a retrenchment strategy and fail to accomplish needed improvements 2. To be competitive, a division needs more resources than the company can provide 3. A division is responsible for an organization's overall poor performance 4. A division is a misfit with the rest of an organization this can result from radically different markets, customers, managers, employees, values, or needs 5. A large amount of cash is needed quickly and cannot be obtained reasonably from other sources 6. Government antitrust action threatens an organization

five guidelines that indicate when product development may be an especially effective strategy to pursue

1. An organization has successful products that are in the maturity stage of the product life cycle the idea here is to attract satisfied customers to try new and improved products as a result of their positive experience with the organization's present products or services 2. An organization competes in an industry that is characterized by rapid technological development 3. Major competitors offer better quality products at comparable prices 4. An organization competes in a high-growth industry 5. An organization has especially strong research and development capabilities

bankruptcy

can allow a firm to avoid major debt obligations and to void Union contracts

what are the five types of bankruptcy

chapter 7, chapter 9, chapter 11, chapter 12, and chapter 13

in small firms, what are the three levels of strategies

company, functional, and operational

in large firms, what are the four levels of strategies

corporate, divisional, functional, and operational

what are Michael Porter's generic strategies

cost leadership, differentiation, and focus

sewing a division or part of an organization is called

divestiture

cost leadership

emphasizes producing standardized products at a low per unit cost for consumers who are price-sensitive

six guidelines that indicate when forward integration may be an especially effective strategy

1. An organization's present Distributors are especially expensive, unreliable, or incapable of meeting the firm's distribution needs. 2. The availability of quality Distributors is so limited as to offer a competitive advantage to those firms that promote forward integration 3. An organization competes in an industry that is growing and is expected to continue to grow markedly this is a factor because forward integration reduces an organization's ability to diversify if it's basic industry falters 4. An organization has both the capital and human resources needed to manage the new business of Distributing its own products 5. The advantages of stable production are particularly high this is a consideration because an organization can increase the predictability of the demand for its output through forward integration 6. Present distributors or retailers have high profit margins this situation suggests that a company could profitably distribute its own products and price them more competitively by integrating forward

7 guidelines when backward integration may be an especially effective strategy

1. An organization's present suppliers are especially expensive, unreliable, or incapable of meeting the firm's needs for parts, components, assemblies, or raw materials 2. The number of suppliers is small and then number of competitors is large 3. An organization competes in an industry that is growing rapidly this is a factor because integrative type strategies such as forward backward and horizontal reduce an organization's ability to diversify in a declining industry 4. An organization has both capital and human resources to manage the new business of supplying its own raw materials 5. The advantages of stable prices are particularly important this is a factor because an organization can stabilize the cost of its raw materials and the associated price of its products through backward integration 6. Present suppliers have high profit margins which suggests that the business of supplying products or services in a given industry is a worthwhile venture 7. An organization needs to quickly acquire a needed resource

five guidelines that indicate when Market penetration may be an especially effective strategy

1. Current markets are not saturated with a particular product or service 2. The usage rate of present customers could be increased significantly 3. The market shares of major competitors have been declining while total industry sales have been increasing 4. The correlation between dollar sells and dollar marketing expenditures historically has been high 5. Increased economies of scale provide major competitive advantages

four primary reason joint ventures are not successful

1. Managers who must collaborate daily in operating The Venture are not involved in forming or shaping The Venture 2. The Venture May benefit The Partnering companies but may not benefit customers, who then complain about poor service or criticize the companies in other ways 3. The Venture may not be supported equally by both Partners. It was supported unequally, problems arise 4. The Venture May begin to compete more with one of the partners than the other

6 guidelines that indicate when Market development may be an especially effective strategy

1. New channels of distribution are available that are reliable, and expensive, and a good quality 2. An organization is successful at what it does 3. New untappd or unsaturated markets exist 4. An organization has the needed capital and human resources to manage expanded operations 5. An organization has excess production capacity 6. An organization's basic industry is rapidly becoming Global in scope

10 guidelines when unrelated diversification may be an especially effective strategy

1. Revenues derived from an organization's current products or Services would increase significantly by adding the new, unrelated products 2. An organization competes in a highly competitive or a no growth industry, as indicated by low industry profit margins and returns 3. An organization's present channels of distribution can be used to market the new products to current customers 4. New products have countercyclical sales patterns compared to an organization's present products 5. An organization's basic industry is experienced declining annual sales and profits 6. An organization has the capital and managerial Talent needed to compete successfully and a new industry 7. An organization has the opportunity to purchase an unrelated business that is an attractive investment opportunity 8. Financial Synergy exists between the Acquired and acquiring firms 9. Existing markets for an organization's present products are saturated 10. Antitrust action could be charged against an organization that historically has concentrated on a single industry

diversification strategies companies can capitalize on for synergy examples

1. Transferring competitively valuable expertise, technological know-how, or other capabilities from one business to another 2. Combining the related activities of separate businesses into a single operation to achieve lower costs 3. Exporting common use of a well-known brand name 4. Cross business collaboration to create competitively valuable resources strengths and capabilities

three guidelines that indicate when liquidation may be an especially effective strategy

1. an organization organisation has pursued both a retrenchment strategy and a divestiture strategy, and neither has been successful 2. An organization's only alternative is bankruptcy. Liquidation represents an orderly and planned means of obtaining the greatest possible amount of cash for an organization's assets. A company can legally declare bankruptcy first and then liquidate various divisions to raise needed Capital 3. The stockholders of a firm can minimize their losses by selling the organization's assets

what is the time frame for objectives

2 to 5 years

how many franchise businesses are in the United States

800,000

De-integration

Makes sense in industries that have global sources of supply

differentiation

a strategy aimed at producing products and services considered unique to the industry and directed at consumers who are relatively price insensitive

approximately how many companies in about how many different Industries in the United States use franchising to distribute their products or services

about 2,000 companies in about 50 different Industries

product diversification

adding new but related products or services

unrelated diversification

adding new, unrelated products or services

vertical integration strategies

allow a firm to gain control over Distributors and suppliers

chapter 11 bankruptcy

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

in some cases, declaring what can be an effective retrenchment strategy

bankruptcy

both financial and strategic objectives should include

both annual and long-term performance

examples of alternative strategies

forward integration, backward integration, horizontal integration, Market penetration, Market development, product development, related diversification, unrelated diversification, retrenchment, divestiture, liquidation

an effective means of implementing forward integration is

franchising

most mergers are considered to be

friendly but the number of hostile takeovers is on the rise

forward integration

gaining ownership or increased control over distributors or retailers

when seeking ownership of or control over a firm's competitors, what strategy is arguably the most common

horizontal integration

if a merger or acquisition is not desire by both parties it is called a

hostile takeover as opposed to a friendly merger

Focus

means producing products and services that fulfill the needs of small groups of consumers

chapter 9 bankruptcy

municipalities

what are the two major differences of nonprofits compared to for-profit companies

nonprofits do not pay taxes and nonprofits do not have shareholders to provide capital

leveraged buyout

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 or requires a smaller firm or vice versa

retrenchment

occurs when an organization recruits their cost an asset reduction to reverse declining sales and profits sometimes called a turn around or ree organizational strategy, retrenchment is designed to fortify an organization's basic distinctive competence

merger

occurs when two organizations of about equal size unite to form one Enterprise

13 potential benefits of Outsourcing

one. Cost savings 2. Focus on Core Business three. Cost restructuring 4. Improve quality five. Knowledge six. Contract 7. Operational expertise 8. Access to Talent non. Catalyst for change 10. Enhance capacity for Innovation 11. Reduce time-to-market 12. Risk management 13. Tax benefit

9 reasons why many mergers and Acquisitions fail

one. Integration difficulties to. Inadequate evaluation of Target 3. Large or extraordinary debt for. Inability to achieve Synergy five. Too much diversification six. Managers overly focused on acquisitions sudden. Too large and acquisition 8. Difficult to integrate different organizational cultures 9. Reduced employee morale do the layoffs and relocations

11 potential benefits of merging with acquiring another firm

one. Provide improved capacity utilization 2. To make better use of the existing Salesforce three. To reduce managerial staff four. To gain economies of scale five. To smooth out seasonal Trends and sells six. To gain access to new suppliers Distributors customers products and creditors seven. To get a new technology 8th. To gain market share non. Inter Global markets Tim. The game pricing power 11. To reduce tax obligations

5 benefits of a firm being the first mover

one. Secure access and commitments to rare resources 2. Gain new knowledge of critical success factors and issues 3. Gain market share a position in the best locations 4. Establish and secure longterm relationships with customers suppliers Distributors and investors five. Gain customer loyalty and commitment

7 benefits of reshoring back into the United States

one. Stable wages two. Reduced gas and electricity costs three. Excellent security to protect designs from overseas copycats 4. Enable closer tabs on quality control and supply chain five. Excellent economy with consumers purchasing more 6. Less shipment cost with consumers nearby 7. Excellent human rights, education, legal, and political system that promote freedom and opportunity for citizens

10 benefits of having clear objectives

provide Direction by revealing expectations, allow Synergy, assist in evaluation by serving as standards, establish priorities, reduce uncertainty, minimize conflicts, stimulate exertion, Aid in and allocation of resources, Aid in design of jobs, provide basis for consistent decision-making

what are the eight desired characteristics of objectives

quantitative, measurable, realistic, understandable, challenging, hierarchical, attainable, congruent across departments

first-mover advantages

refer to the benefits at Fermi achieve by entering a new market or developing a new product or service prior to rival firms

Reshoring

the new term that refers to us companies planning to move some of their manufacturing back to the United States

businesses are said to be unrelated when

their value chains are so dissimilar that no competitively valuable cross business relationships exist

businesses are said to be related when

their value chains possess competitively valuable cross-business relationships that present opportunities to transfer resources from one business to another, combine similar activities and reduce costs, share use of a well-known brand name, and/or create mutually useful resource strengths and capabilities.

what are the two alternative types of cost leadership

type one is a low-cost strategy 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 market

Porter's five generic strategies explained

type one is cost leadership at a low cost. Type 2 is cost leadership at best value. Type 3 is differentiation. Type 4 is focus with low-cost. Type 5 is focus with best value