CHAPTER 1 Dale McConkey: “Plans are less important than planning.

STRATEGIC MANAGEMENT REVIEWER Robert Waterman Jr.: “Most of us fear change... but for strategists and
managers today, there is no choice but to change.”
Key Terms and Definitions
Confucius: “If a man takes no thought about what is distant, he will find
Strategic Management sorrow near at hand.”

Strategic management is the art and science of formulating, Peter Drucker: “The prime task of strategic management is thinking
implementing, and evaluating cross-functional decisions that enable an through the overall mission of a business.”
organization to achieve its objectives. It focuses on integrating
management, marketing, finance/accounting, production/operations, Albert Einstein: “Imagination is more important than knowledge,
research and development, and information systems to achieve because knowledge is limited, whereas imagination embraces the
organizational success. The term "strategic management" is often entire world.”
used synonymously with "strategic planning," though some consider
strategic planning to refer only to strategy formulation. McDonald's Case Study: Doing Great in a Weak Economy

Stages of Strategic Management McDonald’s increased its revenues from $22.7 billion in 2007 to $23.5
billion in 2008. During a time when many businesses struggled,
1. Strategy Formulation – This includes developing a vision McDonald's continued to expand, adding 650 new outlets in 2009. The
and mission, identifying an organization’s external company’s CEO, Jim Skinner, attributed this success to well-planned
opportunities and threats, determining internal strengths and strategies. McDonald's “Plan to Win” strategy focused on increasing
weaknesses, establishing long-term objectives, generating sales at existing locations by improving the menu, remodeling dining
alternative strategies, and choosing particular strategies to rooms, extending hours, and adding snacks. The company avoided
pursue. deep price cuts and instead focused on long-term strategic growth.

2. Strategy Implementation – This involves establishing annual Sun Tzu’s The Art of War and Business Strategy
objectives, devising policies, motivating employees, and
allocating resources so that formulated strategies can be Sun Tzu’s military strategies provide insights applicable to business
executed. It includes creating a strategy-supportive culture, strategy.
restructuring, marketing adjustments, budgeting, and
“Know your enemy and know yourself, and in a hundred battles you will
performance incentives.
never be defeated.” – This emphasizes the importance of competitive
3. Strategy Evaluation – The final stage, which includes analysis and self-assessment.
reviewing external and internal factors, measuring
“Subdue the enemy without fighting is supreme excellence.” – Gaining
performance, and taking corrective actions. All strategies are
market leadership through superior innovation and branding rather
subject to modification as conditions change.
than price wars.
Key Strategic Management Concepts
“Strike the enemy when he is in disorder.” – Capitalizing on
Competitive Advantage – Anything that a firm does especially well competitors’ weaknesses or market disruptions.
compared to rival firms. This can be superior resources, technology,
“A speedy victory is the main objective.” – Reducing time-to-market
branding, or efficiency.
and maintaining an agile business model.
Strategists – Individuals responsible for the success or failure of an
Common Pitfalls in Strategic Planning
organization, such as CEOs, presidents, or directors. They help
formulate, implement, and evaluate strategies. 1. Using strategic planning to gain control over decisions and
resources rather than guiding the organization.
Vision Statement – Answers the question, “What do we want to
become?” It is a guiding statement that sets a long-term direction for 2. Conducting strategic planning only to satisfy accreditation or
the organization. regulatory requirements rather than for genuine business
improvement.
Mission Statement – Enduring statements of purpose that distinguish
one business from another. It identifies the scope of a firm’s 3. Moving too quickly from vision and mission development to
operations in product and market terms and answers the fundamental strategy formulation without proper analysis.
question: “What is our business?”
4. Failing to communicate the plan to employees, leaving them
External Opportunities and Threats – Factors in the external uninformed and disengaged.
environment that could significantly benefit or harm an organization.
These include economic, social, cultural, demographic, environmental, 5. Relying too much on intuitive decision-making that
political, legal, governmental, technological, and competitive trends. contradicts the formal strategic plan.

Internal Strengths and Weaknesses – Controllable activities that an 6. Viewing strategic planning as unnecessary or too expensive.
organization performs well or poorly, including management,
marketing, finance, production, research and development, and 7. Allowing strategic planning to become a bureaucratic
information systems. exercise rather than a dynamic process.

Long-Term Objectives – Specific results that an organization seeks to Guidelines for Effective Strategic Management
achieve over a period greater than one year. These objectives guide
strategy formulation. Keep the process simple and non-routine to foster creativity.

Strategies – The means by which long-term objectives will be achieved, Encourage dialogue and participation across all levels of management.
such as geographic expansion, diversification, acquisition, product
development, market penetration, and joint ventures. Challenge existing assumptions and welcome new perspectives.

Annual Objectives – Short-term milestones that organizations must Ensure that the strategic plan is action-oriented, not just a document.
achieve to reach long-term objectives. They are used to guide
Promote open-mindedness and adaptability in decision-making.
performance and measure progress.
Focus on both qualitative insights and quantitative data.
Policies – Guidelines, rules, and procedures established to support
efforts to achieve objectives. They help ensure consistency in decision- Avoid implementing too many strategies at once, which can stretch
making and operations. resources too thin.
Notable Quotes in Strategic Management Recognize that good ethics is good business.
Abraham Lincoln: “If we know where we are and something about how Comparing Business and Military Strategy
we got there, we might see where we are trending—and if the
outcomes which lie naturally in our course are unacceptable, to make The study of strategic management has strong military origins.
timely change.” Business strategy, like military strategy, aims to gain a competitive
advantage. Both involve using strengths to exploit opponents’
Joel Ross & Michael Kami: “Without a strategy, an organization is like a weaknesses, continuous adaptation to changing conditions, and
ship without a rudder, going around in circles.” leveraging information systems for strategic decisions.
However, while military strategy is based on conflict, business strategy Gather Input – Review articles on vision/mission statements and ask
is based on competition. In both cases, success requires continuous managers to draft their own versions.
assessment of external conditions, strategic positioning, and the ability
to adapt to new challenges. Draft Statements – A facilitator or top managers merge inputs into a
single document.
Conclusion
Refinement Process – Managers discuss, revise, and refine
Strategic management is essential for organizations to proactively statements before finalization.
shape their future rather than reactively respond to challenges. The
process involves setting clear objectives, formulating strategies, Communication and Implementation – The statements are shared
implementing plans effectively, and continuously evaluating across the organization and integrated into strategic planning.
performance. A well-managed strategic plan enhances an
organization’s ability to compete, adapt, and achieve long-term Campbell & Yeung on Mission Statements
success
Developing a mission statement should create an “emotional bond”
between employees and the company.
CHAPTER 2
Employees should identify with the values and direction of the
STRATEGIC MANAGEMENT REVIEWER
organization.
Key Terms and Definitions
Mission Statement Components
Vision Statement
Effective mission statements should include the following nine
A vision statement answers the question: “What do we want to components:
become?” It provides the long-term direction of an organization and
Customers – Who are the firm’s customers?
should be concise, preferably one sentence. It serves as the foundation
for the mission statement. Products or Services – What are the firm’s major offerings?
Mission Statement Markets – Where does the firm compete geographically?
A mission statement defines “What is our business?” It is a declaration Technology – Is the firm technologically current?
of an organization’s purpose that distinguishes it from others. It is
sometimes called a creed statement, statement of purpose, philosophy, Concern for Survival, Growth, and Profitability – Is the firm committed
beliefs, or business principles. to financial success?

Peter Drucker’s Definition of Business Mission Philosophy – What are the basic beliefs, values, and priorities of the
firm?
"A business is not defined by its name, statutes, or articles of
incorporation. It is defined by the business mission. Only a clear Self-Concept – What is the firm’s competitive advantage?
definition of the mission and purpose of the organization makes
possible clear and realistic business objectives." Concern for Public Image – Is the firm responsive to social,
community, and environmental issues?
Difference Between Vision and Mission Statements
Concern for Employees – Are employees valued as a key asset?
Vision Statement: Focuses on what the organization aspires to
become. Examples of Mission Statements (with Missing Components Noted)

Mission Statement: Focuses on the organization’s present purpose and Dell: "To be the most successful computer company in the world at
activities. delivering the best customer experience." (Lacks concern for
employees.)
Notable Quotes in Strategic Management
Procter & Gamble: "To provide branded products of superior quality
Peter Drucker: “That business mission is so rarely given adequate that improve consumers’ lives." (Lacks products/services, technology,
thought is perhaps the most important single cause of business and philosophy components.)
frustration.”
L’Oreal: "We believe lasting business success is built upon ethical
John W. Teets (Greyhound, Inc.): “A strategist’s job is to see the standards and a genuine sense of responsibility to our employees,
company not as it is but as it can become.” consumers, and environment." (Lacks six components, including
customers, markets, and self-concept.)
Theodore Hesburgh: “The very essence of leadership is that you have
to have vision. You can’t blow an uncertain trumpet.” Characteristics of an Effective Mission Statement

John Keane: “A corporate vision can focus, direct, motivate, unify, and Broad in scope – Allows for future expansion and creativity.
even excite a business into superior performance.”
Inspiring and motivating – Generates positive emotions.
Proverbs 29:18: “Where there is no vision, the people perish.”
Enduring – Should remain relevant over time.
Importance of Vision and Mission Statements
Reflects stakeholder interests – Addresses concerns of employees,
Ensures unanimity of purpose within the organization. customers, shareholders, and society.

Provides a foundation for strategic planning. Customer-Oriented – Focuses on the needs of customers rather than
internal capabilities.
Guides resource allocation.
Common Mistakes in Mission Statements
Enhances organizational climate and unity.
Too vague – Should provide clear guidance.
Establishes priorities and direction for employees and managers.
Overly specific – Should allow for strategic flexibility.
Improves organizational performance.
Lack of stakeholder focus – Should address concerns of key
Research Findings on Mission Statements stakeholders.
Rarick & Vitton: Companies with formalized mission statements have Case Study: Wal-Mart's Vision and Mission in a Weak Economy
double the average return on shareholders’ equity compared to those
without. Revenue Growth (2007-2008): $348B → $378B

Bart & Baetz: Positive correlation between mission statements and Net Income Growth: $11.2B → $12.7B
organizational performance.
Strategy:
BusinessWeek: Firms using mission statements experience 30%
higher financial returns. Focus on smaller stores and remodeling instead of new store openings.

Developing Vision and Mission Statements Expansion in emerging markets like Brazil and India.
Strengthening the electronics department to compete with Best Buy Sources of External Information
and Amazon.
Government reports, industry journals, market research studies, and
Introduction of environmental labeling programs. economic forecasts.

The Role of Vision and Mission in Strategic Planning Company reports and annual financial statements of competitors.

Guiding Strategy Formulation – A clear vision and mission help Consumer surveys and industry expert opinions.
generate, evaluate, and select strategies.
The Internet, which provides quick access to stock market trends,
Aiding Strategy Implementation – Provides direction for setting annual competitor websites, and online reports.
objectives and allocating resources.
Competitive Intelligence (CI)
Supporting Strategy Evaluation – Acts as a benchmark for measuring
organizational performance. CI is a systematic and ethical approach to gathering and analyzing data
on competitors. It helps organizations anticipate market movements
and adjust their strategies accordingly.

Key Objectives of a CI Program

Understand the competitive landscape and industry trends.

CHAPTER 3 Identify rivals' strengths, weaknesses, and vulnerabilities.

STRATEGIC MANAGEMENT REVIEWER Predict potential competitor actions and adjust strategies accordingly.

Key Terms and Definitions Methods of Competitive Intelligence:

External Strategic Management Audit Hiring industry experts from rival firms.

An external audit, also called environmental scanning or industry Analyzing competitors’ financial reports and marketing campaigns.
analysis, identifies and evaluates trends and events beyond a firm's
control, such as foreign competition, demographic shifts, and stock Monitoring press releases, patents, and legal filings.
market fluctuations. The purpose of this audit is to pinpoint external
Studying social media activity and customer feedback.
opportunities and threats that could impact an organization's
strategies. Five Forces Model (Michael Porter)
Key External Forces Affecting Organizations Porter’s model helps analyze the competitive intensity within an
industry by examining five key forces:
Economic Forces – Interest rates, inflation, stock market trends,
unemployment rates, GDP growth, etc. Rivalry Among Competing Firms – The intensity of competition within
the industry.
Social, Cultural, Demographic, and Environmental Forces – Population
growth, aging demographics, lifestyle changes, and attitudes toward Potential Entry of New Competitors – The threat posed by new firms
health and sustainability. entering the market.
Political, Governmental, and Legal Forces – Tax policies, labor laws, Potential Development of Substitute Products – The availability of
environmental regulations, trade policies, etc. alternatives that could replace existing products.
Technological Forces – Advancements in AI, automation, internet Bargaining Power of Suppliers – The ability of suppliers to influence
connectivity, and digital transformation. prices and product availability.
Competitive Forces – Rival firms' strategies, market entry barriers, Bargaining Power of Consumers – The ability of buyers to demand
product differentiation, and price competition. better pricing and quality.
Notable Quotes on External Analysis Key Observations:
George Salk: “If you’re not faster than your competitor, you’re in a High rivalry leads to price wars and reduced profitability.
tenuous position, and if you’re only half as fast, you’re terminal.”
Industries with high entry barriers have lower competition (e.g.,
William Cohen: “The opportunities and threats existing in any situation pharmaceuticals).
always exceed the resources needed to exploit the opportunities or
avoid the threats. Thus, strategy is essentially a problem of allocating A strong supplier base can drive up production costs.
resources.”
A weak currency can boost exports but increase inflation risks.
Ian C. Macmillan: “Organizations pursue strategies that will disrupt the
normal course of industry events and forge new industry conditions to Economic Forces and Their Impact
the disadvantage of competitors.”
Economic variables affect the attractiveness of different business
George Patton: “If everyone is thinking alike, then somebody isn’t strategies:
thinking.”
Interest Rates: High rates make borrowing expensive, limiting capital
Charles Darwin: “It is not the strongest of the species that survive, nor expansion.
the most intelligent, but the one most responsive to change.”
Inflation: Increases operational costs and reduces purchasing power.
Wayne Calloway: “Nothing focuses the mind better than the constant
sight of a competitor who wants to wipe you off the map.” Unemployment Trends: High unemployment can lead to lower
consumer spending.
Conducting an External Audit
Stock Market Trends: Rising stocks encourage investments, while
To conduct an effective external audit, organizations must: declining markets signal caution.

Gather competitive intelligence and external data (economic, social, Gross Domestic Product (GDP): Higher GDP growth indicates a strong
technological, political). economy, boosting demand.

Identify key opportunities and threats that may impact business Example: The 2009 Dunkin’ Donuts case study shows how the
operations. company adapted to a weak economy by offering value meal deals,
competing aggressively against McDonald’s and Starbucks.
Evaluate the importance of each external factor and determine how the
firm can respond. Social, Cultural, and Demographic Trends

Use strategic tools like the External Factor Evaluation (EFE) Matrix and Aging populations increase demand for healthcare, retirement plans,
Competitive Profile Matrix (CPM) to analyze data. and travel services.
The rise of health-conscious consumers has led to the growth of information systems. It helps in capitalizing on strengths and
organic foods, fitness products, and wellness programs. addressing weaknesses to formulate and implement effective
strategies.
Changes in consumer buying habits (e.g., shift to e-commerce and
digital transactions). Resource-Based View (RBV) of Strategic Management

Diversity and inclusion efforts are shaping corporate policies and RBV states that a firm’s internal resources are more important than
marketing strategies. external factors in achieving and sustaining a competitive advantage.
These resources are categorized as:
Political, Governmental, and Legal Forces
Physical resources – equipment, location, technology
Governments regulate businesses through trade laws, environmental
policies, and labor standards. Human resources – employees, skills, training

Trade restrictions and tariffs impact global supply chains. Organizational resources – structure, culture, patents, databases

Companies with heavy government contracts must adapt to policy For a resource to provide a sustainable competitive advantage, it must
changes. be:

Protectionism is on the rise, as seen in trade barriers set by Russia and Rare – Not possessed by many competitors
the EU in 2009.
Hard to Imitate – Difficult for competitors to copy
Example: The U.S. government bailed out major banks and automakers
during the 2008-2009 financial crisis, shifting economic policies to Not Easily Substitutable – No readily available alternatives
protect local industries.
Robert Grant: “An externally focused orientation does not provide a
secure foundation for formulating long-term strategy.

Technological Forces The firm’s own resources and capabilities may be a much more stable
basis on which to define its identity.”
Rapid digital transformation has reshaped industries like banking, retail,
and entertainment. Notable Quotes in Strategic Management

Automation and AI reduce labor costs but may lead to job Robert Lenz: “Like a product or service, the planning process itself
displacement. must be managed and shaped if it is to serve executives as a vehicle
for strategic decision-making.”
Social media and e-commerce influence consumer behavior and brand
engagement. William Gruber: “The difference between now and five years ago is that
information systems had limited function. You weren’t betting your
Cybersecurity threats pose new challenges for businesses storing company on it. Now you are.”
sensitive data.
Sun Tzu: “Weak leadership can wreck the soundest strategy.”
Example: Facebook vs. MySpace: Facebook gained market dominance
through superior technology and user engagement, leading to William Cohen: “A firm that continues to employ a previously
MySpace's decline. successful strategy eventually and inevitably falls victim to a
competitor.”
Competitive Profile Matrix (CPM)
Albert Einstein: “Great spirits have always encountered violent
The CPM helps compare a firm’s strengths and weaknesses against opposition from mediocre minds.”
key competitors by evaluating critical success factors such as:
Bruce Henderson: “The idea is to concentrate our strength against our
•Product quality competitor’s relative weakness.”

•Market share Key Internal Forces in Strategic Management

•Financial position Organizations have distinctive competencies, which are strengths that
cannot be easily matched or imitated by competitors. For example, 3M
•Customer loyalty excels in research and development, while Procter & Gamble is known
for its strong marketing.
•Brand reputation
Key functional areas assessed in an internal audit:
External Factor Evaluation (EFE) Matrix
•Management
The EFE Matrix helps prioritize external opportunities and threats by
assigning weights and ratings to each factor. •Marketing
Steps in Developing an EFE Matrix •Finance/Accounting
Identify key external factors (e.g., economic trends, competition, •Production/Operations
technology shifts).
•Research & Development (R&D)
Assign weights based on importance (total must equal 1.0).
•Management Information Systems (MIS)
Rate each factor from 1 (poor) to 4 (superior) based on the firm’s
response. An effective internal audit requires participation from managers and
employees across departments. This fosters communication and
Multiply weights by ratings to compute a weighted score. helps in understanding how different functions contribute to the overall
business strategy.
Sum the scores to get an overall rating (higher scores indicate better
strategy alignment). Ansoff: “Today, due to the growing complexity and dynamism of the
environment, success increasingly depends on a judicious combination
of several functional influences.”
CHAPTER 4 The Process of Performing an Internal Audit
STRATEGIC MANAGEMENT REVIEWER Identify key strengths and weaknesses across business functions.
Key Terms and Definitions Prioritize critical internal factors.
Internal Strategic Management Audit Assess distinctive competencies to build a competitive advantage.
An internal audit involves identifying and evaluating a firm’s strengths Use the Internal Factor Evaluation (IFE) Matrix to evaluate internal
and weaknesses in various functional areas, such as management, conditions systematically.
marketing, finance, production, research and development, and
Organizational Culture and Strategy Case Study: Amazon’s Strategy in a Weak Economy

Organizational culture consists of values, beliefs, norms, and traditions CEO Jeff Bezos’ Vision: Make Amazon the "Wal-Mart of the Internet"
that shape employee behavior. A strong culture can be an asset, but a by expanding product offerings and offering the lowest prices.
rigid or misaligned culture can hinder strategy execution.
Kindle Expansion: Amazon sold 500,000 Kindles in 2008 and aimed for
Cultural Elements $3.7 billion in revenue from e-books by 2012.

Rites & Ceremonies – Activities reinforcing values Competitive Challenges: Google and Sony partnered to compete with
Kindle.
Myths & Stories – Narratives about the company’s past
Legal Issues: Amazon resisted online sales taxes in multiple states to
Symbols & Language – Expressions of corporate identity maintain its pricing advantage.

Leadership & Values – Influence of company founders and executives Developing an Internal Factor Evaluation (IFE) Matrix

Lorsch: “Culture can inhibit strategic management when managers fail The IFE Matrix helps evaluate a firm’s key internal factors by assigning
to recognize the significance of changing external conditions.” weights and ratings.

Functions of Management in Strategic Planning Steps to Create an IFE Matrix:

1. Planning Identify 10-20 internal factors (strengths and weaknesses).

•Establishing objectives and determining how to achieve them. Assign weights to each factor based on importance.

•Peter Drucker: “The best way to predict the future is to create it.” Rate each factor from 1 (major weakness) to 4 (major strength).

2. Organizing Multiply weights by ratings and compute total weighted score.

•Structuring the company to achieve strategic goals. Interpret the score:

•Involves job specialization, departmentalization, and delegation of Above 2.5: Strong internal position
authority.
Below 2.5: Weak internal position
3. Motivating

•Influencing employees to execute strategies effectively.

•Kirkpatrick & Locke: Effective leaders exhibit “knowledge of the

business, cognitive ability, self-confidence, honesty, and integrity.”

4. Staffing

•Hiring and developing employees to meet organizational needs. CHAPTER 5

•Managing human resource functions, including compensation, training, STRATEGIC MANAGEMENT REVIEWER
and labor relations.
Key Terms and Definitions
5. Controlling
Long-Term Objectives
•Monitoring performance and ensuring alignment with strategic
objectives. Long-term objectives represent the expected results from pursuing
specific strategies. These objectives should be quantitative,
•Key activities include financial control, quality control, and risk measurable, realistic, understandable, challenging, hierarchical,
management. obtainable, and congruent among organizational units.

Financial Ratio Analysis in Strategic Management Peter Drucker: “Tomorrow always arrives. It is always different. And
even the mightiest company is in trouble if it has not worked on the
Financial ratios help assess an organization’s performance and guide future.”
strategic decisions.
Characteristics of Effective Objectives:
Types of Financial Ratios
Quantitative – Clearly defined in numerical terms.
Liquidity Ratios – Measure short-term financial stability (e.g., Current
Ratio) Measurable – Progress can be tracked.

Leverage Ratios – Assess financial risk (e.g., Debt-to-Equity Ratio) Realistic – Achievable within resources and capabilities.

Activity Ratios – Measure operational efficiency (e.g., Inventory Understandable – Simple and clear.
Turnover)
Challenging – Encourages performance improvement.
Profitability Ratios – Assess overall financial success (e.g., Net Profit
Margin) Hierarchical – Aligned with organizational structure.

Growth Ratios – Evaluate expansion potential (e.g., Sales Growth Rate) Obtainable – Achievable given market conditions.

William King: “A task force should determine the 10 to 20 most Congruent – Consistent across departments.
important strengths and weaknesses that influence the future of the
organization.” Financial vs. Strategic Objectives

Benchmarking as a Strategic Management Tool Financial Objectives: Focus on growth in revenues, earnings, profit
margins, return on investment, stock price appreciation, and cash flow.
Benchmarking involves comparing a company’s performance against
industry leaders to identify areas for improvement. Strategic Objectives: Focus on market share, product quality,
innovation, customer satisfaction, geographic expansion, and
Key Steps in Benchmarking: competitive positioning.

Identify best practices from industry leaders. Key Insight: There is often a trade-off between financial and strategic
objectives. For example, increasing short-term profits through price
Compare company performance against benchmarks. hikes may hurt long-term customer loyalty.

Implement changes to match or exceed competitors. Levels of Strategies in Organizations

Corporate-Level Strategies – Formulated by the CEO/top executives

for the entire organization.
Divisional-Level Strategies – Applied at the business unit level. 14. Differentiation – Offering unique products or services.

Functional-Level Strategies – Implemented in departments like Example: Apple’s premium branding and ecosystem of devices.
marketing, finance, and operations.
15. Focus (Low Cost Focus) – Targeting a niche market with low prices.
Operational-Level Strategies – Executed at store, plant, or regional
levels. Example: Jiffy Lube focusing on quick, affordable oil changes.

Will Rogers: “Even if you’re on the right track, you’ll get run over if you 16. Focus (Best Value Focus) – Targeting a niche market with high-
just sit there.” quality, high-value products.

Michael Porter’s Five Generic Strategies Example: Rolex producing luxury watches for a niche market.

Cost Leadership (Type 1 & Type 2) – Compete on the lowest price The Balanced Scorecard Approach
possible.
Developed by Robert Kaplan and David Norton, the Balanced
Differentiation (Type 3) – Offer unique products or services. Scorecard evaluates strategies beyond financial measures. It includes:

Focus Strategy (Type 4 & Type 5) – Target a niche market with either Financial Performance – Revenue, profits, stock value.
low cost or differentiation.
Customer Satisfaction – Retention rates, brand loyalty.
Amar Bhide: “Strategies for taking the hill won’t necessarily hold it.”
Internal Processes – Efficiency, product quality.
16 Types of Business Strategies
Learning & Growth – Employee development, innovation.
A. Integration Strategies (Gaining control over distributors, suppliers,
or competitors) Example: 3M Corporation balances financial objectives with strategic
goals, such as ensuring 30% of sales come from new products
1. Forward Integration – Gaining control over distribution channels. introduced in the last four years.

Example: Microsoft opening retail stores like Apple. First-Mover Advantages

2. Backward Integration – Gaining control over suppliers. First movers gain market dominance by introducing products before
competitors. However, they also bear higher risks and R&D costs.
Example: Apple producing its own microchips.
Examples of First Movers:
3. Horizontal Integration – Acquiring or merging with competitors.
Amazon – Revolutionized e-commerce.
Example: Pfizer acquiring Wyeth to strengthen its pharmaceutical
business. Tesla – Pioneered the electric vehicle industry.

B. Intensive Strategies (Expanding market share or product reach) Unknown Quote: “The early bird may get the worm, but the second
mouse gets the cheese.”
4. Market Penetration – Increasing market share for existing products
in current markets. Outsourcing Trends

Example: Coca-Cola spending millions on its "Open Happiness" Companies increasingly outsource operations like manufacturing and
campaign. customer service to cut costs.

5. Market Development – Expanding into new geographic markets. Recent Trends:

Example: Walmart expanding further into China. IT and cloud computing outsourcing.

6. Product Development – Creating new products to increase sales. Outsourcing of financial and legal services.

Example: Google developing the Chrome OS to compete with Microsoft. Example: Apple outsourcing iPhone production to Foxconn in China.

C. Diversification Strategies (Expanding into new business areas) Strategies in High-Velocity Markets

7. Related Diversification – Adding new, related products or services. Industries with rapid change (e.g., tech and telecom) require adaptive
strategies such as:
Example: Under Armour introducing athletic running shoes.
Rapid product innovation.
8. Unrelated Diversification – Expanding into completely different
industries. Agile supply chain management.

Example: IBM entering the water management business. Frequent strategy reassessment.

D. Defensive Strategies (Reducing operations to survive or improve Example: Netflix continuously shifting from DVD rentals to streaming,
efficiency) then to content production.

9. Retrenchment – Cutting costs and restructuring to survive. Case Study: Volkswagen AG’s Strategy in a Weak Economy

Example: Starbucks closing 300 underperforming stores. Market Expansion: Focused on China and Brazil instead of struggling
Western markets.
10. Divestiture – Selling off part of the business.
Cost Reduction: Reduced expenses without sacrificing innovation.
Example: Motorola selling its mobile email division.
Product Diversification: Increased production of electric vehicles and
11. Liquidation – Selling all assets and shutting down the company. hybrids.

Example: Circuit City closing all 567 stores. Results:

E. Competitive Strategies (Porter’s Five Generic Strategies) VW’s net profit rose 15% in 2008 to 4.75 billion euros.

12. Cost Leadership (Low Cost) – Becoming the lowest-cost producer VW outperformed competitors struggling with high raw material costs
in the industry. and exchange rate fluctuations.

Example: Walmart offering low-priced goods due to economies of

scale.

13. Cost Leadership (Best Value) – Offering the best value for the
lowest price.

Example: Amazon providing low prices and excellent customer service.