Lecture 5

Types of Strategies

Business Ethics/Social Responsibility/Environmental Sustainability Issues

Perform
External Audit

Implement
Strategies–
Generate, Implement
Develop Vision Establish Marketing, Measure
Evaluate, Strategies–
and Mission Long-term Finance, and Evaluate
and Select Management
Statements Objectives Accounting, Performance
Strategies Issues
R&D, and MIS
Issues

Perform
Internal Audit

Global/International Issues

Strategy Strategy Strategy

Formulation Implementation Evaluation 2

1
 Learning Objectives
1. Identify and discuss eight characteristics of objectives and
ten benefits of having clear objectives.
2. Define and give an example of eleven types of strategies.
3. Identify and discuss the three types of “Integration
Strategies.”
4. Give specific guidelines when market penetration, market
development, and product development are especially
effective strategies.
5. Explain when diversification is an effective business
strategy.

Learning Objectives
6. List guidelines for when retrenchment, divestiture, and
liquidation are especially effective strategies.
7. Identify and discuss Porter’s five generic strategies.
8. Compare (a) cooperation among competitors, (b) joint
venture and partnering, and (c) merger/acquisition as key
means for achieving strategies.
9. Discuss tactics to facilitate strategies, such as (a) being a
first mover, (b) outsourcing, and (c) reshoring.
10. Explain how strategic planning differs in for-profit, not-
for-profit, and small firms.

2
 Long-Term Objectives
• The results expected from pursuing certain strategies
• 2-to-5 year timeframe

Varying Performance Measures by Organizational Level

3
 The Desired Characteristics of Objectives

The Nature of Long-Term Objectives

• Objectives
– Provide direction
– Allow synergy
– Assist in evaluation
– Establish priorities
– Reduce uncertainty
– Minimize conflicts
– Stimulate exertion
– Aid in both the allocation of resources and the design of jobs

4
 Financial versus Strategic Objectives

• Financial objectives include 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, and so on.
• 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.

Not Managing by Objectives

Managing by Extrapolation

Managing by Crisis

Managing by Subjectives

Managing by Hope

10

5
 Types of Strategies
• Most organizations simultaneously pursue a combination of
two or more strategies, but a combination strategy can be
exceptionally risky if carried too far.
• No organization can afford to pursue all the strategies that
might benefit the firm.
• Difficult decisions must be made and priorities must be
established.

11

forward intergration: hội nhập xuôi (tiến về ng mua cuối) - kiểm soát nhà phân phối để kiểm soát chính sách giá = cách ký hợp đồng dài hạn or mua lại hãng phân phối =>
nhiệm vụ phải
backward intergration: hội nhập ngược - mua đứt supplier hoặc mở cty csanr xuất đầu vào -> hợp đồng dài hạn or mua quyền sở hữu hoặc thành lập mới.

Horizontal intergration: mua luôn dối thủ cạnh tranh (đạo luật chống độc quyền)

Related diversification:

Alternative Strategies Defined and Exemplified

liquidation: là bán bỏ, ko nhất thiết phải là phá sản

làm online LMS - mỗi người 3 lần tính điểm trung bình ko quay lại 30 phút -
chiến lược cạnh tranh trực tiếp trên 1 or 2 lĩnh vực,xem performance và đánh giúa tính hiệu quả của chiến12 lưọc

HOW CAN I IMPROVE MY POSITION IN MY MẢRKET (LÀM NTN ĐỂ CỦNG CỐ VỊ THẾ, SỨC MẠNH CTY TRÊN THỊ TRG - KO CHỈ LÀ RIVAL COMPANY)
- làm ntn để kiểm soát
-

6
 Levels of Strategies with Persons Most Responsible

13

Integration Strategies
• Forward Integration
– Gaining ownership or increased control over distributors or
retailers

• Backward Integration
– Seeking ownership or increased control of a firm's suppliers

• Horizontal Integration
– Seeking ownership of or increased control over a firm's
competitors

14

7
 Forward Integration Guidelines
• When an organization's present distributors are especially
expensive
• When the availability of quality distributors is so limited as
to offer a competitive advantage
• When an organization competes in an industry that is
growing
• When an organization has both capital and human
resources to manage distributing their own products
• When the advantages of stable production are particularly
high
• When present distributors or retailers have high profit
margins
15

Backward Integration Guidelines

• When an organization's present suppliers are especially
expensive or unreliable
• When the number of suppliers is small and the number of
competitors is large
• When the organization competes in a growing industry
• When an organization has both capital and human
resources
• When the advantages of stable prices are particularly
important
• When present suppliers have high profit margins
• When an organization needs to quickly acquire a needed
resource
16

8
 Horizontal Integration Guidelines
• When an organization can gain monopolistic characteristics
in a particular area or region without being challenged by
the federal government
• When an organization competes in a growing industry
• When increased economies of scale provide major
competitive advantages
• When an organization has both the capital and human talent
needed
• When competitors are faltering due to a lack of managerial
expertise

17

Intensive Strategies
• Market Penetration Strategy
– Seeks to increase market share for present products or
services in present markets through greater marketing efforts

• Market Development
– Involves introducing present products or services into new
geographic areas

• Product Development Strategy

– Seeks increased sales by improving or modifying present
products or services

18

9
 Market Penetration Guidelines
• When current markets are not saturated with a particular
product or service
• When the usage rate of present customers could be
increased significantly
• When the market shares of major competitors have been
declining while total industry sales have been increasing
• When the correlation between dollar sales and dollar
marketing expenditures historically has been high
• When increased economies of scale provide major
competitive advantages

19

Market Development Guidelines

• When new channels of distribution are available that are
reliable, inexpensive, and of good quality
• When an organization is very successful at what it does
• When new untapped or unsaturated markets exist
• When an organization has the needed capital and human
resources to manage expanded operations
• When an organization has excess production capacity
• When an organization's basic industry is rapidly becoming
global in scope

20

10
 Product Development Guidelines
• When an organization has successful products that are in
the maturity stage of the product life cycle
• When an organization competes in an industry
characterized by rapid technological developments
• When major competitors offer better-quality products at
comparable prices
• When an organization competes in a high-growth industry
• When an organization has strong research and development
capabilities

21

Diversification Strategies
• Related Diversification
– Value chains possess competitively valuable cross-business
strategic fits

• Unrelated Diversification
– Value chains are so dissimilar that no competitively valuable
cross-business relationships exist

22

11
 Synergies of Related Diversification
• Transferring competitively valuable expertise,
technological know-how, or other capabilities from one
business to another
• Combining the related activities of separate businesses into
a single operation to achieve lower costs
• Exploiting common use of a known brand name
• Using cross-business collaboration to create strengths

23

Related Diversification Guidelines

• When an organization competes in a no-growth or a slow-
growth industry
• When adding new, but related, products would
significantly enhance the sales of current products
• When new, but related, products could be offered at highly
competitive prices
• When new, but related, products have seasonal sales levels
that counterbalance an organization’s existing peaks and
valleys
• When an organization’s products are currently in the
declining stage of the product’s life cycle
• When an organization has a strong management team
24

12
 Unrelated Diversification Guidelines
• When revenues derived from an organization's current
products would increase significantly by adding the new,
unrelated products
• When an organization competes in a highly competitive or
a no-growth industry, as indicated by low industry profit
margins and returns
• When an organization's present channels of distribution can
be used to market the new products to current customers
• When the new products have countercyclical sales patterns
compared to present products
• When an organization's basic industry is experiencing
declining annual sales and profits

25

Unrelated Diversification Guidelines

• When an organization has the capital and managerial talent
needed to compete successfully in a new industry
• When an organization has the opportunity to purchase an
unrelated business that is an attractive investment
opportunity
• When there exists financial synergy
• When existing markets for an organization's present
products are saturated
• When antitrust action could be charged against an
organization that historically has concentrated on a single
industry

26

13
 Defensive Strategies
• Retrenchment
– Occurs when an organization regroups through cost and asset
reduction to reverse declining sales and profits; also called a
turnaround or reorganizational strategy
– Designed to fortify an organization’s basic distinctive
competence

• Divestiture
– Selling a division or part of an organization; often used to
raise capital for further strategic acquisitions or investments

• Liquidation
– Selling all of a company’s assets, in parts, for their tangible
worth; can be an emotionally difficult strategy
27

Retrenchment Guidelines
• When an organization has a distinctive competence but has
failed consistently to meet its goals
• When an organization is one of the weaker competitors in a
given industry
• When an organization is plagued by inefficiency, low
profitability, and poor employee morale
• When an organization fails to capitalize on external
opportunities and minimize external threats
• When an organization has grown so large so quickly that
major internal reorganization is needed

28

14
 Divestiture Guidelines
• When an organization has pursued a retrenchment strategy
and failed to accomplish improvements
• When a division needs more resources to be competitive
than the company can provide
• When a division is responsible for an organization's overall
poor performance
• When a division is a misfit with the rest of an organization
• When a large amount of cash is needed quickly
• When government antitrust action threatens a firm

29

Liquidation Guidelines
• When an organization has pursued both a retrenchment
strategy and a divestiture strategy, and neither has been
successful
• When an organization's only alternative is bankruptcy
• When the stockholders of a firm can minimize their losses
by selling the organization's assets

30

15
 Porter's Five Generic Strategies

31

Michael Porter's Five Generic Strategies

• Cost Leadership emphasizes producing standardized Danh mục 13 chiến lược và các chiến
lượn của MP khác nhau
products at a very low per-unit cost for consumers who are - Cạnh tranh trong 1 lĩnh vực kinh doanh
price-sensitive cụ thể (giáo dục, ý tế,...) => Lmaf thế nào
để cạnh tranh thành công với đối thủ
cạnh tranh trực tiếp?
• Type 1 + Nguyên lý cost leadership
– Low-cost strategy that offers products or services to a wide + VD trong education industry, higer
range of customers at the lowest price available on the marketeducation là GD đại học. Những ai sẵn
sàng đi học đc xếp vào market, cụ thể là
nhóm khách hàng tiềm năng; những ng
• Type 2 đc lựa chọn là targeted customer

– Best-value strategy that offers products or services to a wide

range of customers at the best price-value available on the
market

32

16
 Michael Porter's Five Generic Strategies
- Làm sp khác và tốt hơn, vượt trội hơn với sp của đối thủ
• Type 3 trong 1 ngành hàng. => ng mua phải trả nhiều tiền hơn để
hưởng sp dich vu (chất lượng cao + giá cao => chiến lược
– Differentiation is a strategy aimed at producing products and khác biệt hoá)

services considered unique industry-wide and directed at

consumers who are relatively price-insensitive

• Type 4
– Low-cost focus strategy that offers products or services to a
niche group of customers at the lowest price available on the
market chọn 2 loại sp mà hướng chiến lc cạnh tranh khác nhau để mô tả => trả lời
câu hỏi: cty đã cạnh tranh với các đối thủ trực tiếp như thế nào

• Type 5
– Best-value focus strategy that offers products or services to a
small range of customers at the best price-value available on
the market
33

Means for Achieving Strategies

• Cooperation Among Competitors
• Joint Venture/Partnering
• Merger/Acquisition
• Private-Equity Acquisitions
• First Mover Advantages
• Outsourcing/Reshoring

34

17
Key Reasons Why Many Mergers and Acquisitions Fail

35

Potential Benefits of Merging With or

Acquiring Another Firm

36

18
Benefits of a Firm Being the First Mover

37

19