Strategic Management Chapter 5

Study Notes

Chapter 5: Strategies in Action

This chapter covers various strategic management concepts and cases, focusing on strategies in action.
Learning objectives outlined in the chapter include identifying and discussing characteristics and benefits of clear objectives, defining and exemplifying diverse strategy types, analyzing integration strategies, providing guidelines for specific strategies (market penetration, market development, and product development), explaining diversification effectiveness, outlining guidelines for retrenchment, divestiture, and liquidation, analyzing Porter's five generic strategies, comparing various cooperation methods, and discussing strategic planning differences across different organizations (for-profit, not-for-profit, and small firms).
A comprehensive strategic-management model is presented, linking various chapters and their topics together. This diagram visually illustrates the interrelationships between various aspects of strategic management. This model emphasizes the interconnectedness of external and internal assessments, strategy formulation, implementation, and evaluation.
Long-term objectives are defined as the results expected from pursuing certain strategies, spanning a 2-to-5 year timeframe. They often inform and guide short-term objectives.
Key characteristics of long-term objectives include providing direction, fostering synergy, assisting evaluation, establishing priorities, reducing uncertainties, minimizing conflicts, stimulating resource exertion, and supporting both allocation of resources and job designs.
Table 5.1 details five key characteristics of effective objectives: quantitative, understandable, challenging, compatible, and obtainable.
Financial objectives focus on revenue growth, earnings improvement, higher dividends, improved profit margins, and returns on investment.
Strategic objectives aim for greater market share, faster delivery than competitors, quicker design-to-market time, lower costs, higher product quality, wider geographic coverage, and achieving technological leadership.
Additional strategies include managing by crisis, managing by hope, managing by extrapolation, and managing by mystery.
Combinations of strategies are commonplace, but these combinations can be risky.
Alternative strategies discussed include forward integration, backward integration, horizontal integration, market penetration, market development, product development, related diversification, unrelated diversification, retrenchment, divestiture, and liquidation. Examples are provided for each strategy.
Guidelines are provided for various strategies, including integration strategies, market penetration, market development, product development, diversification, and defensive strategies (retrenchment, divestiture, and liquidation).
Value chain analysis and benchmarking are detailed in the chapter.
Value chain analysis involves analyzing the value of each activity in a firm's operations, from raw materials to marketing.
Benchmarking compares a company's value chain activities to those of industry-leading firms. The aim is to identify best practices.
The book also provides a figure illustrating the value chain and a series of examples showing value chain activities in a typical manufacturing firm.
The chapter concludes by explaining how value chain analysis leads to sustained competitive advantages.

Strategic Management in Nonprofit and Small Firms

Two key differences exist between nonprofit and for-profit organizations: tax obligations and structure of capital funding. Nonprofits do not pay taxes and do not have shareholders to provide capital.