Strategic Management Lecture 2 (PDF)

Lecture 2. Types of Business Strategies MNGT 4113 Strategic Management CENTRAL LUZON STATE UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY Science City...

Lecture 2. Types of Business Strategies MNGT 4113 Strategic Management CENTRAL LUZON STATE UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY Science City of Muñoz, Nueva Ecija 3120 Lecture 2. Types of Business Strategies Strategies Choices that risk resources and trade-offs Learning Outcomes that sacrifice opportunity Define and give an example of eleven types of Most organizations simultaneously pursue a strategies. combination of two or more strategies Give specific guidelines in using these strategies. Each alternative strategy has countless variations A strategy is a means by which long-term objectives will be achieved 1  Types of Strategies Forward Integration 1. Forward Integration Integration Backward Integration Gaining/ seeking ownership Strategies or increased control over distributors or retailers Horizontal Integration 2. Backward Integration The Case of Ford Backward Integration Gaining/ seeking ownership or increased control over Ford Smart Mobility, LLC- focuses on connectivity, mobility, autonomous vehicles, the customer experience, firm’s suppliers and data analytics 2  The Case of Jollibee Foods Corporation (JFC) 3. Horizontal Integration Horizontal Integration Gaining/ seeking ownership or Acquisition of Chowking Foods Corp. was completed increased control over competitors in March 2000 In 1994, JFC ventured into the pizza-pasta segment with its acquisition of Greenwich Pizza Corp. In 2016, JFC got full control of Mang Inasal In 2018, JFC has taken 100% ownership of Colorado- based Smashburger, a famous casual burger brand Types of Strategies Market Penetration 4. Market Penetration Gaining/ seeking increased market Intensive Market Development share for present products/ services in Strategies present markets through greater marketing efforts Product Development 3  6. Product Development 5. Market Development Introducing present products/ services Gaining/ seeking increased sales by improving existing products or services into new geographic areas or developing new ones Some areas to consider: Some areas to consider: the new product leverage your existing the opportunities to improve your existing brand and operations products entering a completely new market with the life cycle of your existing products your new product introduction Source: https://clearseasresearch.com/blog/new-product- Source: https://clearseasresearch.com/blog/new-product- development/build-new-or-improve-existing-products-which-is-better/ development/build-new-or-improve-existing-products-which-is-better/ 4  The Case of Coca-Cola Market penetration the infamous Coca-Cola Christmas advertisement that helped boost sales during Christmas season The Case of Coca-Cola Market development The Case of Coca-Cola Diet = female market Product development Zero = male market (a more masculine appeal) new flavored variants Bottle size 5  Types of Strategies The Case of Coca-Cola American beverage corporation since 1892 Related Diversification Expanded its product portfolio extensive over the Diversification years (product development); not just in the US but to almost 200 countries worldwide (market Strategies Unrelated Diversification development) Marketing has been the main reason behind it’s success, now, having a strong online presence (market penetration) Tests for Diversification, questions to consider (Porter, 1987): 7. Related Diversification How attractive is the industry that a firm is Adding new but related products or considering entering? services How much will it cost to enter the industry? Will the new unit and the firm be better off? Source: https://pressbooks.lib.vt.edu/strategicmanagement/chapter/8- 3-diversification/ 6 8. Unrelated Diversification Adding new, unrelated products or Related or Unrelated? services Types of Strategies Retrenchment Related or Unrelated? Defensive Divestiture Strategies Liquidation 7 9. Retrenchment Regrouping through cost and asset The Cases for Retrenchment reduction to reverse declining sales during the Pandemic (US) and profit Walmart let go of 1,240 employees Disney laid off 32,000 employees The Case of General Electric Company (GE) Divestiture 10. Divestiture the company sold its appliance business to Sweden- based Electrolux AB Selling a division or part of an GE focused to its primary business components: organization energy solutions, jet engines (aviation), and healthcare technologies CEO Lawrence Culp cited the reasons for the move: greater focus for each area, tailored capital allocation, and strategic flexibility to drive long-term growth and value 8  The Case of Toys “R” Us Liquidation 11. Liquidation burdened with billions in debt from a private equity Selling all of a company’s buyout lost market share to mass merchants like Walmart, assets, in parts, for their Amazon and Target tangible worth key leaders at Toys R Us failed to “assess whether the Company could comply with the financial covenants in the debtor-in-possession (DIP) financing, which was required to avoid a precipitous default and forced liquidation” Summary of the Strategies Long-term Objectives These represent the results expected from pursuing certain strategies Strategies represent the actions to be taken to accomplish long-term objectives 9  Desired Characteristics of Objectives Benefits of having Clear Objectives Quantitative 1. Provide direction by revealing expectations 2. Allow synergy measurable, 3. Assist in evaluation by serving as standards realistic, 4. Establish priorities understandable, 5. Reduce uncertainty challenging, 6. Minimize conflicts hierarchical, 7. Stimulate exertion obtainable, and 8. Aid in allocation of resources 9. Aid in design of jobs congruent across departments 10. Provide basis for consistent decision making Strategic Objectives Financial Objectives Growth in earnings Growth in revenues Larger market share Growth in earnings Quicker on-time delivery than rivals Higher dividends Shorter design-to-market times than rivals Larger profit margins Lower costs than rivals Greater ROI Higher product quality than rivals Higher earnings per share Wider geographic coverage than rivals Rising stock price Achieving technological leadership Improved cash flow Consistently getting new or improved products to market ahead of rivals 10 Porter’s Five Generic Strategies Thank you for listening! 11