Types of Strategies.pptx

Types of Strategies  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. D...

Types of Strategies  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. Copyright ©2017 Pearson Education, 4-2 Limited Alternative Strategies Defined and Exemplified Copyright ©2017 Pearson Education, 4-3 Limited Alternative Strategies Defined and Exemplified Copyright ©2017 Pearson Education, 4-4 Limited Levels of Strategies with Persons Most Responsible Copyright ©2017 Pearson Education, 4-5 Limited  Integration Strategies Forward Integration involves gaining ownership or increased control over distributors or retailers Backward Integration strategy of seeking ownership or increased control of a firm's suppliers Horizontal Integration a strategy of seeking ownership of or increased control over a firm's competitors Copyright ©2017 Pearson Education, 4-6 Limited Copyright ©2017 Pearson Education, 4-7 Limited  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 Copyright ©2017 Pearson Education, 4-8 Limited  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 Copyright ©2017 Pearson Education, 4-9 Limited  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 Copyright ©2017 Pearson Education, 4-10 Limited  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 Copyright ©2017 Pearson Education, 4-11 Limited  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 Copyright ©2017 Pearson Education, 4-12 Limited 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 Copyright ©2017 Pearson Education, 4-13 Limited  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 Copyright ©2017 Pearson Education, 4-14 Limited  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 Copyright ©2017 Pearson Education, 4-15 Limited  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 Copyright ©2017 Pearson Education, 4-16 Limited  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 Copyright ©2017 Pearson Education, 4-17 Limited  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 Copyright ©2017 Pearson Education, 4-18 Limited  Unrelated Diversification Guidelines (cont.)  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 Copyright ©2017 Pearson Education, 4-19 Limited  Defensive Strategies Retrenchment Regroups through cost and asset reduction to reverse declining sales and profits 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 Copyright ©2017 Pearson Education, 4-20 Limited  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 Copyright ©2017 Pearson Education, 4-21 Limited  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 Copyright ©2017 Pearson Education, 4-22 Limited  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 Copyright ©2017 Pearson Education, 4-23 Limited  Defensive Strategies Liquidation selling all of a company’s assets, in parts, for their tangible worth can be an emotionally difficult strategy Copyright ©2017 Pearson Education, 4-24 Limited  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 Copyright ©2017 Pearson Education, 4-25 Limited Porter's Five Generic Strategies Copyright ©2017 Pearson Education, 4-26 Limited Porter's Five Generic Strategies Copyright ©2017 Pearson Education, 4-27 Limited  Michael Porter's Five Generic Strategies Cost Leadership emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive Type 1 low-cost strategy that offers products or services to a wide range of customers at the lowest price available on the market Type 2 best-value strategy that offers products or services to a wide range of customers at the best price-value available on the market Copyright ©2017 Pearson Education, 4-28 Limited  Michael Porter's Five Generic Strategies Type 3 Differentiation is a strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive Copyright ©2017 Pearson Education, 4-29 Limited  Michael Porter's Five Generic Strategies 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 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 Copyright ©2017 Pearson Education, 4-30 Limited Means for Achieving Strategies Cooperation Among Competitors Joint Venture/Partnering Merger/Acquisition Private-Equity Acquisitions First Mover Advantages Outsourcing/Reshoring Copyright ©2017 Pearson Education, 4-31 Limited Key Reasons Why Many Mergers and Acquisitions Fail Copyright ©2017 Pearson Education, 4-32 Limited Potential Benefits of Merging With or Acquiring Another Firm Copyright ©2017 Pearson Education, 4-33 Limited Benefits of a Firm Being the First Mover Copyright ©2017 Pearson Education, 4-34 Limited