Presentation on theme: "Formulating Long-Term Objectives and Grand Strategies"— Presentation transcript:
1Formulating Long-Term Objectives and Grand Strategies
2Types of Long-Term Objectives ProfitabilityProductivityCompetitive positionEmployee developmentEmployee relationsTechnological leadershipPublic responsibility
3Qualities of Long-Term Objectives AcceptableAchievableFlexibleMeasurableMotivatingSuitableUnderstandable
4The Balanced Scorecard The Balanced Scorecard is a set of measures that are directly linked to the company’s strategy. It directs a company to link its own long-term strategy with tangible goals and actions.
7Menu of Strategy Options for Winning in the Marketplace
8GENERIC STRATEGIES Low-Cost Leadership A strategy aimed at producing standardized products at low per-unit cost for consumers who are price-sensitive .Examples:H.J Heinz – because beans and canned vegetables do not permit much of a mark-up, the profit comes from the large volume of cans sold. Thus, Heinz goes to extraordinary lengths to reduce costs – by even one-twentieth of a cent per can.
9 Wal-Mart is famous for squeezing its suppliers to ensure low prices for its goods especially that they are famous for their Every Day Low Pricing strategy (EDLP)Dell Computer initially achieved market share by keeping inventories low and only building computers to order.
10GENERIC STRATEGIES Differentiation A strategy aimed at producing products and services considered unique industry-wide and directed at consumers who are relatively price-insensitive .
11Differentiation Themes unique taste – Dr. Peppermultiple features – Microsoft Officewide selection and one-stop shopping – Home Depot, Wal-Martengineering design and performance – BMW, Ferrarirapid product innovationprestige and distinctiveness – Rolex, Chanel, Mercedes Benztop-of-the-line image and reputation – Starbucks, Tiffany
12GENERIC STRATEGIES Focus A strategy aimed at producing products and services that fulfill the needs of small groups of customers .Example:RTW stores selling plus-size clothes
13Risks of Generic Strategies Risks of Cost LeadershipRisks of DifferentiationRisks of FocusCost leadership is not sustainedCompetitors imitateTechnology changesOther bases for cost leadership erodeProximity in differentiation is lostCost focusers achieve even lower cost in segmentsDifferentiation is not sustainedBases for differentiation become less important to buyersCost proximity is lostDifferentiation focusers achieve greater differentiation in segmentsFocus strategy is imitatedTarget segment becomes unattractiveStructure erodesDemand disappearsBroadly target competitors overwhelm segmentsSegment’s differences from others narrowAdvantages of broad line increase
14The Value Disciplines Operational Excellence A specific strategic approach to the production and delivery of products and services. A company that follows this strategy attempts to lead its industry in price and convenience by pursuing a focus on lean and efficient operations.
15The Value Disciplines Customer Intimacy Companies excelling in customer intimacy combine detailed customer knowledge with operational flexibility. They are willing to spend money now to build customer loyalty for the long-term, considering each customer’s lifetime value to the company, not the profit of any single transaction.
16The Value Disciplines Product Leadership Companies that pursue the discipline of product leadership strive to produce a continuous stream of state-of-the-art products and services. The 3 challenges that must be met are:CreativityCommercialize ideas quicklyRelease their own improvements
17GRAND STRATEGIES Types of Grand Strategies Concentrated growth Market developmentProduct developmentInnovationHorizontal integrationVertical integrationConcentric diversificationConglomerate diversificationTurnaroundDivestitureLiquidationBankruptcyJoint venturesStrategic alliancesConsortia
18Characteristics of a Concentrated Growth Strategy Involves focusing resources on the profitable growth of a single product, in a single market, with a single dominant technologyRationale – Firm develops and exploits its expertise in a delimited competitive arenaDeterminants of competitive market successAbility to assess market needsKnowledge of buyer behaviorCustomer price sensitivityEffectiveness of promotion
19Strategies of Market & Product Development Market developmentConsists of marketing present products, often with only cosmetic modifications to customers in related market areas byAdding channels of distribution orChanging content of advertising or promotionI
20Strategies of Market & Product Development Involves substantial modification of existing products or creation of new but related productsBased on penetrating existing market by- Incorporating product modifications into existing items or- Developing new products connected to existing products
21Innovation StrategyInvolves creating a new product life cycle,thereby making similar existing productsobsolete.
22Horizontal and Vertical Integration Strategies Horizontal IntegrationBased on growth via acquisition of one or more similar firms operating at the same stage of the production-marketing chain
23Horizontal and Vertical Integration Strategies Involves acquiring firmsThat supply acquiring firm with inputs (backward integration) orAre customers for firm’s outputs (forward integration)
24Vertical and Horizontal Integrations Textile producerTextile producerShirt manufacturerShirt manufacturerClothing storeClothing store
25Motivations for Diversification Increase firm’s stock value Increase growth rate of firm Investment is better use of funds than using them for internal growth Improves stability of earnings and sales Balance or fill out product line Diversify product line Acquire a needed resource quickly Achieve tax savings Increase efficiency and profitability
26Diversification Strategies Concentric DiversificationInvolves acquisition of businesses related to acquiring firm in terms of technology, markets, or products
27Diversification Strategies Conglomerate DiversificationInvolves acquisition of a business because it represents a promising investment opportunityPrimary motivation is profit pattern of venture
28Turnaround StrategyA turnaround situation represents absolute and relative-to-industry declining performance of a sufficient magnitude to warrant explicit turnaround actionsThe immediacy of the resulting threat to company survival posed by the turnaround situation is known as situation severityTurnaround responses typically include two stages of strategic activitiesRetrenchmentRecovery response
29Divestiture and Liquidation Strategies Divestiture StrategyInvolves selling a firm or a major component of a firmReasons for divestiturePartial mismatches between acquired firm and parent firmCorporate financial needsGovernment antitrust action
30Divestiture and Liquidation Strategies Liquidation StrategyInvolves selling parts of a firm, usually for its tangible asset value and not as a going concern
31The Strategy of Bankruptcy Two approachesLiquidation – Involves complete distribution of a firm’s assets to creditors, most of whom receive a small fraction of amount owedReorganization – Involves creditors temporarily freezing their claims while a firm reorganizes and rebuilds its operations more profitablyAdvantage of a reorganization bankruptcyProactive option offering maximum repayment of a firm’s debt in the future if a recovery strategy is successful
32Corporate Combination Strategies Joint VenturesInvolves establishing a third company (child), operated for the benefit of the co-owners (parents)Strategic AllianceInvolves creating a partnership between two or more companies that contribute skills and expertise to a cooperative projectExists for a defined periodDoes not involve the exchange of equity
33Corporate Combination Strategies Consortia are defined as large interlocking relationships between businesses of an industry. In Japan such consortia are known as keiretsus, in South Korea as chaebolsA Japanese keiretsu is an undertaking involving up to 50 different firms that are joined around a large trading company or bank and are coordinated through interlocking directories and stock exchangesChaebols are typically financed through government banking groups and largely are run by professional managers trained by participating firms expressly for the job