1. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -1 Not Managing by Objectives Managing by Extrapolation – “If it ain’t broke, don’t fix it” Managing by Crisis – The true measure of a good strategist is the ability to fix problems Managing by Subjectives – “Do your own thing, the best way you know how” Managing by Hope – The future is full of uncertainty and if at first you don’t succeed, then you may on the second or third try

2. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -2 Types of Strategies Vertical Integration Strategies Forward Integration Backward Integration Horizontal Integration

3. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -3 Vertical 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 or increased control over competitors

4. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -4 Types of Strategies Intensive Strategies Market Penetration Market Development Product Development

5. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -5 Intensive Strategies Market Penetration Seeking increased market share for present products or services in present markets through greater marketing efforts Market Development Introducing present products or services into new geographic areas Product Development Seeking increased sales by improving present products or services or developing new ones

6. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -6 Diversification Strategies Related Diversification Adding new but related products or services Unrelated Diversification Adding new, unrelated products or services

7. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -7 Defensive Strategies Retrenchment Regrouping through cost and asset reduction to reverse declining sales and profit Divestiture Selling a division or part of an organization Liquidation Selling all of a company’s assets, in parts, for their tangible worth

8. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -8 Retrenchment Strategy Bankruptcy types  Chapter 7 – liquidation  Chapter 9 – municipalities  Chapter 11 – reorganization  Chapter 12 – family farmers  Chapter 13 – small businesses

9. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -9 Porter’s Five Generic Strategies Type 1 Cost Leadership – Low cost Type 2 Cost Leadership – Best value Type 3 Differentiation Type 4 Focus – Low cost Type 5 Focus – Best value

10. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -10 Type 1 or 2 Cost Leadership Strategy Conditions Vigorous price competition Plentiful supply of identical products Little product differentiation Products used in same ways Low cost to switch Large buyers with power Industry newcomers use low prices to attract buyers

11. Type 1 Cost Leadership Market to those who are price sensitive Offers low cost per unit to a wide variety of customers Wal-Mart Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -11

12. Type 2 – Cost Leadership Again low cost is the strategy, but it is based on the best deal (price-value) compared to rivals Market to a wide range of customers Sam’s offers Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -12

13. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -13 Type 3 Differentiation Strategy Conditions Many ways to differentiate and buyers perceive the differences as having value Diverse buyer needs and uses Few rival firms following similar differentiation approach Fast paced technological change and evolving product features

14. Type 3 – Differentiation Strategy It is a product or service that is unique industrywide and directed at a market that is not price-sensitive Perhaps a Mont Blanc Pen Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -14

15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -15 Type 4 or 5 Focus Strategy Conditions Focus meaning they focus on a small group of consumers Large, profitable, and growing target market niche Industry leaders do not consider the niche crucial to their success Industry leaders consider it costly or difficult to meet the needs of this niche Industry has many niches and segments Few rivals are specializing on this target segment

16. Type 4 - Focus Example of Focus Strategy 4  They focus on lowest price Jiffy Lube and Pizza Hut Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -16

17. Type 5 - Focus Example of Focus Strategy 5  Focus on a niche group at a higher price but they are loaded with features and it is perceived as the best value  Cannondale Bikes (top of the line in the biking industry)  Maytag – washing machine Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -17

18. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Ch 5 -18 Means for Achieving Strategies Cooperation among competitors Joint venture / partnering Merger / acquisition First mover advantages Outsourcing