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ACTION
A COMPREHENSIVE STRATEGIC-
MANAGEMENT MODEL
 NG
OBJECT 01 Identify and discuss eight characteristics of objectives and ten
benefits of having clear objectives

02 Define and give an example of eleven types of strategies.

IVE 03 Identify and discuss the three types of “Integration Strategies.”

04 Give specific guidelines when market penetration, market

development, and product development are especially effective
strategies.
Explain when diversification is an effective business strategy.

05 List guidelines for when retrenchment, divestiture, and liquidation are

especially effective strategies.
06
Identify and discuss Porter’s five generic strategies.

07 Compare (a) cooperation among competitors, (b) joint venture and

partnering, and (c) merger/acquisition as key means for achieving

08 strategies.

Discuss tactics to facilitate strategies, such as (a) being a first

mover, (b) outsourcing, and (c) reshoring.
09
LONG-
TERM
OBJECTI
VE
LONG-TERM
OBJECTIVE
The results expected from
pursuing certain strategies

2-to-5 year timeframe

VARYING PERFORMANCE MEASURES BY
ORGANIZATIONAL LEVEL
 THE DESIRED
CHARACTERISTICS OF
OBJECTIVES
 THE NATURE OF LONG-TERM
OBJECTIVES
 Objectives
 provide direction
 allow synergy
 assist in evaluation
 establish priorities
 reduce uncertainty
 minimize conflicts
 stimulate exertion
 aid in both the allocation of resources and the design of jobs
 FINANCIAL VERSUS STRATEGIC
OBJECTIVES
 Financial objectives include growth in revenues, growth in earnings,
higher dividends, larger profit margins, greater return on investment,
higher earnings per share, a rising stock price, improved cash flow, and
so on.
 Strategic objectives include a larger market share, quicker on-
time delivery than rivals, shorter design-to-market times than rivals,
lower costs than rivals, higher product quality than rivals, wider
geographic coverage than rivals, achieving technological leadership,
consistently getting new or improved products to market ahead of
rivals, and so on.
 NOT MANAGING BY OBJECTIVES

Managing by Extrapolation

Managing by Crisis

Managing by Subjectives

Managing by Hope
Copyright ©2017 Pearson Education, 4-10
 TYPES
OF
STRATEG
IES
 TYPES OF STRATEGIES
1. Forward Integration
Integration 2. Backward integration
Strategies
3. Horizontal integration
4. Market penetration
5. Market development Intensive
Strategies
6. Product development

7. Related diversification
Diversification
Strategies 8. Unrelated diversification
9. Retrenchment
10.Divestiture Defensive
Strategies
11.Liquidation
 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.
ALTERNATIVE STRATEGIES DEFINED AND
EXEMPLIFIED
ALTERNATIVE STRATEGIES DEFINED AND
EXEMPLIFIED
LEVELS OF STRATEGIES WITH PERSONS
MOST RESPONSIBLE
INTEGRAT
ION
STRATEG
IES
 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
 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
 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
 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
 INTENSI
VE
STRATEG
IES
 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
 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
 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
 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
DIVERSIFICAT
ION
STRATEG
IES
 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
 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
 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
 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
 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
DEFENSI
VE
STRATEG
IES
 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
 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
 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
 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
 DEFENSIVE STRATEGIES
 Liquidation
 selling all of a company’s assets, in parts, for their tangible worth
 can be an emotionally difficult strategy
 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
MICHAEL
PORTER’S
5 GENERIC
STRATEGIES
 PORTER'S FIVE GENERIC
STRATEGIES
 Organizations can gain competitive advantage from three (3)
different bases (Generic Strategies)
1. Cost leadership
2. Differentiation
3. Focus
PORTER'S FIVE GENERIC
STRATEGIES
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
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
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
MEANS
FOR
ACHIEVIN
G
STRATEG
IES
 MEANS FOR ACHIEVING
STRATEGIES
 Cooperation Among Competitors
 Joint Venture/Partnering
 Merger/Acquisition
 Private-Equity Acquisitions
 First Mover Advantages
 Outsourcing/Reshoring
KEY REASONS WHY MANY MERGERS AND
ACQUISITIONS FAIL
POTENTIAL BENEFITS OF MERGING WITH
OR ACQUIRING ANOTHER FIRM
BENEFITS OF A FIRM
BEING THE FIRST
MOVER