Strategies in Action: Publishing As Prentice Hall

Chapter 5
Strategies in Action
Copyright © 2009 Pearson Education, Inc. Ch 5 -1

Publishing as Prentice Hall
Long-Term Objectives
Objectives –
Quantifiable Hierarchical
Measurable Obtainable
Realistic Congruent
Understandable Timeline
Challenging

Financial vs. Strategic Objectives
Financial Objectives
Growth in revenues
Growth in earnings
Higher dividends
Higher profit margins
Higher earnings per share
Improved cash flow

Types of Strategies
Forward
Integration
Integration Backward
Strategies Integration
Horizontal
Integration

Guidelines for Forward Integration
 When an organization’s present distributors

are especially expensive, or unreliable, or
incapable of meeting the firm’s distribution
needs.
 When the availability of quality distributors
is so limited.
 When an organization competes in an industry
that is growing and is expected to continue to
grow markedly

 When an organization has both the capital and
human resources needed to manage the new
business of distributing its own products.
 When the advantages of stable production are
particularly high.
 When present distributors or retailers have
high profit margins

Guidelines for Backward Integration
 When an organization’s present suppliers are

especially expensive, or unreliable, or
incapable of meeting the firm’s needs for parts,
components, assembles, or raw materials.
 When the number of suppliers is small and the
number of competitors is large.
 When an organization competes in an industry
that is growing rapidly

 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.

Guidelines for Horizontal Integration
 When an organization can gain monopolistic

characteristics in a particular area or region.
 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 to successfully manage an expanded
organization.
 When competitors are faltering due to a lack of
managerial expertise or a need for particular
resources that an organization possesses

Examples
Forward Southwest Airlines selling tickets

Integration through Galileo
Backward Hilton Hotels could acquire a large

Integration furniture manufacturer
Horizontal Huntington Bancshares and Sky

Integration Financial Group merged

Types of Strategies
Market
Penetration
Intensive Market
Strategies Development
Product
Development

Guidelines for Market Penetration
 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 increased economies of scale provide major
competitive advantages.

Guidelines for Market Development
 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.

Guidelines Product Development
 When an organization has successful products that

are in the maturity stage of the product life
cycle.
 When an organization competes in an industry that
is characterized by rapid technological
developments.
 When major competitors offers better-quality
products at comparable prices.
 When an organization competes in a high-growth
industry.
 When an organization has especially strong research
and development capabilities.

Examples
McDonald’s selling millions of

Market
“Shrek the Third” items to a
Penetration
healthier image
Burger King opened its first

Market Development
restaurant in Japan
Product Google introduced “Google Presents”

Development to compete with PowerPoint

Types of Strategies
Related
Diversification
Diversification
Strategies
Unrelated
Diversification

Guidelines for Related Diversification
 When an organization competes in a no-growth or 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 price.
 When new, but related, products have seasonal sales
levels that counterbalance an organization’s existing
peaks and valley.
 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

Guidelines for Unrelated Diversification
 When revenues derived from an organization’s current

products or services would increase significantly by
adding the new, unrelated products.
 When an organization competes in a highly
competitive and/or a no-growth industry.
 When an organization’s present channels of
distribution can be used to market the new products
to current customers.

 When an organization’s basic industry is
experiencing declining annual sales and profits.
 When an organization has the capital and
managerial talent needed to compete successfully
in a new industry.
 When existing markets for an organization’s
present products are saturated.

Types of Strategies
Retrenchment
Defensive Divestiture
Strategies
Liquidation

Guidelines for Retrenchment
 When an organization has a clearly distinctive

competence but has failed consistently to meet its
objectives and goals over time.
 When an organization is one of the weaker competitors
in a given industry.
 When an organization is plagued by inefficiency, low
profitability, poor employee morale, and pressure from
stockholders to improve performance.
 When an organization has failed to capitalize on
external opportunities, minimize external threats,
take advantage of internal strengths, and overcome
internal weaknesses over time.
 When an organization has grown so large so quickly
that major internal reorganization is needed.

Guidelines for Divestiture
 When an organization has pursued a retrenchment

strategy and failed to accomplish needed 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 and
cannot be obtained reasonably form other sources.
 When government antitrust action threatens an
organization.

Guidelines for Liquidation
 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.

Examples
Related MGM Mirage is opening its first

Diversification non-casino luxury hotel
Unrelated
Ford Motor Company entered the
Diversification industrial bank business
Discovery Channel closed 103

Retrenchment mall-based and stand-alone
stores

Examples
Whirlpool sold its struggling Hoover

Divestiture
floor-care business to Techtronic
Industries
Follow Me Charters sold all of its

Liquidation assets and ceased doing business

Michael Porter’s Generic Strategies
Cost Leadership Strategies

(Low-Cost & Best-Value)
Differentiation Strategies
Focus Strategies
(Low-Cost Focus &
Best-Value Focus)


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Chapter 5

Copyright © 2009 Pearson Education, Inc. Ch 5 -1

Copyright © 2009 Pearson Education, Inc. Ch 5 -3

Copyright © 2009 Pearson Education, Inc. Ch 5 -4

Copyright © 2009 Pearson Education, Inc. Ch 5 -5

 When an organization’s present distributors

Copyright © 2009 Pearson Education, Inc. Ch 5 -6

Copyright © 2009 Pearson Education, Inc. Ch 5 -7

 When an organization’s present suppliers are

Copyright © 2009 Pearson Education, Inc. Ch 5 -8

Copyright © 2009 Pearson Education, Inc. Ch 5 -9

 When an organization can gain monopolistic

Copyright © 2009 Pearson Education, Inc. Ch 5 -10

Forward Southwest Airlines selling tickets

Backward Hilton Hotels could acquire a large

Horizontal Huntington Bancshares and Sky

Copyright © 2009 Pearson Education, Inc. Ch 5 -11

Copyright © 2009 Pearson Education, Inc. Ch 5 -12

 When current markets are not saturated with a

Copyright © 2009 Pearson Education, Inc. Ch 5 -13

 When new channels of distribution are available

Copyright © 2009 Pearson Education, Inc. Ch 5 -14

 When an organization has successful products that

Copyright © 2009 Pearson Education, Inc. Ch 5 -15

McDonald’s selling millions of

Burger King opened its first

Product Google introduced “Google Presents”

Copyright © 2009 Pearson Education, Inc. Ch 5 -16

Copyright © 2009 Pearson Education, Inc. Ch 5 -17

 When an organization competes in a no-growth or slow-

Copyright © 2009 Pearson Education, Inc. Ch 5 -18

 When revenues derived from an organization’s current

Copyright © 2009 Pearson Education, Inc. Ch 5 -19

Copyright © 2009 Pearson Education, Inc. Ch 5 -20

Copyright © 2009 Pearson Education, Inc. Ch 5 -21

 When an organization has a clearly distinctive

Copyright © 2009 Pearson Education, Inc. Ch 5 -22

 When an organization has pursued a retrenchment

Copyright © 2009 Pearson Education, Inc. Ch 5 -23

 When an organization has pursued both a retrenchment

Copyright © 2009 Pearson Education, Inc. Ch 5 -24

Related MGM Mirage is opening its first

Discovery Channel closed 103

Copyright © 2009 Pearson Education, Inc. Ch 5 -25

Whirlpool sold its struggling Hoover

Follow Me Charters sold all of its

Copyright © 2009 Pearson Education, Inc. Ch 5 -26

Cost Leadership Strategies

Copyright © 2009 Pearson Education, Inc. Ch 5 -27

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