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Topic 4 -Types of Strategies (Alternative Strategies or Integration (1.…
Topic 4 -Types of
Strategies
Nature of Long - Term
Objectives
Provide Direction
2.Allow synergy
Assist in evaluation
Establish in priorities
Reduce uncertainty
6.Minimise conflicts
Stimulate exertion
Aid in allocation of resources and the design of jobs
Financial
Objectives
Growth in business
Growth in earnings
Higher dividend
Larger profit margin
Greater Return of Investment
Higher earning
Rising stock price
Improved cash flow
Strategic
Objectives
Larger market share
Quicker on - time delivery
Lower costs than rival
Higher product qualities than rival
Wider geographical coverage
Achieve technology leadership
Not Managing
By Objectives
Extrapolation
Crisis
Subjectives
Hope
Alternative Strategies
or Integration
1. Forward Integration
Gain ownership or increased control over distributors or retailers
2. Backward Integration
Seek ownership or increased control of a firm's suppliers
3. Horizontal Integration
Seek ownership / increased control over competitors
4. Market Penetration
Seek to increase market share for present products or services in present markets through greater marketing efforts.
5. Market Development
Introduce present products or services into new geographical area
6. Product Development
Seek to increase sales by improving present products or services or developing new ones
7. Related Diversification
Add new but related products or services
8. Unrelated Diversification
add new, but unrelated products / services
9. Retrenchment
Regroup through cost and asset reduction to reverse declining sales and profit
10. Divestiture
Sell a division or part of an organisation
11. Liquidation
Sell all company's assets, in parts for their tangible worth
Level of Strategies with
Persons Most Responsible
1. Large
Company
a) Corporate Level
CEO
b) Division Level
Division president
Executive vice president
c) Functional Level
Finance manager
Marketing manager
R&D manager
Manufacturing manager
Information system manager
Human resource manager
d) Operational Level
Plant manager
Sales manager
Product and
department manager
2. Small Company
a) Company Level
Owner
President
b) Functional Level
Finance manager
Marketing manager
R&D manager
Manufacturing manager
Information system manager
Human resource manager
c) Operational Level
Plant manager
Sales manager
Production and department manager
Michael Porter's
Generic Strategies
Type 1
Low - Cost Strategy
Offer product or service to wide range of customers at lowest price available on the market
Type 2
Best - Value Strategy
Offer the best price value available on the market
Type 3
Differentiation
Aim to produce products and services that considered unique and directed at consumers who are relatively price - insensitive
Type 4
Low - Cost Focus
Offer to a niche group of consumers at lowest price available on the market
Type 5
Best - Value Focus
Offer to a niche group of customers at the best price value available on the market
Means For
Achieving Strategies
Cooperation among competitors
Joint venture / Partnering
Merger / Acquisition
Private - equity acquisition
First mover advantages
Outsourcing / Resharing
Reasons Why Managers and
Acquisitions Fail
Integration difficulties
Inadequate evaluation of target
Large debt
Inability to achieve synergy
Too much diversification
Managers overly focused on acquisitions
Too large acquisitions
Reduced employee morale due to layoffs and relocations
Potential Benefits of Merging with or
Acquiring Another Firm
to provide improved capacity utilisation
to make better use of the existing sales force
to reduce managerial staff
to gain economies of scale
to smooth out seasonal trends in sales
to gain new technology
to gain market share
to enter global markets
Benefit of a Firm Being
the First Mover
Secure access and commitments to rare resources
Gain new knowledge of critical success factors and issues
Gain market share and position in the best location
Gain customer loyalty and commitment
Establish and secure long - term relationship with customers, suppliers, distributors and investors