Lecture 6:

Strategies in Action
 CHAPTER OUTLINE

• Long-Term Objectives

• The Balanced Scorecard

• Types of Strategies

 Integration Strategies
 Intensive Strategies
 Diversification Strategies
 Defensive Strategies
 Porter’s Five Generic Strategies
 CHAPTER OUTLINE (CONT’D)

• Means For Achieving Strategies

• Strategic Management in Nonprofit and Governmental

Organizations

• Strategic Management in Small Firms

 LONG TERM OBJECTIVES

• Represent the results expected from

pursuing certain strategies
• Then strategies represent the actions to be
taken to accomplish long – term objectives
• The time frame for objectives and strategies
should be consistent (usually from two to
five years )
 The Nature of Long-Term Objectives:

• Quantifiable • Hierarchical
• Measurable • Obtainable
• Realistic • Timeline
• Understandable • Congruent among
organizational units
• Challenging
 OBJECTIVES ARE COMMUNALLY
STATED IN TERMS SUCH AS THE
FOLLOWING

• Growth in sales
• Profitability
• Market share
• Degree and nature of diversification
• Degree and nature of vertical integration
• Social responsibility
 WHY STATED AND
COMMUNICATED OBJECTIVES ARE
VITAL TO SUCCESS?

1. Objectives help stakeholders understand their role in an organization’s

future
2. Provide a basis for consistent decision making by managers whose values
and attitudes differs
3. By reaching a consensus on objectives during strategy – formulation
activates- the organization can minimize potential conflicts later during
implementation
4. Objectives serve as standards by which individuals ,groups, departments,
divisions and entire organizations can be evaluated
5. Objectives also provide directions and allow organizational synergy
 Financial vs. Strategic Objectives
Financial Objectives

• Growth in revenues
• Growth in earnings
• Higher dividends
• Higher profit margins
• Greater return on investment
• Higher earnings per share
• Rising stock price
• Improved cash flow
 STRATEGIC OBJECTIVES

• Development in brands
• Larger market share
• Quicker on time delivery than rivals
• Shorter design- to market time than rivals
• Lower costs than rivals
• Higher product quality
• Wider geographic coverage
• Achieving ISO 14001
• Technological leadership
 IS THERE ANY CONFLICT
BETWEEN THE FINANCIAL
OBJECTIVES AND STRATEGIC
OBJECTIVES .
• Some times it could be some conflict between
them organizations sometimes to achieve the
financial objectives can harm the long run
strategic objectives
• (Higher dividends –technology leadership )
• trade- off between them is important
• Priorities decisions have to be made.
Not Managing by Objectives
Strategists should avoid the ways to not managing by
objectives

• Managing by Extrapolation – If it isn't broke, don’t fix it.

• Managing by Crisis – The true measure of a good
strategist is the ability to fix problems.
• Managing by Subjective – Do your own thing, the best
way you know how.
• Managing by Hope – The future is full of uncertainty and
if first you don’t succeed, then you may on the second or
third try.
The Balanced Scorecard
Robert Kaplan & David Norton

• It is a strategy evaluation & control technique

• Balance financial measures with nonfinancial measures
• Balance shareholder objectives with customer &
operational objectives
• Several Arab agencies have adopted the balance
scorecard approach in recent years (Abu Dhabi – saudia
Arabia- Dubai )
 THE BALANCED SCORECARD

• The core concept of the balanced scorecard

• A balanced scorecard for a firm is a simply listing

of all key objectives (financial and non financial )
such customer service – employees morals – product
quality – pollution abatement, business ethics ,
social responsibility ……etc.
 TYPES OF STRATEGIES

Three important strategies have been displayed

•Growth strategy (offensive )

•Involve increasing investment , this implies that the company is
aggressively trying to change its industry and competition condition

•Retrenchment strategy (Defensive )

•Is a defensive strategy where the company seek to protect its position
and hopefully minimize exposure to risk .this means that the company
applies a course of action that limits the size or the kind of its market
involvement
• The stability strategy (maintain the status quo ) it means
that company avoid undertaking any changes and keep
satisfy with the current market position .
• In today’s global market this strategy is not fit . It is mostly
found in small enterprises
• For this reason we will focus in detail on the other types of
strategies only
 DEFINITIONS OF THE ALTERNATIVE
TYPES OF STRATEGIES

 Vertical integration (forward ) - gaining

ownership or increased control over distributions
or retailers
 Vertical integration (backward) - seeking
ownership or increased control of a firm’s
ownership
 Horizontal integration - seeking ownership or
increased control over competitors
 DEFINITIONS OF THE ALTERNATIVE
TYPES OF STRATEGIES

 Market penetration - seeking increased market share for existing

products or services in existing markets through greater market effort
 Market development - introducing existing product into new
geographic area
 Product development - seeking increased sales by improving &
modifying the existing product
 Innovation - introducing completely new product or service
 Related diversification - adding new but related products or
services
 DEFINITIONS OF THE ALTERNATIVE
TYPES OF STRATEGIES

 Unrelated diversification - adding new unrelated

products or services
 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
Notes
•Most organizations simultaneously pursue a
combination of these strategies .
•Organizations have limited resources and
incomplete information , thus priorities must be
undertaken (choose among alternative)
Levels of Strategies and the person who is
responsible
Corp
Level
Chief executive
officer

Division Level
Division president&
vice president

Functional Level
Function manger

Operational Level
Plant manger – sales manger – production manager
Types of Strategies

Forward
Integration

Integration Backward
Strategies Integration

Horizontal
Integration
Types of Strategies

Market
Penetration

Market
Development
Intensive
Strategies
Product
Development

Innovation
Types of Strategies

Related
Diversification

Diversification
Strategies

Unrelated
Diversification
Types of Strategies

Retrenchment

Defensive Divestiture
Strategies

Liquidation
 Michael Porter’s Generic Strategies

Cost Leadership Strategies

(Low-Cost & Best-Value)
Producing standardized products at a very
low per unit cost for consumers who are price- sensitive

Differentiation Strategies
Means producing products & services considered
unique across the industry

Focus Strategies
means producing products & service
That fulfill the needs of small groups of consumers
Means for Achieving Strategies

•Joint Venture/Partnering

•Mergers and Acquisitions

•Private Equity Acquisitions

•First-Mover Advantages

•Outsourcing
 Joint Venture/Partnering

• Joint venture is a popular strategy

• Two or more companies form a temporary
partnership for the purpose of capitalizing on
some opportunity.
• Unlike the many U.S. counterparts, Arab
corporations have sought cooperative and joint
venture agreements with global corporations
 Mergers and Acquisitions

• A merger occurs when two organizations of

about equal size unite to form one enterprise
• An acquisition occurs when a large
organization purchases a smaller firm or vice
versa
 Mergers and Acquisitions (cont’d)

Key reasons why mergers and acquisitions fail:

(important )
• Inadequate evaluation of target

• Large debt

• Inability to achieve synergy (Synergy means 1+1= more than 2)

• Too much diversification

• Difficult to integrate different organizational cultures

• Reduced employee morale due to layoffs and relocations

 Outsourcing

Business-Process Outsourcing (BPO)

Companies taking over the functional operations of other
firms.
 STRATEGIC MANAGEMENT IN NONPROFIT
AND GOVERNMENTAL ORGANIZATIONS

• In Arab world the non- profit and governmental

organizations are successfully applying strategic
management
• Educational institutions are more frequently using strategic
management techniques and concepts (as ex. universities
across the region have adopted strategic planning to
manage their resources and develop realistic plans for the
future )
• Medical Organizations:- many strategies being pursued by
many hospitals as such creating home health services ,
acquiring ambulance service and diagnostic service
STRATEGIC MANAGEMENT IN SMALL
FIRMS
• 95% of all businesses in the Arab world region are
family firms

• Most Arab entrepreneurs start off as owners of small

and medium-sized firms

• Strategic management is vital for small companies

• Lack of strategic management knowledge is a serious

obstacle for many small business owners