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Chapter5
StrategiesinActionStrategicManagement:
Concepts&Cases11thEditionFredDavid
1Copyright2005PrenticeHallChapter5
StrategiesinActionChapterOutlineLong-TermObjectivesTypesofStrategiesIntegrationStrategies2Copyright2005PrenticeHallChapterOutlineLong-TermObjecChapterOutline(cont’d)IntensiveStrategiesDiversificationStrategiesDefensiveStrategies3Copyright2005PrenticeHallChapterOutline(cont’d)IntensChapterOutline(cont’d)MichaelPorter’sGenericStrategiesMeansforAchievingStrategiesFirstMoverAdvantages4Copyright2005PrenticeHallChapterOutline(cont’d)MichaeChapterOutline(cont’d)OutsourcingStrategicManagementinNonprofit&
GovernmentalOrganizationsStrategicManagementinSmallFirms5Copyright2005PrenticeHallChapterOutline(cont’d)Outsou
Strategiesfortakingthehillwon’tnecessarilyholdit.–
AmarBhideStrategiesinAction
Theearlybirdmaygettheworm,butthesecondmousegetsthecheese.–
Unknown6Copyright2005PrenticeHall
StrategiesfortakingthehilStrategiesinAction
--Questforhigherrevenues --QuestforhigherprofitsCompaniesEmbraceStrategicPlanning7Copyright2005PrenticeHallStrategiesinAction
--QuestResultsexpectedfrompursuingcertainstrategiesStrategiesrepresentactionstoaccomplishlong-termobjectivesLong-TermObjectives8Copyright2005PrenticeHallResultsexpectedfrompursuingLong-TermObjectivesObjectives--QuantifiableMeasurableRealisticUnderstandableChallenging9Copyright2005PrenticeHallLong-TermObjectivesObjectivesLong-TermObjectivesObjectives--HierarchicalObtainableCongruentTime-line10Copyright2005PrenticeHallLong-TermObjectivesObjectivesLong-TermObjectivesStrategistsShouldAvoid--ManagingbyExtrapolationManagingbyCrisisManagingbySubjectivesManagingbyHope11Copyright2005PrenticeHallLong-TermObjectivesStrategistVaryingPerformanceMeasuresbyOrganizationalLevel12Copyright2005PrenticeHallVaryingPerformanceMeasuresbFinancialvs.StrategicObjectivesFinancialObjectivesGrowthinrevenuesGrowthinearningsHigherdividendsHigherprofitmarginsHigherearningspershareImprovedcashflow13Copyright2005PrenticeHallFinancialvs.StrategicObjectFinancialvs.StrategicObjectivesStrategicObjectivesLargermarketshareQuickeron-timedeliverythanrivalsQuickerdesign-to-markettimesthanrivalsLowercoststhanrivalsHigherproductqualitythanrivalsWidergeographiccoveragethanrivals14Copyright2005PrenticeHallFinancialvs.StrategicObjectFinancialvs.StrategicObjectivesTrade-OffMaximizeshort-termfinancialobjectives–harmlong-termstrategicobjectivesPursueincreasedmarketshareattheexpenseofshort-termprofitabilityTradeoffsrelatedtoriskofactions;concernforbusinessethics;needtopreservenaturalenvironment;socialresponsibilityissues15Copyright2005PrenticeHallFinancialvs.StrategicObjectNot
ManagingbyObjectivesManagingbyextrapolationManagingbycrisisManagingbysubjectivesManagingbyhope16Copyright2005PrenticeHallNotManagingbyObjectivesManaTheBalancedScorecardRobertKaplan&DavidNorton--Strategyevaluation&controltechniqueBalancefinancialmeasureswithnon-financialmeasuresBalanceshareholderobjectiveswithcustomer&operationalobjectives17Copyright2005PrenticeHallTheBalancedScorecardRobertKTypesofStrategiesOperationalLevelFunctionalLevelDivisionLevelCorp
LevelALargeCompany18Copyright2005PrenticeHallTypesofStrategiesOperationalTypesofStrategiesOperationalLevelFunctionalLevelCompanyLevelASmallCompany19Copyright2005PrenticeHallTypesofStrategiesOperationalTypesofStrategies
Vertical
Integration
Strategies
Forward
IntegrationBackward
IntegrationHorizontal
Integration20Copyright2005PrenticeHallTypesofStrategies
Vertical
VerticalIntegrationStrategiesGainControlOver--DistributorsSuppliersCompetitors21Copyright2005PrenticeHallVerticalIntegrationStrategieForwardIntegrationStrategiesGainControlOver--DistributorsRetailers22Copyright2005PrenticeHallForwardIntegrationStrategiesForwardIntegrationStrategiesGuidelines--Currentdistributors–expensiveorunreliableAvailabilityofqualitydistributors–limitedFirmcompetinginindustryexpectedtogrowmarkedlyFirmhasbothcapital&HRtomanagenewbusinessofdistributionCurrentdistributorshavehighprofitmargins23Copyright2005PrenticeHallForwardIntegrationStrategiesBackwardIntegrationStrategiesOwnershiporControl--Firm’ssuppliers24Copyright2005PrenticeHallBackwardIntegrationStrategieBackwardIntegrationStrategiesGuidelines--Currentsuppliers–expensiveorunreliable#ofsuppliersissmall;#ofcompetitorsislargeHighgrowthinindustrysectorFirmhasbothcapital&HRtomanagenewbusinessStablepricesareimportantCurrentsuppliershavehighprofitmargins25Copyright2005PrenticeHallBackwardIntegrationStrategieHorizontalIntegrationStrategiesOwnershiporControl--Firm’scompetitors26Copyright2005PrenticeHallHorizontalIntegrationStrategHorizontalIntegrationStrategiesGuidelines--Gainmonopolisticcharacteristicsw/ofederalgovernmentchallengeCompetesingrowingindustryIncreasedeconomiesofscale–majorcompetitiveadvantagesFalteringduetolackofmanagerialexpertiseorneedforparticularresource27Copyright2005PrenticeHallHorizontalIntegrationStrategTypesofStrategies
Intensive
Strategies
Market
PenetrationMarket
DevelopmentProduct
Development28Copyright2005PrenticeHallTypesofStrategies
Intensive
IntensiveStrategiesIntensiveEfforts--Improvecompetitivepositionwithexistingproducts29Copyright2005PrenticeHallIntensiveStrategiesIntensiveMarketPenetrationStrategiesIncreasedMarketShare--Presentproducts/servicesPresentmarketsGreatermarketingefforts30Copyright2005PrenticeHallMarketPenetrationStrategiesIMarketPenetrationStrategiesGuidelines--CurrentmarketsnotsaturatedUsagerateofpresentcustomerscanbeincreasedsignificantlySharesofcompetitorsdeclining;industrysalesincreasingIncreasedeconomiesofscaleprovidemajorcompetitiveadvantage31Copyright2005PrenticeHallMarketPenetrationStrategiesGMarketDevelopmentStrategiesNewMarkets--Presentproducts/servicestonewgeographicareas32Copyright2005PrenticeHallMarketDevelopmentStrategiesNMarketDevelopmentStrategiesGuidelines--Newchannelsofdistribution–reliable,inexpensive,goodqualityFirmissuccessfulatwhatitdoesUntapped/unsaturatedmarketsExcessproductioncapacityBasicindustryrapidlybecomingglobal33Copyright2005PrenticeHallMarketDevelopmentStrategiesGProductDevelopmentStrategiesIncreasedSales--Improvingpresentproducts/servicesDevelopingnewproducts/services34Copyright2005PrenticeHallProductDevelopmentStrategiesProductDevelopmentStrategiesGuidelines--ProductsinmaturitystageoflifecycleIndustrycharacterizedbyrapidtechnologicaldevelopmentCompetitorsofferbetter-qualityproducts@comparablepricesCompeteinhigh-growthindustryStrongR&Dcapabilities35Copyright2005PrenticeHallProductDevelopmentStrategiesTypesofStrategies
Diversification
Strategies
RelatedDiversificationUnrelated
Diversification36Copyright2005PrenticeHallTypesofStrategies
DiversificDiversificationRelated–Whentheirvaluechainspossescompetitivelyvaluablecross-businessstrategicfitsUnrelated–Whentheirvaluechainsaresodissimilarthatnocompetitivelyvaluablecross-businessrelationshipsexist37Copyright2005PrenticeHallDiversificationRelated–WhenRelatedDiversificationPreferred
ToCapitalizeon:TransferringcompetitivelyvaluableexpertiseCombiningtherelatedactivitiesofseparatebusinessesintoasingleoperationtolowercostsExploitingcommonuseofawell-knownbrandnameCross-businesscollaborationtocreatecompetitivelyvaluableresourcestrengthsandcapabilities38Copyright2005PrenticeHallRelatedDiversificationPreferDiversificationStrategiesLessPopular--MoredifficulttomanagediversebusinessactivitiesHowever--Thegreatestriskofbeinginasingleindustryishavingallyoureggsinonebasket39Copyright2005PrenticeHallDiversificationStrategiesLessRelatedDiversificationMaybeEffectiveWhen:Anorganizationcompetesinano-growthoraslowgrowthindustryAddingnew,butrelated,productswouldsignificantlyenhancethesalesofcurrentproductsNew,butrelatedproductscouldbeofferedathighlycompetitiveprices40Copyright2005PrenticeHallRelatedDiversificationMaybeRelatedDiversificationMaybeEffectiveWhen:New,butrelated,productshaveseasonalsaleslevelsthatcounterbalanceanorganization’sexistingpeaksandvalleysAnorganization’sproductsarecurrentlyinthedecliningstageoftheproduct’slifecycleAnorganizationhasastrongmanagementteam41Copyright2005PrenticeHallRelatedDiversificationMaybeConglomerateDiversificationStrategiesGuidelines--Decliningannualsales&profitsCapital&managerialabilitytocompeteinnewindustryFinancialsynergybetweenacquiredandacquiringfirmsCurrentmarketsforpresentproducts-saturated42Copyright2005PrenticeHallConglomerateDiversificationSUnrelatedDiversificationFavorscapitalizingonaportfolioofbusinessesthatarecapableofdeliveringexcellentfinancialperformanceEntailshuntingtoacquirecompanies:WhoseassetsareundervaluedThatarefinanciallydistressedWithhighgrowthpotentialbutareshortoninvestmentcapital43Copyright2005PrenticeHallUnrelatedDiversificationFavorUnrelatedDiversificationMaybeEffectiveWhen:Revenuesderivedfromanorganization’scurrentproductsorserviceswouldincreasebyaddingnewunrelatedproductsAnorganizationcompetesinahighlycompetitiveoranogrowthindustryAnorganization’scurrentdistributionchannelscanbeusedtomarketnewproductstoexistingcustomers44Copyright2005PrenticeHallUnrelatedDiversificationMayUnrelatedDiversificationMaybeEffectiveWhen:NewproductshavecountercyclicalsalespatternsAnorganization’sbasicindustryisexperiencingdecliningannualsalesandprofitsAnorganizationhasthecapitalandmanagerialtalenttocompetesuccessfullyinanewindustry45Copyright2005PrenticeHallUnrelatedDiversificationMayUnrelatedDiversificationMaybeEffectiveWhen:AnorganizationhastheopportunitytopurchaseanunrelatedbusinessasanattractiveinvestmentopportunityThereexistsfinancialsynergybetweentheacquiredandacquiringfirmExistingmarketsforthepresentproductsaresaturatedAntitrustactioncouldbechargedagainstacompany46Copyright2005PrenticeHallUnrelatedDiversificationMayTypesofStrategies
Defensive
Strategies
RetrenchmentDivestitureLiquidation47Copyright2005PrenticeHallTypesofStrategies
Defensive
RetrenchmentStrategiesRegrouping--Cost&assetreductiontoreversedecliningsales&profit48Copyright2005PrenticeHallRetrenchmentStrategiesRegroupBankruptcyChapter7–LiquidationChapter9–MunicipalitiesChapter11–ReorganizationforCorporationsChapter12–FamilyFarmersCheaper13–ReorganizationforSmallBusinessesandIndividuals49Copyright2005PrenticeHallBankruptcyChapter7–LiquidatRetrenchmentStrategiesGuidelines--Failedtomeetobjectives&goalsconsistency;hasdistinctivecompetenciesFirmisoneofweakercompetitorsInefficiency,lowprofitability,pooremployeemorale,pressureforstockholdersStrategicmanagershavefailedRapidgrowthinsize;majorinternalreorganizationnecessary50Copyright2005PrenticeHallRetrenchmentStrategiesGuideliDivestitureStrategiesSellingadivisionorpartofanorganization51Copyright2005PrenticeHallDivestitureStrategiesSellingDivestitureStrategiesGuidelines--RetrenchmentfailedtoattainimprovementsDivisionneedsmoreresourcesthanareavailableDivisionresponsibleforfirm’soverallpoorperformanceDivisionisamis-fitwithorganizationLargeamountofcashisneededandcannotberaisedthroughothersources52Copyright2005PrenticeHallDivestitureStrategiesGuidelinLiquidationStrategiesCompany’sassets,inparts,fortheirtangibleworthSelling53Copyright2005PrenticeHallLiquidationStrategiesCompany’LiquidationStrategiesGuidelines--Retrenchment&divestiturefailedOnlyalternativeisbankruptcyMinimizestockholderlossbysellingfirm’sassets54Copyright2005PrenticeHallLiquidationStrategiesGuidelinMichaelPorter’sGenericStrategiesCostLeadershipStrategiesDifferentiation
StrategiesFocusStrategies55Copyright2005PrenticeHallMichaelPorter’sGenericStrat56Copyright2005PrenticeHall56Copyright2005PrenticeHallGenericStrategiesInconjunctionwithdifferentiationEconomiesordiseconomiesofscaleCapacityutilizationachievedLinkagesw/suppliers&distributorsCostLeadership
(Type1andType2)57Copyright2005PrenticeHallGenericStrategiesInconjunctiCostLeadershipWaysofensuringtotalcostsacrossvaluechainarelowerthancompetitors’totalcostsPerformvaluechainactivitiesmoreefficientlythanrivalsandcontrolfactorsthatdrivecostsRevampthefirm’soverallvaluechaintoeliminateorbypasssomecost-producingactivities58Copyright2005PrenticeHallCostLeadershipWaysofensurinCostLeadershipCanbeespeciallyeffectivewhen:PricecompetitionamongrivalsisvigorousRival’sproductsareidenticalandsuppliesarereadilyavailableTherearefewwaystoachievedifferentiationMostbuyersusetheproductinthesamewayBuyershavelowswitchingcostsBuyersarelargeandhavesignificantpowerIndustrynewcomersuselowpricestoattractbuyers59Copyright2005PrenticeHallCostLeadershipCanbeespecialGenericStrategiesManyprice-sensitivebuyersFewwaysofachievingdifferentiationBuyersnotsensitivetobranddifferencesLarge#ofbuyersw/bargainingpowerLowCostProducerAdvantage60Copyright2005PrenticeHallGenericStrategiesManyprice-sGenericStrategiesGreaterproductflexibilityGreatercompatibilityLowercostsImprovedserviceGreaterconvenienceMorefeaturesDifferentiation(Type3)61Copyright2005PrenticeHallGenericStrategiesGreaterprodDifferentiationCanbeespeciallyeffectivewhen:TherearemanywaystodifferentiateandmanybuyersperceivethevalueofthedifferencesBuyerneedsandusesarediverseFewrivalfirmsarefollowingasimilardifferentiationapproachTechnologychangeisfastpacedandcompetitionrevolvesaroundevolvingproductfeatures62Copyright2005PrenticeHallDifferentiationCanbeespecialGenericStrategiesIndustrysegmentofsufficientsizeGoodgrowthpotentialNotcrucialtosuccessofmajorcompetitorsFocusedStrategies(Type4&5)63Copyright2005PrenticeHallGenericStrategiesIndustrysegFocusedStrategy
Canbeespeciallyeffectivewhen:Thetargetmarketnicheislarge,profitable,andgrowingIndustryleadersdonotconsiderthenichecrucialIndustryleadersconsiderthenichetoocostlyordifficulttomeetTheindustryhasmanydifferentnichesandsegmentsFew,ifany,otherrivalsareattemptingtospecializeinthesametargetsegment64Copyright2005PrenticeHallFocusedStrategyCanbeespeci65Copyright2005PrenticeHall65Copyright2005PrenticeHallMeansforAchievingStrategiesTwoormorecompaniesformatemporarypartnershiporconsortiumforpurposeofcapitalizingonsomeopportunityJointVenture/Partnering-66Copyright2005PrenticeHallMeansforAchievingStrategiesReasonswhyMergersandAcquisitionsFailIntegrationdifficultiesInadequateevaluationoftargetLargeorextraordinarydebtInabilitytoachievesynergy67Copyright2005PrenticeHallReasonswhyMergersandAcquisMeansforAchievingStrategiesR&DpartnershipsCross-distributionagreementsCross-licensingagreementsCross-manufacturingagreementsJoint-biddingconsortiaCooperativeArrangements-68Copyright2005PrenticeHallMeansforAchievingStrategiesMeansforAchievingStrategiesManagerswhomustcollaboratedaily;notinvolvedindevelopingtheventureBenefitsthecompanynotthecustomersNotsupportedequallybybothpartnersMaybegintocompetewithoneofthepartnersWhyJointVenturesFail-69Copyright2005PrenticeHallMeansforAchievingStrategiesJointVenturesGuidelines--SynergiesbetweenprivateandpubliclyheldDomesticwithforeignfirm,localmanagementcanreduceriskComplementarydistinctivecompetenciesResources&riskswhereprojectishighlyprofitable(e.g.AlaskaPipeline)Twoormoresmallerfirmscompetingw/largerfirmNeedtointroducenewtechnologyquickly70Copyright2005PrenticeHallJointVenturesGuidelines--SynReasonswhyMergersandAcquisitionsFailToomuchdiversificationManagersoverlyfocusedonacquisitionToolargeanacquisitionDifficulttointegratedifferentorganizationalculturesReducedemployeemoralduetolayoffsandrelocations71Copyright2005PrenticeHallReasonswhyMergersandAcquisMeansforAchievingStrategiesProvideimprovedcapacityutilizationBetteruseofexistingsalesforceReducemanagerialstaffGaineconomiesofscaleSmoothoutseasonaltrendsinsalesGainnewtechnologyAccesstonewsuppliers,distributors,customers,products,creditorsMergers&Acquisitions72Copyright2005PrenticeHallMeansforAchievingStrategiesRecentMergersAcquiringFirmAcquiredFirmIBMAscentialSoftwarePhilipMorrisPTHanjayaMandalaSampU.S.SteelNationalSteelCorpOraclePeopleSoftOSIMInternationalLtdBrookstoneAdobeSystemsMacromediaUSAirwaysAmericanWestUnitedParcelServiceOvernightCorp.73Copyright2005PrenticeHallRecentMergersAcquiringFirmAcFirstMoverAdvantagesBenefitsafirmmayachievebyenteringanewmarketordevelopinganewproductorservicepriortorivalfirms74Copyright2005PrenticeHallFirstMoverAdvantagesBenefitsFirstMoverAdvantagesSecuringaccesstorareresourcesGainingnewknowledgeofkeyfactors&issuesCarvingoutmarketshareEasytodefendposition&costlyforrivalfirmstoovertakePotentialAdvantages75Copyright2005PrenticeHallFirstMoverAdvantagesSecuringOutsourcingCompaniestakingoverthefunctionaloperationsofotherfirmsBusiness-processoutsourcing(BPO)76Copyright2005PrenticeHallOutsourcingCompaniestakingovOutsourcingLessexpensiveAllowsfirmtofocusoncorebusinessEnablesfirmtoprovidebetterservicesBenefits77Copyright2005PrenticeHallOutsourcingLessexpensiveBenef
KeyTerms&ConceptsForReview(Chapter5)AcquisitionConcentric
DiversificationBackward
IntegrationConglomerate
DiversificationBankruptcyCooperative
ArrangementsCombination
StrategyCostLeadership78Copyright2005PrenticeHall
KeyTerms&ConceptsForRevie
KeyTerms&ConceptsForReview(Chapter5)DifferentiationFocusDiversification
StrategiesForwardIntegrationDivestitureFranchisingFirstMover
AdvantagesGenericStrategies79Copyright2005PrenticeHall
KeyTerms&ConceptsForRevie
KeyTerms&ConceptsForReview(Chapter5)Horizontal
DiversificationIntensiveStrategiesHorizontal
IntegrationJointVentureHostileTakeoverLeveragedBuyoutIntegration
StrategiesLiquidation80Copyright2005PrenticeHall
KeyTerms&ConceptsForRevie
KeyTerms&ConceptsForReview(Chapter5)Long-Term
ObjectivesOutsourcingMarketDevelopmentProductDevelopmentMarketPenetrationRetrenchmentMergerVerticalIntegration81Copyright2005PrenticeHall
KeyTerms&ConceptsForRevieChapter5
StrategiesinActionStrategicManagement:
Concepts&Cases11thEditionFredDavid
82Copyright2005PrenticeHallChapter5
StrategiesinActionChapterOutlineLong-TermObjectivesTypesofStrategiesIntegrationStrategies83Copyright2005PrenticeHallChapterOutlineLong-TermObjecChapterOutline(cont’d)IntensiveStrategiesDiversificationStrategiesDefensiveStrategies84Copyright2005PrenticeHallChapterOutline(cont’d)IntensChapterOutline(cont’d)MichaelPorter’sGenericStrategiesMeansforAchievingStrategiesFirstMoverAdvantages85Copyright2005PrenticeHallChapterOutline(cont’d)MichaeChapterOutline(cont’d)OutsourcingStrategicManagementinNonprofit&
GovernmentalOrganizationsStrategicManagementinSmallFirms86Copyright2005PrenticeHallChapterOutline(cont’d)Outsou
Strategiesfortakingthehillwon’tnecessarilyholdit.–
AmarBhideStrategiesinAction
Theearlybirdmaygettheworm,butthesecondmousegetsthecheese.–
Unknown87Copyright2005PrenticeHall
StrategiesfortakingthehilStrategiesinAction
--Questforhigherrevenues --QuestforhigherprofitsCompaniesEmbraceStrategicPlanning88Copyright2005PrenticeHallStrategiesinAction
--QuestResultsexpectedfrompursuingcertainstrategiesStrategiesrepresentactionstoaccomplishlong-termobjectivesLong-TermObjectives89Copyright2005PrenticeHallResultsexpectedfrompursuingLong-TermObjectivesObjectives--QuantifiableMeasurableRealisticUnderstandableChallenging90Copyright2005PrenticeHallLong-TermObjectivesObjectivesLong-TermObjectivesObjectives--HierarchicalObtainableCongruentTime-line91Copyright2005PrenticeHallLong-TermObjectivesObjectivesLong-TermObjectivesStrategistsShouldAvoid--ManagingbyExtrapolationManagingbyCrisisManagingbySubjectivesManagingbyHope92Copyright2005PrenticeHallLong-TermObjectivesStrategistVaryingPerformanceMeasuresbyOrganizationalLevel93Copyright2005PrenticeHallVaryingPerformanceMeasuresbFinancialvs.StrategicObjectivesFinancialObjectivesGrowthinrevenuesGrowthinearningsHigherdividendsHigherprofitmarginsHigherearningspershareImprovedcashflow94Copyright2005PrenticeHallFinancialvs.StrategicObjectFinancialvs.StrategicObjectivesStrategicObjectivesLargermarketshareQuickeron-timedeliverythanrivalsQuickerdesign-to-markettimesthanrivalsLowercoststhanrivalsHigherproductqualitythanrivalsWidergeographiccoveragethanrivals95Copyright2005PrenticeHallFinancialvs.StrategicObjectFinancialvs.StrategicObjectivesTrade-OffMaximizeshort-termfinancialobjectives–harmlong-termstrategicobjectivesPursueincreasedmarketshareattheexpenseofshort-termprofitabilityTradeoffsrelatedtoriskofactions;concernforbusinessethics;needtopreservenaturalenvironment;socialresponsibilityissues96Copyright2005PrenticeHallFinancialvs.StrategicObjectNot
ManagingbyObjectivesManagingbyextrapolationManagingbycrisisManagingbysubjectivesManagingbyhope97Copyright2005PrenticeHallNotManagingbyObjectivesManaTheBalancedScorecardRobertKaplan&DavidNorton--Strategyevaluation&controltechniqueBalancefinancialmeasureswithnon-financialmeasuresBalanceshareholderobjectiveswithcustomer&operationalobjectives98Copyright2005PrenticeHallTheBalancedScorecardRobertKTypesofStrategiesOperationalLevelFunctionalLevelDivisionLevelCorp
LevelALargeCompany99Copyright2005PrenticeHallTypesofStrategiesOperationalTypesofStrategiesOperationalLevelFunctionalLevelCompanyLevelASmallCompany100Copyright2005PrenticeHallTypesofStrategiesOperationalTypesofStrategies
Vertical
Integration
Strategies
Forward
IntegrationBackward
IntegrationHorizontal
Integration101Copyright2005PrenticeHallTypesofStrategies
Vertical
VerticalIntegrationStrategiesGainControlOver--DistributorsSuppliersCompetitors102Copyright2005PrenticeHallVerticalIntegrationStrategieForwardIntegrationStrategiesGainControlOver--DistributorsRetailers103Copyright2005PrenticeHallForwardIntegrationStrategiesForwardIntegrationStrategiesGuidelines--Currentdistributors–expensiveorunreliableAvailabilityofqualitydistributors–limitedFirmcompetinginindustryexpectedtogrowmarkedlyFirmhasbothcapital&HRtomanagenewbusinessofdistributionCurrentdistributorshavehighprofitmargins104Copyright2005PrenticeHallForwardIntegrationStrategiesBackwardIntegrationStrategiesOwnershiporControl--Firm’ssuppliers105Copyright2005PrenticeHallBackwardIntegrationStrategieBackwardIntegrationStrategiesGuidelines--Currentsuppliers–expensiveorunreliable#ofsuppliersissmall;#ofcompetitorsislargeHighgrowthinindustrysectorFirmhasbothcapital&HRtomanagenewbusinessStablepricesareimportantCurrentsuppliershavehighprofitmargins106Copyright2005PrenticeHallBackwardIntegrationStrategieHorizontalIntegrationStrategiesOwnershiporControl--Firm’scompetitors107Copyright2005PrenticeHallHorizontalIntegrationStrategHorizontalIntegrationStrategiesGuidelines--Gainmonopolisticcharacteristicsw/ofederalgovernmentchallengeCompetesingrowingindustryIncreasedeconomiesofscale–majorcompetitiveadvantagesFalteringduetolackofmanagerialexpertiseorneedforparticularresource108Copyright2005PrenticeHallHorizontalIntegrationStrategTypesofStrategies
Intensive
Strategies
Market
PenetrationMarket
DevelopmentProduct
Development109Copyright2005PrenticeHallTypesofStrategies
Intensive
IntensiveStrategiesIntensiveEfforts--Improvecompetitivepositionwithexistingproducts110Copyright2005PrenticeHallIntensiveStrategiesIntensiveMarketPenetrationStrategiesIncreasedMarketShare--Presentproducts/servicesPresentmarketsGreatermarketingefforts111Copyright2005PrenticeHallMarketPenetrationStrategiesIMarketPenetrationStrategiesGuidelines--CurrentmarketsnotsaturatedUsagerateofpresentcustomerscanbeincreasedsignificantlySharesofcompetitorsdeclining;industrysalesincreasingIncreasedeconomiesofscaleprovidemajorcompetitiveadvantage112Copyright2005PrenticeHallMarketPenetrationStrategiesGMarketDevelopmentStrategiesNewMarkets--Presentproducts/servicestonewgeographicareas113Copyright2005PrenticeHallMarketDevelopmentStrategiesNMarketDevelopmentStrategiesGuidelines--Newchannelsofdistribution–reliable,inexpensive,goodqualityFirmissuccessfulatwhatitdoesUntapped/unsaturatedmarketsExcessproductioncapacityBasicindustryrapidlybecomingglobal114Copyright2005PrenticeHallMarketDevelopmentStrategiesGProductDevelopmentStrategiesIncreasedSales
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