Chapter 5: Objectives & Strategies

Process at this point in lecture

SWOT -> 3-4 Matches reflecting priorities a company should be taking -> Objectives & 3-4 strategies used to support them

Objectives

what you want to accomplish; the things needed in order to achieve a mission

How do you achieve objectives?

Strategies (long-term) and tactics (short-term; smaller in scope; each functional area plays a role.

Objectives should be

Specific (but not like tactics)

Measurable

Achievable

Realistic

Time-bound

A good example of an objective

"Develop and implement two 'green initiatives' in each manufacturing site by Q3 2023"

What can objectives help organizations do? (focus most on the bold ones)

- Establish priorities

- Allocation of resources

- Provide direction on strategy selection

- Aid in evaluation of progress

- Reduce uncertainty

- Minimize conflicts

- Aid in the design of jobs

4 categories of strategies

1. Integration

2. Intensive

3. Diversification

4. Defensive

T or F: Certain categories lend themselves to more to certain functional areas

True

Integration strategies are more ________________ oriented

operations (manufacturing, sourcing)

4 integration strategies

1. Forward integration

2. Backward integration

3. Vertical integration

4. Horizontal Integration

Forward Integration

- Control of sale and distribution

- Do this for exclusivity, control of price and brand reputation, trying to prevent brand degradation

- Giving up -> points of distribution

- Example: American Eagle

backward integration

- Concerned with creation of products, controlling the process

- Positive: Mass distribution, tighter control over quality

- Example: Ben & Jerry's

Vertical Integration

- Control over entire process (from creation to distribution)

- Example: Andrew Carnegie & U.S. Steel

- He owned the mines of raw materials, owned the railroad, the plant, controlling the labor, controlling the distribution

- Ford is another example, but he didn't do it the same way Carnegie did it.

Horizontal Integration

Acquiring a rival firm -> goal to gain market share

- Example: Marriot when they purchase Starwood hotel group -> did this for efficiency, to eliminate competitor, acquire market share, don't need to build other hotels (per say)

- Disadvantages: Expensive; approvals; potential for monopolizing with too much market share.

3 Intensive Strategies

1. Market Penetration

2. Market Development

3. Product Development

Intensive strategies are _________________ oriented

marketing

Market Penetration

- All about market share; goal of marketing better (same product, same market)

- Asking the question, "how am I going to grow this business?"

- Example: NicoDerm CQ -> they did it through using nonbranded PR and websites talking about awareness/tools for quitting.

Market Development

- Expanding geographic presence

- Example: Goody's (headache powder)

- Popular in the Southeast, so their next goal was to go to the Southwest

- Also, asked the question, "how am I going to grow this business?" In this case, it's expanding geographically.

Product Development

- Extending an existing product in a different way

- Often concentrated around form and flavor

- Example: Tums, trying to change the product through form and flavor (tried gummies, tried different flavors)

- Example: Automobiles (a new model every year).

T or F: Sometimes businesses go after 2 of the 3 intensive strategies

True

Diversification Strategies

1. Related Diversification

2. Unrelated Diversification

Related Diversification

Synergies between 2 elements that get together; working together well.

Example of Related Diversification

Merger of Dr. Pepper Snapple and Keurig Green Mountain -> Diversifying portfolio; also allows them to better compete with Coke & Pepsi

- Synergies: Kinds of beverages; productions

- Growing market: Bottled coffee, Keurig Green Mountain needs bottling expertise & distribution (stores and vending machines)

Unrelated Diversification

No synergies; driving value for holding company

Example of unrelated diversification

Berkshire Hathaway; buying brands and making them better

Current stock price: $745,143

Defensive Strategies

think WT matches; not where you want to be

3 types of defensive strategies

1. Retrenchment

2. Divestiture

3. Liquidation

Retrenchment

Reactive strategy

Taking a step back and digging a new position; designed to improve core competency.

"When an organization regroups through cost and asset reduction to reverse declining sales and profits."

Example of Retrenchment

Volkswagen, not doing great right now (not just the Diesel engine scandal)

Problems: Increased labor costs, materials costs, and competition in Asia -> all of which are driving down profits.

Divestiture

Proactive strategy

"Selling a division or part of an organization."

A goal is to improve growth potential - invest the money from the sale into the other divisions of the business

Example of Divestiture

Pfizer -> selling the animal health unit of their business

Liquidation

Out of business; liquidating all of its assets (to pay creditors)

Example of Liquidation

RiteAid

- tried Chapter 11, failed, now are doing Chapter 7 liquidation