 It represent the results expected from pursuing

certain strategies.

 Strategies represent the actions to be taken to

accomplish long-term objectives.

 The time frame for objectives and strategies

should be consistent, usually from 2 to 5 years.
 Quantitative, measurable, realistic,
understandable, challenging, hierarchical,
obtainable, and congruent among organizational
unit.

 Objectives are commonly stated in terms.

 Long-term objectives are needed at the

corporate, divisional, and functional levels in an
organization.
%
80
70
60
50
40 Long-Term Objectives
Annual Objectives
30
20
10
0
Corporate Division Function
 Managing by Extrapolation.
 Managing by Crisis.
 Managing by Subjective.
 Managing by Hope.
 Developed in 1993 by Harvard Business School
professors Robert Kaplan and David Norton
 Strategy to evaluate and control technique
 Get its name from the perceived need of firms to

“balance” financial measures with nonfinancial

measures.
Implementing Balanced Scorecards typically
includes four processes:
1. Translating the vision into operational goals;
2. Communicating the vision and link it to individual
performance;
3. Business planning;
4. Feedback and learning, and adjusting the
strategy accordingly.
 Conflict

 The overall aim is to “balance” shareholder

objectives with customer and operational
objectives.
1) Forward integration
- gaining ownership/increase control over
distributors/retailers.
-e.g: Dell Computer recently began pursuing
forward integration by establishing its own stores
within a store.
2) Backward integration
-seeking ownership/increased control of
firm’s suppliers.
-e.g: A bakery business bought a wheat farm in
order to reduce the risk associated with the
dependency on flour.
3) Horizontal integration
-seeking ownership of/increased control
over firm’s competitors.
-e.g: mergers/takeovers
1) Market penetration
-seeks to increase market share for
present products/services through
greater marketing effort.

2) Market Development
-introducing present products/services into new
geographical areas
-e.g: Air Asia has expand their flight to another
country.

3) Product development
-strategy that seeks increased sales by
improving or modifying present
products/services.
•Related Diversification known as Concentric Diversification which
means the old products adding new, but related products or services.
•For example, Dell Computer is pursuing related diversification by
manufacturing and marketing consumer electronics products such as
flat-panel televisions and MP3 players. Also Dell has recently opened an
online music-downloading store.
•Horizontal Diversification is adding new, unrelated
products or services for present customers. Usually a firm
already should familiar with its present customer.
•Conglomerate Diversification is adding new, unrelated
products or services.
•For example, General Electric is a classic firm that is highly
diversified. GE makes locomotives, lightbulbs, power plants,
and refrigerators; GE manages more credit cards than American
Express and owns more commercial aircraft than American
Airlines.
 Retrenchment occurs when an organization regroups through cost
and assets reduction to reverse declining sales and profits.
 Sometimes called a turnaround or reorganizational strategy,
retrenchment is designed to fortify an organization’s basic distinctive
competence.
 Divestiture is selling a division or part of an organization.
 It often is used to raise capital for further strategic acquisitions or
investments.
 Liquidation is a selling all company’s assets, in parts, for their
tangible worth.
 Liquidation is recognition of defeat and consequently can be
emotionally difficult strategy.
 However, it may be better to cease operating than to continue losing
large sums of money.
 For example, America Online Latin America Inc. failed for
bankruptcy protection in mid 2005 and announced plan to liquidate
its business. Since it founding in 1999, AOL Latin America had never
been cash-flow positive.
• According to Porter, strategies allow
organizations to gain competitive
advantages on three bases: Cost
Leadership, Differentiation and Focus
which Porter calls them as the Generic
Strategies.
 Generic Strategies
Cost
Differentiati Focus
Leadership
on

Type 1
Large Type 3 __
Type 2
Market
Size of

Type 4
__ Type 3
Small
Type 5

Type 1: Cost Leadership – Low Cost

Type 2: Cost Leadership – Best Value
Type 3: Differentiation
Type 4: Focus – Low Cost
Type 5: Focus – Best Value
 Cost Leadership
◦ Emphasizes on producing products at a very low cost
(per unit).
◦ Type 1: Low cost
 offers products @ services to wider range customers at the
market lowest price.
◦ Type 2: Best Value
 offers products @ services to wider range of customers at
the market best price-value.
◦ These strategies target at a large market
 Differentiation (Type 3)
◦ This strategy aims at producing unique goods and
services directed to price-insensitive customers.
 Producing products and services
 Type 4 – Low cost offers products or services to

a small range of customers at the lowest price.

 Type 5 - Best Value offers products or services

to a smalL range of customers at the best price

value.
 A sucessful focus strategy depends on an

industry segment sufficient size and has good

growth potential
• 2 or more companies formed
• Form separate organization and share equity ownership in the new entity

• Cooperative arrangements:
 Research and development partnership
 Cross distribution agreements
 Cross licensing agreements
 Cross manufacturing agreements
 Joint bidding consortia
• Pursue strategies( retrenchment to market development )
TING THE CHALLENGE OF HIGH VELOCITY CHANGE

•Introduce better
products in response to •React and
defensiv new offerings of rivals response as need
e •Response to •Defend and
unexpected changes in protect the
buyer needs and company’s
preferences position
•Adjust to new
government policies
•Analyze the prospects
for market globalization •Plan ahead for
•Research buyer needs, expected future
preferences, and changes
expectations -add/adapt
•Monitor closely new resources and
technological and competitive
developments to capabilities
predict future path -improve products
line
•Pioneer new and -strengthen
•Seize the offensive
distribution
technologies •Be the agent of
•Introduce innovative industry changes, set
offensiv products that open new the pace
markets and spur the •Influence the rules of
e creation of whole new the game
industries •Force the rivals to
•Seek to seek industry
• Manager not involve in forming and shaping venture
• Not benefit customers
• Not supported equally-problem arise
• Compete among partners

• Guidelines:
 Private and public synergistically combined
 Domestic organization and foreign company
 Complement each other well
 Project potentially profitable
 2 or more smaller firm in trouble
 Need to introduce new technology
• Used to pursue strategies
• Merger: 2 organizations equal size united-enterprise
• Acquisition: large company purchase/acquire smaller firm/vice
versa
• Both desired: takeover/hostile takeover
• Not desired: friendly merger

• Forces drive to merge:

 Deregulation
 Technology change
 Excess capacity
 Inability to boost profits through price increases
 Depressed stock market
 Need to gain economy of scales
• Force drive to acquisition:
 Increased market power
 Reduce entry barriers
 Reduced cost of new products development
 Increase speed of products to market
 Lowered risk compared to developing new
products
 Increase diversification
 Avoidance of excessive competition
 Opportunity to learn and develop new capabilities
 First Mover Advantages
 Refer to the benefits a firm may achieve by
entering a new market or developing a new
product or service prior to rival firms.
Advantages
1. Build a firm’s image and reputation with buyers
2. Produce cost advantages
3. Create strongly loyal customers
4. Make imitation

 First mover advantages tend to be greatest when

competitors are roughly the same size and
possess similar resources.
 Outsourcing
 Business-process outsourcing (BPO) is rapidly growing
new business that involves companies taking over the
functional operations.
 Example: HR, Information System, Accounting, etc

Reasons of Outsourcing
1. Less expensive
2. Focus on core businesses
3. Provide better service

Example: IBM, Airline Industry, etc

 Educational Institutions
 Medical organizations
 Government agencies and departments