LM Alternative Strategies As of Jan 2017

Alternative
Strategies
5-2
Copyright ©2013 Pearson Education
Walt Disney Company
(Theme park Company)
1984 Profits: $242 Million
Theme Park Operations: 77 percent of profits
Consumer Products: 22 percent of profits

(Licensing Mickey Mouse, Donald Duck etc)
Filmed Entertainment: 1 percent of profits
Walt Disney took over when Roy O. Disney died
Walt Disney Company
Hired Michael Eisner - 1984
-Value both the filmed entertainment legacy and theme park
operations
- Focused on the animation and movie studios
1. Increased admission prices at theme parks

1984 - $186 m 1994 - $688 m
2. Focused on movie studios (character development)
1984 - $2.42 m 1994 - $845 m
3. Diversified into television (ABC), hotels, retail stores,

sport team, cruise line, publishing, consumer
products, licensing, etc.
Consumer products revenue
1984 - $53 m 1994 - $433 m
(Huey & McGowan, 1995)
Market Cap: 1984 = $2 billion 1994 = $28 billion

• Disney animator’s created The Little Mermaid in
1989 had box office receipts of $83.5 million. It
won an Oscar.
• Beauty and the Beast was released in 1991, setting
new box office records for an animated film
($145.8 million).
• The Lion King came out in 1994 and has had box
office sales of over $328.5 million and has sold
over 30 million copies in the home video
market.
Market Cap 1994 = $28 billion
Market Cap: 1984 = $2 billion
6
The DIVERSIFICATION efforts
Market Cap 1994 = $28 billion
described involved acquiring
new resources for the firm.
1. Increased admission
prices at theme parks
Taken together, these actions
2. Focused on movie
and changes led to phenomenal
studios (character
growth in the market development)
capitalization of Walt Disney. 3. Diversified into television (ABC), hotels,
retail stores, sport team, cruise line,
publishing, consumer, products,
licensing, etc.
Market Cap: 1984 =

$2 billion
Other Examples of Strategizing
applied to School, Government
Offices and LGU, and other
Organizations
5-8
EXAMPLE
ONLY
Objective:
•Revenue P30 Billion,
Income P1.5 Billion
Application to
PRIVATE COMPANY
SMYPC (Applying relationship marketing)
More packaging products and
(San Miguel Packaging giving technical assistance to core
Corporation) clients
 San Miguel Beer
 Coca Cola
 Proctor and Gamble
Commercialize more innovative

products
Current Status
Objective:
EXAMPLE • Increase accuracy of amount of rainfall
ONLY prediction
• Increase accuracy of prediction of storm
signal# and arrival time
• Decrease stakeholder complaints (of
fishermen, farmers, schools, offices) by 30%
Application to Government
PAGASA (DOST)
Upgrade metrological
equipment, disc
Access Weather Data from

other countries (payed?)
Quick announcement of weather to TV

networks and social media
Current Status
Rainfall prediction, not accurate
Prediction of storm signal# and arrival time, not accurate
High complaints of fishermen, farmers, schools, offices
Equipment (outdated)
Objective:
EXAMPLE • Highly equipped LM graduates ready for Law school (High
ONLY student satisfaction ratings in terms of preparation to Law
School)
• Excellent feedback from Law Professors (plus retention rates)
• Successful LMs in the corporate world (employed immediately)
• High enrollment rate to BS Legal Management
Department Increase No. of Law

Subjects
of Legal Management - CAS
Continuous improvement of teaching procedures
(case study approach, more problem solving)
GPA retention 2.50 (example only)

5 units strama,
5 units bplan,
5 units marketing
subjects
Total 10 units
Current Status acctng subject
EXAMPLE Objective:
ONLY • To become no. 1 in OSE ranking
• High satisfaction rating from fellow leg ma
students
• Zero complaints from SBC professors and staff
Application to student organization Cost cutting in expenses

Get sponsors for the seminar
JBLC events
2 seminars on law updates and 2

seminars on management
(technical, intensive)
Invite leg ma alumni successful in
corporate world.
Top 3 LM deans lister in all year 1 focus group discussion with law
levels will have dinner treat with professors (for every sem)
supreme court judge or attorney
senator
Current Status of JBLC

EXAMPLE Objective: Output/Outcome
ONLY • Crime: Deploy 15 police
• Dengue Incidence: Upgrading of public clinics
• Accumulated SME livelihood Income: 50 M Pesos, 3
seminars on entrepreneurship.
Application to
LGU
Municipality of
Los Banos Change of LGU Administration
(LAGUNA)
Current Status
• Crime: 20 incidence, Deploy 3 police
• Dengue Incidence: 45 patients
• Poor Livelihood
EXAMPLE Objective: Outcome
ONLY • Crime: 10 incidence (50% REDUCED)
• Dengue Incidence: 15 patients (66% REDUCED)
• Accumulated SME livelihood Income: 50 M Pesos,
STRATEGY IN PUBLIC ADMINISTRATION IS MORE
CHALLENGING
Application to LGU
Municipality of BRGY Pa-ilaw Project
Los Banos Deploy 15 police

(LAGUNA) Upgrading of clinics with capabilities to treat
dengue patients (worth P10 Million from DOH)
• 3 seminars on entrepreneurship and active participation

TRANSPARENCY
to OTOP (buco pie)
Change of LGU Administration
Anti Drugs / Oplan Tukhang
Current Status • Marketing promotion
of resorts
• Crime: 20 incidence, Deploy 3 police
• Dengue Incidence: 45 patients
• Poor Livelihood
EXAMPLE Objective:
ONLY •Revenue P180 Billion
•To become the leading
bank in terms of asset
Application to Bank
Open more branches
Current Status
EXAMPLE Objective:
• Cases: Lower count
ONLY • Budget from DBM: increase by 25%
Application to Government
Supreme Court –
(DOJ)
Current Status
Case: High / Unsolved
5-19
Defining Strategic Management
 A strategic plan is a company’s game plan.
 A strategic plan results from tough managerial choices
among numerous good alternatives, and it signals
commitment to specific markets, policies, procedures,
and operations.
Walt Disney Company Market Cap 1994 = $28 billion

1-20
Defining Strategic Management
 Strategies
 the means by which long-term objectives will
be achieved

5-21
Sample of Umbrella STRATEGIES Most organizations

 Forward Integration simultaneously pursue a
 Backward Integration combination of two or more
 Horizontal Integration strategies,
but a combination strategy
 Market Penetration
can be exceptionally risky if
 Market Development carried too far.
 Product Development
 Related Diversification No organization can afford to
 Unrelated Diversification pursue all the strategies that
might benefit the firm.
 Retrenchment
 Divestiture Difficult decisions must be
 Liquidation made and priorities must be
established.

Alternative Strategies
1. Forward Integration
2. Backward Integration
3. Horizontal Integration
4. Market Penetration
5. Market Development
6. Product Development
7. Related Diversification
8. Unrelated Diversification
9. Retrenchment
10. Divestiture
11. Liquidation
5-23
2. Backward Integration Aspiring
4. Market Penetration Legal Management
5. Market Development graduates specializing in
business
7. Related Diversification Or
9. Retrenchment Corporate Lawyers
must understand these basic
10. Divestiture umbrella strategies
11. Liquidation
1. Forward Integration INTEGRATION STRATEGY
2. Backward Integration (gaining control over distributors,
suppliers and/or competitors)
4. Market Penetration INTENSTIVE STRATEGY
5. Market Development (effort of firm’s competitive position
with its existing products is to improve)
7. Related Diversification DIVERSIFICATION STRATEGY
8. Unrelated Diversification (diversify into other products)
9. Retrenchment
10. Divestiture DEFENSIVE STRATEGY
(strategy to save the company)
11. Liquidation
5-25
2. Backward Integration INTEGRATION STRATEGY
5. Market Development INTENSTIVE STRATEGY
DIVERSIFICATION STRATEGY
9. Retrenchment
10. Divestiture Classification of DEFENSIVE STRATEGY
11. Liquidation Strategies with Collective
countless
variation classification
5-26
Alternative Strategies Defined
and Exemplified
5-27
Alternative Strategies Defined
and Exemplified
5-28
Integration Strategies
(gaining control over distributors, suppliers and/or
competitors)
1. Forward integration
2. Backward integration
3. Horizontal integration
Strategy Trend, Rationale, Basis
• COMPANY A AND ITS SUPPLIERS vs COMPANY B AND ITS SUPPLIERS
• COMPANY A & ITS BUSINESS PARTNERS vs COMPANY B & BUSINESS PARTNERS
• Global Focus: Doing international business, sourcing suppliers abroad
• Pressure from the top management for Productivity and Efficiency
5-29
- involves gaining ownership or increased control over distributors

or retailers
Examples:
 Unilever created partnerships with convenient stores.
-Low mark up price for the convenient stores
(OPERATION AND IT PERSPECTIVE)
-Shelf space or slotting
-Sharing of database on inventory data
-Twice a week meeting in reporting product sales and rejected products
-Unilever may lease a near warehouse to store its inventory for quick
distribution to 7 eleven and ministop
-Giving of cash incentives or awards to convenient stores with highest sales for
consumer products
-Acquisition of locally owned convenient stores in provinces and convert it to
special Unilever product stores.
5-30
INTEGRATION STRATEGY
or retailers
Examples:
 Manufacturing companies are creating
alliances with shopping malls like SM Malls
(since SM is implementing an international expansion)
Nestle Distributor
Input Retailer consumers
5-31
or retailers
Examples:
 Manufacturing companies are creating
alliances with shopping malls like SM Malls
(since SM is implementing an international expansion)
Retailer
Distributors Retailer
Nestle consumers
Input Distributors Retailer
Distributors Retailer
Retailer
5-32
or retailers
Examples:
 MacBook Distributors are closely monitored by the
Head Office of Apple
-Apple is giving complete training or frequent product knowledge
seminar of apple gadgets
5-33
or retailers
Examples:
 Franchising strategy of Jollibee/ McDo
-Frequent auditing of Jollibee branches (OPERATIONS
PERSPECTIVE)
-Auditors must ensure that ALL RAW MATERIALS & OTHER
INVENTORIES MUST BE COMING FROM JOLLIBEE.
-Providing incentives and recognitions for franchise owners with
high audit compliance
-McDonald will obligate all its Luzon restaurant to renovate the
dining area.
5-34
or retailers
Examples:
 Franchising strategy of Jollibee/ McDo
-Frequent auditing of Jollibee branches (OPERATIONS
PERSPECTIVE)
-Auditors must ensure that ALL RAW MATERIALS & OTHER
INVENTORIES MUST BE COMING FROM JOLLIBEE.
Punishment on violations on franchise agreement must be legitimate.
(LEGAL PERSPECTIVE)
-Providing incentives and recognitions for franchise owners with
high audit compliance Legal matters through franchising
-McDonald will obligate all its Luzon
contract restaurant
must to renovate the
be checked
dining area.
5-35
1. Forward Integration Guidelines

 When an organization’s present distributors
are especially expensive
 When the availability of quality distributors is
so limited as to offer a competitive
advantage
 When an organization competes in an
industry that is growing
 When present distributors or retailers have
high profit margins
5-36
INTEGRATION
2. Backward Integration STRATEGY
- strategy of seeking ownership or increased

control of a firm’s suppliers
Example
 Coca Cola agreed with San Miguel Packaging on a 3
year supplier contract for glass bottles
 Coca cola will deploy an operation officer to the glass
manufacturing plant of San Miguel to check sanitation or
production quality of glass bottles (OPERATION
PERSPECTIVE)
 Coca cola may give recognition award to best suppliers
 Coca cola needs stable pricing of raw materials (Financial
Strategy)
 By implementing backward integration strategy, Coca needs to
hire experienced purchasing officers (Human Resource) 5-37
INTEGRATION

Example
production quality of glass bottles (OPERATION
PERSPECTIVE)
 Coca cola may give recognition award to best suppliers
 Suppliers
Coca with
cola needs
highest stable
policy pricing of raw materials (Financial
compliance
Strategy)
No rejects (No bubbles, no cracks)
Suppliers who follows ISO9000, ISO14000
 By implementing
On time delivery backward integration strategy, Coca needs to
hire experienced
Follows purchasing officers (Human Resource)
just in time system
5-38
INTEGRATION

Example
production quality of glass bottles
Lawyers are(OPERATION
needed here
PERSPECTIVE)
• To check contracts
 Coca cola may give recognition award
• Answer the to against
cases best suppliers
the
 Coca cola needs stable pricing
companyof raw materials (Financial
Strategy) • File case to suppliers with violations
 By implementing backward integration strategy, Coca needs to
hire experienced purchasing officers (Human Resource) 5-39
INTEGRATION

Example
 Acquisition of coal powered plant by big
manufacturing companies.
 Common practice is partial acquisition (LEGAL MATTERS IS
CRUCIAL HERE)
 Has to be supported with high financial returns
5-40
INTEGRATION

Example
 Subcontracting of coffee beans of Starbucks
to Cavite Coffee Farmers.
 Starbucks might give education benefits to son or daughter of
the coffee farmer (Corporate Social Responsibility)
 Starbucks will provide the supply of coffee seeds or planting
materials
 Starbucks will frequently visit the coffee farmers to check
agricultural problems and other issues.
 In-store communication for Rustan Coffee’s care to farmers
(Marketing perspective)
5-41
INTEGRATION

Example
 Starbucks will provide the supply of coffee seeds or its planting
materials
 In-store communication for Rustan’s care to farmers (Marketing
perspective)
5-42
INTEGRATION

Example
 Starbucks will provide the supply of coffee seeds or its planting
materials to coffee farmers (suppliers)
perspective)
5-43
INTEGRATION
- strategy
Careful!!of seeking
Career Tipsownership
/ Do’s and Don’ts or increased
 There are so many options in recommending strategies,
control of a firm’smake
suppliers
it sure to select few, and it is really appropriate for
Example the company
 Do research if the company has done it before, make it
Subcontracting sure
of this
coffee beans
time it will of Starbucks
be different
to Cavite CoffeeFarmers.
Consider the financial implication of this detailed
strategy
 Starbucks will provide the supply of coffee seeds or planting
materials
perspective)
5-44
INTEGRATION

Example
In Hospital, suppliers of medical equipment and
consumables needs careful management also;
5-45
2.Backward Integration Guidelines
 When an organization’s present suppliers

are especially expensive or unreliable
 When the number of suppliers is small and
the number of competitors is large
 When the advantages of stable prices are
particularly important
 When an organization needs to quickly
acquire a needed resource
5-46
INTEGRATION
3. Horizontal Integration STRATEGY
- a strategy of seeking ownership of or increased

control over a firm’s competitors
Example
 Oligopoly of Shell, Petron and Caltex
 Frequent club or association meetings for
industry updates (Management)
 Tie up with government controlling body
 Oil deregulation issues (LEGAL)
5-47
INTEGRATION

Example
 Barong manufacturers in Lumban tried to collaborate
for close pricing and quality to overcome competitors in
Bulacan and Taal.
 Collaborative advertisement of barong from Lumban
 Jollibee purchased majority ownership of Mang
Inasal
 SM acquired Waltermart (now being controlled by SM); Acquisition
of Macro; Then converted to SM Hypermarkets).
5-48
INTEGRATION

Example
 BDO acquired Equitable Bank (2007)
 Equitable Banks were converted to BDO
 Small banks were seeking assistance intervention of the
Government (BSP and Department of Finance)
Requesting to stop the merging, since this will create monopoly

(legal matters)
5-49
3. Horizontal Integration Guidelines
 When an organization can gain monopolistic

characteristics in a particular area or region
without being challenged by the federal
government
 When an organization competes in a growing
industry
 When increased economies of scale provide
major competitive advantages
 When competitors are faltering due to a lack of
managerial expertise
5-50
Common
Common
Intensive Strategies
(effort of firm’s competitive position with its
existing products is to improve)
4. Market penetration strategy
5. Market development strategy
6. Product development strategy
• Smart Consumers (environment and health conscious, demanding,
multitasking)
• Globalization
• Rapid Product Development
• Pressure from the top management and shareholders to perform or increase
the sales revenue
5-53
INTEGRATION
4. Market Penetration STRATEGY
- seeks to increase market share for present products

or services in present markets through greater marketing
efforts
Example
 Philippine Airline tries to increase market share again
by improving their services (Operations and Marketing)
 Mabuhay millage card
 McDonald provides (Marketing)
 Discount coupons to trigger more sales.
 Free sandwich on labor day to first 100 customer
 Coca cola glass
5-54
INTENSIVE
4. Market Penetration STRATEGIES

efforts
Example
 Philippine Airline tries to increase market share by
-This requires coordination of all branch
improving their services (Operations and Marketing)
outlet of McDonalds.
 McDonald provides (Marketing)
 Free sandwich on labor day to first 100 customers (OPERATIONS)
 Coca cola glass
5-55
Application of PROJECT MANAGEMENT
Example
-This requires coordination of all branch
 Philippine Airline tries to increase
outlet market share by
of McDonalds.
improving their services (Operations
-Enough andcheese
patties, bun, Marketing)
must be
supplied before May 1 (Delegated for
 McDonald provides Logistics
(Marketing)
Team of the McDo)
 Free sandwich on labor day to first 100 customers (OPERATIONS)
5-56
INTEGRATION
- seeks to increase market share for present products or services

in present markets through greater marketing efforts
Example
 With the greater marketing efforts of BPI, convincing its
customers to deposit more, avail time deposits,
-Installation of Software (or Customer Relationship
Management or CRM Software) that will monitor client transactions
(Operations and IT)
CRM software aims to
Increase deposits of clients with less than P100,000
Convince clients for more car loan
or Requiring each BPI branch to accumulate 30 car loans annually
5-57
INTEGRATION

efforts
Example
 Globe and Smart created heavy advertisement and
promotions.
 To overtake Smart, Globe may hire the most competitive
Marketing people and executives to create more brand
awareness (MARKETING PERSPECTIVE) – example only
• SMART may impose “End of employment rule”, that their resigned
employees must not apply or be employed by Globe, after 1 year.
• This is to avoid talent piracy
• And avoid leakage or revealing the STRATEGY PLAN to the competitor
5-58
INTEGRATION

efforts
Example
 Globe and Smart created heavy advertisement
Check Labor Code
and
promotions.
awareness – example only
• SMART may impose “End of employment rule”, that their resigned
employees must not apply or be employed by Globe, after 1 year.
• This is to avoid talent piracy
• And avoid leakage or revealing the STRATEGY PLAN to the competitor
5-59
INTEGRATION

efforts
Example
 Globe and Smart created heavy advertisement and
promotions.
awareness (MARKETING and HR PERSPECTIVE) – example
only
 Ayala will invest in technology infrastructure for Globe and
create more tower for effective signal system (OPERATIONS
PERSPECTIVE) – examples only
5-60
4. Market Penetration INTENSIVE
STRATEGIES
Example
 Starbuck’s promo on planner.
 Customer loyalty card programs (SM advantage, Suki
Card of Mercury Drugs, Everyday Rewards of 7
Eleven)
 Small Milk Tea Business are offering free drinks on the 11th
purchase of the customer
 Clothing companies provide discount whenever their employee
buy their own products; with ceiling amount
 Octoberfest of San Miguel Beer, Sports or Marathon
Event of Nestle Milo (to maintain awareness of their
products and increase sales)
5-61
4. Market Penetration INTENSIVE
STRATEGIES
Due to Octoberfest, the SMBI is
anticipating more sales of beer!
Example SMBI must ensure that their PROCESS of beer

 Starbuck’s production
promo onis planner.
capable of producing big volume
of beer.
Eleven) SMBI must increase the PRODUCTION CAPACITY
 Small Milk Tea Business
of theirare offering
brewery free drinks on the 11th
plant
 Clothing companiesSMBI
provide
mustdiscount
ensure beerwhenever
QUALITYtheir employee
is being applied.
buy their own products; with ceiling amount
Event of Nestle Milo (to maintain awareness of their
products and increase sales)
5-62
Due to Octoberfest, the SMBI is anticipating
more sales of beer!
Example SMBI must ensure that their PROCESS of beer

 Starbuck’s production
promo onis planner.
capable of producing big volume
of beer.
Eleven)
 Small Milk Tea Business are offering free drinks on the 11th
 Clothing companies provide discount whenever their employee
Ex. Increase of
buy their own products; with ceiling amount Monthly
Capacity from
Production
Event of Nestle Milo (to maintain awareness500,000

of their
bottles
products and increase sales) to 800,000
bottles 5-63
SMBI must ensure QUALITY is being applied.
Malt as raw materials in beer production are

checked regularly.
(This is to anticipate increase of beer production)
Marketing Penetration Strategies SMBI
(sponsorship)
Marketing practices of SMBI
Marketing Penetration Strategies of

SMBI
SMBI


SMBI
(Retail Marketing)

SMBI
Example
 Pfizer will create mobile advertisement to increase
sales of its paracetamol (to compete with Biogesic
paracetamol of Unilab)
 Pfizer must hire and give benefits to the most competent Sales
Rep or Medical Representatives (HR PERSPECTIVE)
 Pfizer must allocate increase advertising expense (FINANCIAL
PERSPECTIVE)
 Unilab does not believe in selling effort and product
development effort because everything has been done
to paracetamol drugs. So their Market Penetration
Strategy is in the Brand Marketing through its endorser
John Lyod. 5-71
Example
Inquirer Newspaper’s availability in the bakery channel

targeting early risers
5-72
4. Market Penetration of training consultancy firms
- seeks to increase market share for present products or services in present markets through
greater marketing efforts
5-73
4. Market Penetration of manpower agencies and
search firms
- seeks to increase market share for present products or services in present markets through greater
marketing efforts
5-74
More Usage – When and in what occasions is the
product or service used?
 Del Monte regularly comes out with
recipes to encourage more usage of Del
Monte products
Promotion
 To build and improve consumer demand.
Sales Promotions
To convince customers to buy the product
Minute Burger pioneered the “buy

1 take 1 promo” of their
hamburgers
Promotion
Advertisement
To effectively inform and persuade the target market
Nesfruta improved penetration and repeat purchase rate when they

launched two new flavors, melon and guyabano, supported with TV
advertising.
INTENSIVE STRATEGY
4. Market Penetration Guidelines
 When current markets are not saturated with a

particular product or service
 When the usage rate of present customers
could be increased significantly
 When the market shares of major competitors
have been declining while total industry sales
have been increasing
 When increased economies of scale provide
major competitive advantages
5-78
INTEGRATION
5. Market Development STRATEGY
- involves introducing present products or

services into new geographic areas
Example:
 Introduction of J.Co Donut (5 years ago)
 Increasing number of store outlet of Red Ribbon
and 7 Eleven to Visayas and Mindanao Region
 Jollibee invested huge resources to finance
expansion of Red Ribbon to catch up with
Goldilocks (Finance Strategy, e.g. equity or debt
financing?)
 Increasing number of stores of Puregold
(Operations)
 Facebook marketing for small enterprises
 Centrum was introduced to senior citizen
5-79
INTEGRATION

Careful!!
Example:
Career Tips / Do’s and Don’ts
 Introduction of J.Co Donut to malls There are so many options
 Increasing number of store outlet of Red Ribbon inmake
recommending strategies,
it sure to select few,
and 7 Eleven to Visayas and Mindanao Region and it is really appropriate
 Jollibee invested huge resources to finance for the company
Do research if the company
expansion of Red Ribbon to catch up with
has done it before, make it
Goldilocks (Finance Strategy, e.g. equity or debt sure this time it will be
financing?) different
 Increasing number of stores of Puregold Consider the financial
implication of this detailed
(Marketing and Operations) strategies
 Facebook marketing for small enterprises
 Centrum was introduced to senior citizen
INTEGRATION
Example:
 Misterdonut (many years ago) chosed Michael V. to
develop market to the masses and communicate low
cost strategy
 Nescafe is conducting product activation and
sponsorship to campus colleges and universities
because it is target the students to drink nescafe coffee.
So the Nestle Finance Department budgets
sponsorship (Marketing Perspective)
 PAL will develop and add market (e.g. serve the airline
transportation requirement in Mainland China)
 Develop Website with Chinese Translation
(I.T. PERPECTIVE)
5-81
INTENSIVE
5. Market Development STRATEGIES
- involves introducing present products or services into new geographic areas

Example: (All Financial Institutions have their specific styles of executing market development
strategy; They must be strategic in their operations location decisions.)
5-82
INTENSIVE
5. Market Development STRATEGIES

Medical City testing and check ups in mall.
(Both M.dev and M.pen)
5-83
Product and Promotion
5-85
5. Market Development Guidelines
 When new channels of distribution are

available that are reliable, inexpensive, and of
good quality
 When an organization is very successful at
what it does
 When new untapped or unsaturated markets
exist
 When an organization has excess production
capacity
5-86
INTENSIVE
6. Product Development STRATEGIES
- seeks increased sales by improving or modifying

present products or services
Examples:
 Continuous product innovation of Apple, Nokia,
Samsung and Sony.
5-87
INTENSIVE
6. Product Development STRATEGIES

Examples:
 Continuous product innovation of Apple, Nokia,
Samsung and Sony.
Human Resource Strategy for fast changing industry.

Hire and develop people with the appropriate skills.
HR team must ensure that they will hire and develop best people who could
adopt to changes and will introduce innovations in the company.
Consider the agreement End on Employment contract
5-88
INTEGRATION
6. Product Development STRATEGY

Examples:
 San Miguel Packaging Corporation invites suppliers in
product development activities
 Getting inputs and technical recommendation on how to
effectively convert plastic resins into plastic crates and plastic
tubes (combined BACKWARD INTEGRATION AND PRODUCT
DEVELOPMENT)
5-89
INTEGRATION

Examples:
 Pascual Laboratory is doing product development in
their medicine drugs
 Medium sized family-owned corporation try to avoid all external
sources of funds in order to avoid entanglements and to keep
control of the company within the family (Financial Strategy)
5-90
INTEGRATION

Examples:
 Pascual Laboratory is doing product development in
their medicine drugs
Check Intellectual
Property Rights
5-91
INTEGRATION

Examples:
 Colleges and Universities are improving their course
offerings
 Quick service restaurants are modifying their products
in their menu
 Wendy’s and Jollibee are frequently getting feedbacks from
dining customer for product evaluation
 For small enterprises, this pertains to innovation or
uniqueness strategy.
5-92
INTEGRATION

Examples:
 Commercial bank creates various financial services
(varying interest rates, credit card, mutual funds, time
deposits)
 -Online payment and transfer of fund (IT and Operations
matters)
5-93
6. Product Development INTEGRATION
STRATEGY

Examples:
 For Commercial Banks like BPI
 Other Areas of service improvement in the regular bank operations
Commercial Bank
Operations Finance Marketing

Teller Scheduling Investments Loans
Check Clearing Commercial
Security
Industrial
Collection Real estate Financial
Transaction processing Personal
Facilities design/layout Mortgage
Vault operations Accounting
Maintenance Trust Department
Security Auditing
STRATEGY

Examples:
Commercial Bank

Differentiation
Check Clearing Security (better) Commercial
Industrial
Transaction processing Response
Personal
(faster)
Vault operations Accounting Cost
leadership
Maintenance (cheaper) Trust Department
Security Auditing
STRATEGY

Examples:
Commercial Bank
Operations Finance
Market Penetration Marketing
Teller Scheduling Investments Loans Differentiation
Check Clearing
Market Development Commercial (better)
Security
Collection Product Development Industrial
Real estate Financial
Transaction processing Personal
Response
-All these INTEGRATION (faster)
STRATEGIES are affecting these
Accounting Cost
Vault operations leadership
examples of operations and HR
Maintenance Trust Department (cheaper)
issues in a commercial bank
Security Auditing
Check Available
Technologies and/
or Softwares
Examples:
Commercial Bank

Differentiation
Check Clearing Security (better) Commercial
Industrial
Transaction processing Response
Personal
(faster)
Vault operations Accounting Cost
leadership
Maintenance (cheaper) Trust Department
Security Auditing
 Coke Zero was formulated
to cater to people who do
not like or cannot take the
sugar content of regular
coke
 One of the strong trends in Product Development

is the concept of BUSINESS OF EXPEREINCE.
 Known company is the Starbucks, Ayala Malls,
Disney, Fridays,
6. Product Development Guidelines
 When an organization has successful products

that are in the maturity stage of the product life
cycle
 When an organization competes in an industry
that is characterized by rapid technological
developments
 When major competitors offer better-quality
products at comparable prices
 When an organization competes in a high-
growth industry
5-102
Intensive Strategies
4. Market penetration strategy
5. Market development strategy
6. Product development strategy
How are law firms and

schools applying this 3
umbrella strategies?
5-103
Diversification Strategies
(diversify into other products)
7. Related diversification
8. Unrelated diversification

• Globalization and expansion
• Rapid Product Development
• Competition
• Sustainability and anticipation of the future
• Synergies of Businesses
• Pressure from the top management and shareholders to perform
DIVERSIFICATION
7. Related Diversification STRATEGY
- Adding new but related products and services

-Value chains possess competitively valuable cross-
business strategic fits
Examples:
 Diversification of Ginebra to other non-alcoholic
beverage like Ice Tea and Bottled Juice (5 years ago)
 Ginebra must be careful in diversification strategy
because it might affect the Masculine Brand Identity of
their core alcohol products (MARKETING/ BRANDING
PERSPECTIVE)
 The new products must be carefully studied based on
market demand and with low threat from competitors
5-105
DIVERSIFICATION

Examples:
 Diversification of Ginebra to other non-alcoholic
beverage like Ice Tea and Bottled Juice (5 years ago)
 Ginebra must be careful in diversification strategy
because it might affect the Masculine Brand Identity of
their core alcohol products (MARKETING/ BRANDING
PERSPECTIVE)
 The new products must be carefully studied based on
market demand and with low threat from competitors
5-106
DIVERSIFICATION
Examples:
 Ayala Land Corporation enters various business
(originally from mall and office leasing and house
and lot, now into condominiums, apartments,
subdivision, hotels, resorts)
5-107
DIVERSIFICATION
Examples:
 Ayala enters various business (originally from mall
and office leasing and house and lot, now into
condominiums, apartments, subdivision, hotels,
etc)
5-108
5-109
DIVERSIFICATION

Examples:
 Plans of some colleges and universities (in
preparation for K-12.) is to offer diploma or short
courses.
5-111
DIVERSIFICATION
Examples:
 Ayala enters various business (originally from mall
and office leasing and house and lot, now into
condominiums, apartments, subdivision, hotels,
etc)
 Ateneo offers new seminars and trainings and
short diploma courses
 Ateneo and its executives e.g. Dean and Rector will
convince trainors and speakers to render time for
providing the seminar. (HR perspective)
5-112
5-113

Hospital management is becoming
competitive by introducing more services
5-114
Asia Brewery added Cobra; Since their beer facilities are underutilized,
they conceptualized this new product just to utilize their facilities
Additional Information
 Cobra energy drink was formulated for blue-collar workers as well as
those who work during midnight shifts.
 What are the needs of blue-collar and midnight BPO workers?
7. Synergies of Related Diversification
 Transferring competitively valuable

expertise, technological know-how, or other
capabilities from one business to another
 Combining the related activities of separate
businesses into a single operation to
achieve lower costs
 Exploiting common use of a well-known
brand name
5-116
- Adding new but unrelated products and services

- value chains are so dissimilar that no competitively
valuable cross-business relationships exist
Example
Disney diversified not just in themed park, but also in movie
animation, hotels, souvenir, licensure of characters.
San Miguel Corporation purchased petroleum companies,
toll highway and airports
Banks owning the real state property (LEGAL MATTERS)
and now for leasing and selling
5-117
- Adding new but unrelated products and services

- value chains are so dissimilar that no competitively
valuable cross-business relationships exist
Example
Corporate Lawyers are
Disney diversified not just in themed park,needed
but also in movie
here
animation, hotels, souvenir, licensure of characters.
San Miguel Corporation purchased petroleum company, toll
highway and airports
Banks owning the real state property (LEGAL MATTERS)
and now for leasing and selling
5-118
7. Related Diversification Guidelines
 When an organization competes in a no-

growth or a slow-growth industry
 When adding new, but related, products
would significantly enhance the sales of
current products
 When new, but related, products could be
offered at highly competitive prices
 When an organization has a strong
management team
5-119
8. Unrelated Diversification Guidelines
 When revenues derived from an organization’s

current products would increase significantly by
adding the new, unrelated products
 When an organization’s present channels of
distribution can be used to market the new
products to current customers
 When an organization’s basic industry is
experiencing declining annual sales and profits
5-120
8. Unrelated Diversification Guidelines
 When an organization has the opportunity to

purchase an unrelated business that is an
attractive investment opportunity
 When existing markets for an organization’s
present products are saturated
 When antitrust action could be charged
against an organization that historically has
concentrated on a single industry
5-121
Defensive Strategies
9. Retrenchment
10. Divestiture
11. Liquidation
• Sustainability
• Recovery of investment
• Minimize financial damages
5-122
DEFENSIVE STRATEGY
9. Retrenchment Strategies
 Retrenchment
 occurs when an organization regroups
through cost and asset reduction to reverse
declining sales and profits
 also called a turnaround or reorganizational
strategy
 designed to fortify an organization’s basic
distinctive competence
5-123
DEFENSIVE STRATEGY
9. Retrenchment Guidelines
 When an organization is one of the weaker

competitors in a given industry
 When an organization is plagued by
inefficiency, low profitability, and poor
employee morale
 When an organization has grown so large so
quickly that major internal reorganization is
needed
5-124
DEFENSIVE
9. Retrenchment STRATEGY

Example:
-Layoff employees and giving separation cost
(legal matters and finance)
-Rotation of managers to different departments
-Minimizing of operations expenses (FINANCIAL
PERSPECTIVE)
-Closing of Mang Pepe (under Jollibee Group of
Companies)
5-125
DEFENSIVE STRATEGY
10. Divestiture Strategies
 Divestiture
 Selling a division or part of an organization
 often used to raise capital for further strategic
acquisitions or investments
5-126
DEFENSIVE STRATEGY
10. Divestiture Strategies
 Divestiture
 Example
 -When Ayala sold its Burger King
 San Miguel sold Coca Cola
5-127
DEFENSIVE STRATEGY
10. Divestiture Guidelines
 When an organization has pursued a

retrenchment strategy and failed to accomplish
needed improvements
 When a division needs more resources to be
competitive than the company can provide
 When a division is responsible for an
organization’s overall poor performance
 When a division is a misfit with the rest of an
organization
5-128
DEFENSIVE STRATEGY
11. Liquidation Strategies
 Liquidation
 selling all of a company’s assets, in parts, for
their tangible worth
 can be an emotionally difficult strategy
5-129
DEFENSIVE STRATEGY
11. Liquidation Guidelines
Examples
 Liquidation of Export Bank
5-130
DEFENSIVE STRATEGY
11. Liquidation Guidelines
 When an organization has pursued both a

retrenchment strategy and a divestiture
strategy, and neither has been successful
 When an organization’s only alternative is
bankruptcy
 When the stockholders of a firm can
minimize their losses by selling the
organization’s assets
5-131
with its existing products)
9. Retrenchment
11. Liquidation
Career Opportunities
5-133
5-134
But, still, the non Notice: Technical skills
managers (fresh (diversify into other products)
are highly utilize during
9. Retrenchment graduates) must the early years of
10. Divestiture demonstrate their DEFENSIVE
working inSTRATEGY
the
11. Liquidation contribution
strategy of the
in the company.
company
Graduate of Legal
Management must use
9. Retrenchment their . . .
11. Liquidation
As Middle Manager or Top Manager
(President or VP), there will be more
heavy job responsibilities. They need to
set strategy plan to direct the company
1. Forward Integration towards theINTEGRATION
vision, mission STRATEGY
and objective
Skills in strategic management DIVERSIFICATION STRATEGY
formulation, (diversify into other products)
implementation and
9. Retrenchment
evaluation become more useful as the
non managers or fresh graduates
10. Divestiture DEFENSIVE
are STRATEGY
promoted. (strategy to save the company)
11. Liquidation
Conceptual and
Problem Solving
Skills
Trend in career growth
Multitasking
Show your conceptual or

problem solving skills
especially in strategic
management of the
companies

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1984 Profits: $242 Million

Theme Park Operations: 77 percent of profits

Consumer Products: 22 percent of profits

1. Increased admission prices at theme parks

3. Diversified into television (ABC), hotels, retail stores,

Market Cap: 1984 = $2 billion 1994 = $28 billion

Market Cap: 1984 = $2 billion

Market Cap: 1984 =

Commercialize more innovative

Access Weather Data from

Quick announcement of weather to TV

Department Increase No. of Law

GPA retention 2.50 (example only)

Application to student organization Cost cutting in expenses

2 seminars on law updates and 2

Current Status of JBLC

Los Banos Deploy 15 police

• 3 seminars on entrepreneurship and active participation

Open more branches

Walt Disney Company Market Cap 1994 = $28 billion

Market Cap: 1984 = $2 billion

Walt Disney Company Market Cap 1994 = $28 billion

Market Cap: 1984 = $2 billion

Sample of Umbrella STRATEGIES Most organizations

Market Cap: 1984 = $2 billion

- involves gaining ownership or increased control over distributors

1. Forward Integration Guidelines

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

- strategy of seeking ownership or increased

 When an organization’s present suppliers

- a strategy of seeking ownership of or increased

- a strategy of seeking ownership of or increased

- a strategy of seeking ownership of or increased

Requesting to stop the merging, since this will create monopoly

 When an organization can gain monopolistic

- seeks to increase market share for present products

- seeks to increase market share for present products

- seeks to increase market share for present products or services

- seeks to increase market share for present products

- seeks to increase market share for present products

- seeks to increase market share for present products

Example SMBI must ensure that their PROCESS of beer

Example SMBI must ensure that their PROCESS of beer

Event of Nestle Milo (to maintain awareness500,000

SMBI must ensure QUALITY is being applied.

Malt as raw materials in beer production are

Marketing Penetration Strategies of

Marketing practices of SMBI

Marketing Penetration Strategies of

Marketing Penetration Strategies of

Inquirer Newspaper’s availability in the bakery channel

Minute Burger pioneered the “buy

Nesfruta improved penetration and repeat purchase rate when they

 When current markets are not saturated with a

- involves introducing present products or

- involves introducing present products or