Chapter 5

Objectives
• Quantitative, measurable, realistic, understandable,
challenging, hierarchical, obtainable, and congruent.

• Long term and annual

• Financial vs. Strategic Objectives

• Approaches to avoid

• Balanced Scorecard

• Types – combination strategies: “stuck in the middle”

 Integration Strategies
• Vertical integration – forward, backward, horizontal

• “Make” or “buy” decision basically same as “market” or

“firm”

• Efficient Boundaries – core technology + make decisions

• *Asset specificity, uncertainty, and frequency

• Assumes bounded rationality and opportunism

Transform:
Input Output
Technical Core
•
 Intensive Strategies
• Market penetration – current/current

• Market development – current/new

• Product development – new/current or new

 Diversification and Defense
• Related vs. Unrelated

• Retrenchment

• Divestiture

• Liquidation
 Porter’s Generic Strategies
• Cost leadership
– Low-cost (Type 1 and 4)
– Best-value (Type 2 and 5)

• Differentiation (Type 3)
• Joint ventures

• Merger/Acquisition

• First-mover advantages

• Outsourcing
Chapter 6
 Strategy
Formulation/Analysis
• Stage 1 - Input
– EFE
– CPM
– IFE

• Stage 2 – Matching
– SWOT
– SPACE
– BCG
– IE
– Grand Strategy

• Stage 3 – Decision
– QSPM
 SWOT
Strengths: Weakness:
1. 1.
2. 2.
3. 3.

Opportunities: SO: WO:

1. 1. (S2/O3) 1. (W2/O2)
2.
3.

Threats: ST: WT:

1. 1. (S1/T3) 1. (W3/T3)
2.
3.
 SPACE Matrix
FP
Conservative:
•Market penetration
•Market development
•Product development
•Related diversification
Aggressive:
•Integration
•Market Development
•Market Penetration
•Product Development
•Diversification (both)

CP IP

Defensive: Competitive:
•Retrenchment •Integration
•Divestiture •Market Penetration
•Liquidation •Market Development
•Product Development

SP
 BCG Matrix
Relative Market Share
1.0 High .5 Medium Low 0.0
High +20
Stars II: ? I:
Industry Sales Growth Rate %

•Integration •Market Penetration

•Market Penetration •Market Development
•Market Development •Product Development
•Product Development •Divestiture

Cash Cows III: Dogs IV:

•Product Development •Retrenchment
•Diversification •Divestiture
•Retrenchment •Liquidation
•Divestiture

Low -20
 IE Matrix
IFE

Grow and Build

EFE Hold and Maintain

Harvest or Divest
 Grand Strategy
Rapid Mkt Growth

II I

Weak Strong
Competitive Competitive
Position Position

III
IV

Slow Mkt Growth