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.

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Long-Term Objectives

Annual Objectives

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.

Cost Leadership Differentiati

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Generic Strategies

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 )

•Introduce better products in response to new offerings of rivals•Response to unexpected changes in buyer needs and preferences•Adjust to new government policies

MEETING THE CHALLENGE OF HIGH VELOCITY CHANGE

•Analyze the prospects for market globalization •Research buyer needs, preferences, and expectations•Monitor closely new technological and developments to predict future path

•Pioneer new and technologies•Introduce innovative products that open new markets and spur the creation of whole new industries•Seek to seek industry standards

•React and response as need•Defend and protect the company’s position

•Plan ahead for expected future changes-add/adapt resources and competitive capabilities-improve products line-strengthen distribution

•Seize the offensive •Be the agent of industry changes, set the pace•Influence the rules of the game•Force the rivals to follow

defensive

offensive

• 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.

Advantages1. Build a firm’s image and reputation with buyers2. Produce cost advantages3. Create strongly loyal customers4. 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 Outsourcing1. Less expensive2. Focus on core businesses3. Provide better service

Example: IBM, Airline Industry, etc

Educational Institutions Medical organizations Government agencies and departments