Chapter 5

Strategies in Action

Strategic Management:
Concepts & Cases
13th Edition
Fred David

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Publishing as Prentice Hall

Ch 5 -1

Types of Strategies
Corp
Level

A Large Company

Division Level

Functional Level

Operational Level

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Ch 5 -2

Types of Strategies
Forward
Integration

Integration
Strategies

Backward
Integration

Horizontal
Integration

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Ch 5 -3

Types of Strategies
Market
Penetration

Intensive
Strategies

Market
Development

Product
Development

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Ch 5 -4

Types of Strategies
Related
Diversification

Diversification
Strategies

Unrelated
Diversification

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Ch 5 -5

Types of Strategies
Retrenchment

Defensive
Strategies

Divestiture

Liquidation

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Ch 5 -6

2007 Examples
Forward
Integration

Southwest Airlines selling tickets

through Galileo

Backward
Integration

Hilton Hotels could acquire a large

furniture manufacturer

Horizontal
Integration

Huntington Bancshares and Sky

Financial Group merged

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Ch 5 -7

2007 Examples
Market
Penetration

McDonalds selling millions of

Shrek the Third items to a
healthier image

Market
Development

Burger King opened its first

restaurant in Japan

Product
Development

Google introduced Google

Presents to compete with
PowerPoint

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Ch 5 -8

2007 Examples
Related
Diversification
Unrelated
Diversification

Retrenchment

MGM Mirage is opening its first noncasino luxury hotel

Ford Motor Company entered the

industrial bank business

Discovery Channel closed 103 mallbased and stand-alone stores

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Ch 5 -9

2007 Examples
Divestiture

Liquidation

Whirlpool sold its struggling Hoover

floor-care business to Techtronic
Industries
Follow Me Charters sold all of its
assets and ceased doing business

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Ch 5 -10

Michael Porters Generic Strategies

Cost Leadership Strategies
(Low-Cost & Best-Value)

Differentiation Strategies

Focus Strategies
(Low-Cost Focus &
Best-Value Focus)

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Ch 5 -11

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Ch 5 -12

Type 1 or 2 Cost Leadership Strategy

Conditions

Vigorous price competition

Plentiful supply of identical products
Little product differentiation
Products used in same ways
Low cost to switch
Large buyers with power
Industry newcomers use low prices to attract
buyers

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Pearson
5 -13
Education, Inc.
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Type 3 Differentiation Strategy Conditions

Many ways to differentiate and buyers

perceive the differences as having value
Diverse buyer needs and uses
Few rival firms following similar
differentiation approach
Fast paced technological change and
evolving product features

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Pearson
5 -14
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Type 4 or 5 Focus Strategy Conditions

Large, profitable, and growing target market

niche
Industry leaders do not consider the niche
crucial to their success
Industry leaders consider it costly or difficult
to meet the needs of this niche
Industry has many niches and segments
Few rivals are specializing on this target
segment

Copyright 2009 Pearson Education, Inc.

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Copyright 2011Ch
Pearson
5 -15
Education, Inc.
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