Chapter 5 notes

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Western University
Management and Organizational Studies
Management and Organizational Studies 4410A/B
Raymond Leduc

Chapter 5Strategies in Action Longterm objectivesthe results expected from pursuing certain strategies strategies are the actions to be taken to accomplish longterm objectives o Time frame for both should be consistent25 years o Desired characteristics quantitative measurable realistic understandable challenging hierarchical obtainable and congruent QMRUCHOC among firm units and associated with a timeline o Benefits of clear objectives provide direction allow synergy aid in evaluation establish priorities reduce uncertainty minimize conflicts stimulate exertion and aid in the allocation of resources and the design of jobs o Serve as standards and act as basis for consistent managerial decisions o Needed at the corporate 75of pay based on LT objectives divisional 50 and functional 25 levelso A measure of managerial performanceFinancial objectivesgrowth in revenuesearnings higher dividends larger profit margins greater ROI higher OPSStrategic objectiveslarger market share quick ontime delivery shorter designtomarket lower costs higher product quality tech leadershipThere is a TRADEOFF between financial and strategic objectives but both should include both annual and longterm performance o Financial objectives can be bestmet by focusing first on achieving strategic objectives Not managing by objectives o Managing by extrapolationkeep doing things the same because its going well if it aint broke dont fix it o Managing by crisisbelieves that the true measure of a good strategist is the ability to solve problems a form of reacting and lets events dictate whatwhen mgmt makes decisions o Managing by subjectivesbelieves that theres no plan for which way to go and what to do just do the best you can to accomplish what you think is rightdo your own thing the best way you know howAka the mystery approacho Managing by hopedecisions are based on the hope that they will work and that good times are just around the cornerThe Balanced Scorecard KaplanNortonstrategy evaluation and control technique o Its name comes from the need of firms to balance financial measures that are often used exclusively in strategy evaluation and control with nonfinancial measures such as product quality and customer service o An effective scorecard has a combo of financial and strategic objectives tailored to the business o Used to balance shareholder objectives with customeroperational objectives o Consistent with continuous improvement in mgmt CIM and total quality mgmt TQM o It is basically a listing of all key objectives to work toward with an associated timeline and contact person of whom is responsibleTypes of strategies Vertical Integration Strategies 1 Forward integrationgaining ownership or increased control over distributorsretailers ie having websites to directly sell products to customers or franchising a Guidelines which may indicate that forward integration is an effective strategy i When present distributors are expensiveunreliableincapable of meeting needs ii When availability of quality distributors is lowiii When competing in a growing industry that is expected to grow more iv When the firm has both capitalhuman resources needed to manage the new business of distributing its own products v When the advantages of stable production are highthe firm can increase the predictability of demand through using this strategy vi When present distributorsretailers have high profit marginsthe firm can distribute its own and price more competitively
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