This document summarizes a lecture on strategic management. It discusses the objectives of the lecture, which are to understand the characteristics of objectives, types of strategies including integration, expansion, and diversification strategies. It also covers topics like market penetration, product development, and guidelines for diversification, retrenchment, divestiture and liquidation. Porter's five generic strategies are also identified and discussed. Specific strategies like forward integration, backward integration, horizontal integration, market development and their examples are provided in detail.

1. JahanUniversity
BachelorofBusinessAdministration
Departmentof BusinessAdministration
Subject: Strategic Management
Lecture# Third
Lecturer: Hijratullah Tahir
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2. Objectives of the lecture
After completion of this lecture students will be able to know:
1. Identify and discuss eight characteristics of objectives.
2. Define and give an example of eleven types of strategies
3. Identify and discuss the three types of “Integration Strategies.”
4. Guidelines for market penetration, market, and product development.
5. Explain when diversification guidelines for when retrenchment,
divestiture, and liquidation.
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3. Outline of the lecture
Topic 1: Identify and discuss eight characteristics of objectives
Topic 2: Define and give an example of eleven types of strategies
Topic 3: Identify and discuss the three types of Integration Strategies.
Topic 4: Market penetration, market and/ or product development.
Topic 5: Explain when diversification is an effective business strategy.
Topic 6: Guidelines for when retrenchment, divestiture, and liquidation
Topic 7: Identify and discuss Porter’s five generic strategies.
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4. Long-term Objectives
• Long-term objectives represent the results expected from pursuing
certain strategies.
• Strategies represent the actions to be taken to accomplish long-term
objectives.
• Usually from 2 to 5 years.
• Used the corporate, divisional, and functional levels of an organization.
• They are an important measure of managerial performance.
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5. Characteristics of Objectives
1. Quantitative
2. Measurable
3. Realistic
4. Understandable
5. Challenging
6. Hierarchical
7. Obtainable
8. Congruent across department
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6. Benefits of Objectives
• Provide direction by revealing expectations
• Allow synergy, Aid in allocation of resources, Aid design of job
• Assist in evaluation by serving as standards
• Establish priorities
• Reduce uncertainty
• Minimize conflicts
• Stimulate exertion and Provide basis for consistent decision making
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7. Types of Strategies
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Integration
• Forward Integration
• Backward Integration
• Horizontal Integration
Expansion
• Product Development
• Market Development
• Market Penetration
Diversification
• Related Diversification
• Un-related Diversification

8. Integration Strategies
1. Forward and backward integration collectively referred to as vertical
integration.
2. Vertical integration - gain control over distributors and suppliers,
3. Horizontal integration - gaining ownership and/or control over rivals.
4. Vertical and horizontal actions by firms are broadly referred to as
integration strategies
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9. Forward Integration
• Gaining ownership or increased control over distributors or retailers.
• Establishing websites to sell their products directly to consumers.
• In a forward integration move, Coca-Cola recently signed a 10-year
partnership with Green Mountain Coffee Roasters,
• To offer for the first time a Coca-Cola drink through a K-Cup.
• An effective means of implementing forward integration is franchising.
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10. Backward Integration
• Strategy of seeking ownership or increased control of a firm’s suppliers.
• Suitable, Firm’s current suppliers are unreliable, too costly, or cannot meet
the firm’s needs.
• Starbucks purchased its first coffee farm—a 600-acre property in Costa Rica.
• Manufacturers as well as retailers purchase needed materials from
suppliers.
• De-integration makes sense in industries that have global sources of supply.
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11. Horizontal Integration
• Seeking ownership of or control over a firm’s competitors, horizontal
integration is arguably the most common growth strategy.
• Thousands of mergers, acquisitions, and takeovers among
competitors are consummated annually.
• Nearly all these transactions aim for increased economies of scale
and enhanced transfer of resources and competencies.
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12. Intensive Strategies
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• Intensive Strategies Market penetration, market development,
and product development are sometimes referred to as intensive
strategies
• Because they require intensive efforts if a firm’s competitive
position with existing products is to improve

13. Market Penetration Strategy
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• Seeks to increase market share for present products or services in
present markets through greater marketing efforts.
• Includes increasing the number of salespersons, increasing advertising
expenditures, offering extensive sales promotion items, or increasing
publicity efforts.
• For example, Anheuser annually purchases several $4.5+ million, 30-
second advertising slots during the Super Bowl.

14. Market Development Strategy
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• Involves introducing present products or services into new geographic
areas.
• For example, Whirlpool recently acquired Indesit, an Italian company
that sells appliances, in order to double Whirlpool’s size in Europe,
where the company has struggled to compete against Electrolux AB of
Sweden, LG Electronics Inc. of South Korea

15. Product Development Strategy
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• Seeks increased sales by improving or modifying present products or
services.
• Product development usually entails large research and development
expenditures.
• Walt Disney Company recently developed a Disney Baby line of
products and services that it expects to become a powerful baby
brand for customers ages 0 to 2.

16. Diversification Strategies
• Two general types of diversification strategies are related
diversification and unrelated diversification.
• Related diversification when their value chains possess
competitively valuable cross-business strategic fits;
• Unrelated diversification when their value chains are so
dissimilar that no competitively valuable cross-business
relationships exist.
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17. Defensive Strategies
• In addition to integrative, intensive, and diversification strategies,
organizations also could pursue defensive strategies such as;
1. Retrenchment,
2. Divestiture, or
3. Liquidation.
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18. Retrenchment Strategy
• Occurs when an organization regroups through cost and asset
reduction to reverse declining sales and profits.
• Sometimes called a turnaround or reorganizational strategy,
• During retrenchment, strategists work with limited resources and face
pressure from shareholders, employees, and the media.
• Retrenchment can involve selling off land and buildings to raise needed
cash, pruning product lines, closing marginal businesses, automating
processes and reducing the number of employees.
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19. Divesture Strategy
• Selling a division or part of an organization is called divestiture.
• It is often used to raise capital for further strategic acquisitions or
investments.
• Divestiture can be part of an overall retrenchment strategy to rid an
organization of businesses that are unprofitable and that require too
much capital.
• Divestiture has also become a popular strategy for firms to focus on
their core businesses and become less diversified
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20. Liquidation Strategy
• Selling all of a company’s assets, in parts, for their tangible worth
is called liquidation;
• Liquidation is a recognition of defeat and consequently can be an
emotionally difficult strategy.
• However, it may be better to cease operating than to continue
losing large sums of money.
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21. Michael Porter’s Five Forces
• Three most widely read books on competitive analysis in the 1980s were
Michael Porter’s Competitive Strategy (1980), Competitive Advantage
(1985), and Competitive Advantage of Nations (1989).
• According to Porter, strategies allow organizations to gain competitive
advantage from three different bases: cost leadership, differentiation,
and focus.
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22. Cost Leadership
• Emphasizes producing standardized products at a low per unit cost for
consumers who are price sensitive.
• Type 1 is a low-cost strategy that offers products or services to a wide
range of customers at the lowest price available on the market.
• Type 2 is a best-value strategy that offers products or services to a wide
range of customers at the best price value available on the market.
• Both Type 1 and Type 2 strategies target a large market.
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23. Differentiation Strategy
• Porter’s Type 3 generic strategy is differentiation,
• A strategy aimed at producing products and services considered unique
to the industry and directed at consumers who are relatively price
insensitive.
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24. Focus Strategy
• Focus means producing products and services that fulfill the needs of
small groups of consumers.
• Type 4 is a low- cost focus strategy that offers products or services to a
small range (niche group) of customers at the lowest price available on
the market.
• Type 5 is a best-value focus strategy that offers products or services to a
small range of customers at the best price-value available on the mkt.
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25. Joint Venture and Partnering
• Joint venture is a popular strategy that occurs when two or more
companies form a temporary partnership or consortium for the
purpose of capitalizing on some opportunity.
• Often, the two or more sponsoring firms form a separate
organization and have shared equity ownership in the new entity
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26. Merger and Acquisition
• Merger and acquisition are two commonly used ways to pursue
strategies.
• Merger - When two organizations of about equal size unite to form one
enterprise.
• Acquisition - When a large organization purchases (acquires) a smaller
firm or vice versa.
• If a merger or acquisition may be hostile takeover or friendly merger.
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27. Tactics to Facilitate Strategies
Strategists use numerous tactics to accomplish strategies;
1. First Mover Advantage - entering a new market or developing
a new product or service prior to rival firms
2. Outsourcing - Companies hiring other companies to take over
various parts of their functional operations, such as HR,
Marketing and Finance, etc.
3. Off-shoring and Re-shoring
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28. Conclusion
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• Characteristics and Benefits of objectives
• Define and give an example of eleven types of strategies
• Identify and discuss the three types of Integration Strategies.
• Market penetration, market and/ or product development.
• Explain when diversification is an effective business strategy.
• Retrenchment, divestiture, and liquidation
• Porter’s five generic strategies.

29. References
1. Strategic Management Concepts and Cases Sixteen Edition by
Fred R. David.
2. Fundamental of Business Management Process by Marlon
Dumas and Jan Mandelling.
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