Chapter 5:

1.) Long-term objectives represent the results expected from pursuing certain strategies.
2.) They are important measures of managerial performance.
3.) Characteristics of Objectives:
1. Quantitative
2. Measurable
3. Realistic
4. Understandable
5. Challenging
6. Hierarchal
7. Obtainable
8. Congruent acroos departments
4.) Benefits of having Clear Objectives:
1. Provide direction by revealing expectations
2. Allow synergy
3. Aid in evaluation by serving as standards
4. Establish priorities
5. Reduce uncertainty
6. Minimize conflicts
7. Stimulate exertion
8. Aid in allocation of resources
9. Aid in design of jobs
10. Provide basis for consistent decision making
5.) Two types of Objectives:
1. Financial Objectives: those associated with growth in revenues, growth in earnings, higher
dividends, etc.
2. Strategic Objectives: concerned with larger market shares, quicker on-time delivery than rivals,
higher product quality than rivals, etc.
6.) Not Managing by Objectives:
1. Managing by Extrapolation: If I aint broke, dont fix it
2. Managing by Crisis: good strategists have the ability to solve problems; form of reacting.
3. Managing by Subjectives: Do your own thing, the best way you know how; aka the mystery
approach to decision making
4. Managing by Hope: decisions are predicated on the hope that they will work and the good times
are just around the corner, especially luck and good fortune is on our side.
7.) Balance Scorecard is a strategy evaluation and control technique; contains a carefully chosen combination
of strategic and financial objectives.
8.) Types of Strategies:
1. Forward Integration: Gaining ownership/increased control over distributors/retailers
i. Franchising: effective means of implementing forward integration
2. Backward Integration: Seeking ownership/increased control of a firms suppliers
3. Horizontal Integration:
1
Seeking ownership/increased control over competitors
4. Market Penetration: Seeking increased market share for present products/services in present
markets through greater marketing efforts
5. Market Development: Introducing present products or services into new geographic area
6. Product Development:
2
Seeking increased sales by improving present
products/services/developing new ones
7. Related Diversification: Adding new but related products/services
8. Unrelated Diversification: Adding new unrelated products/services
9. Retrenchment: Regrouping through cost and asset reduction to reverse declining sales and profit
10. Divestiture: Selling a division or part of an organization
11. Liquidation: Selling all of a companys assets, in parts, for their tangible worth

1
Forward, Backward and horizontal strategies are also known as VERTICAL INTEGRATION STRATEGIES
2
Market Pen, Devt and Product Devlt are aka INTENSIVE STRATEGIES
9.) Combination Strategy can be too risky if carried too far.
10.)Michael Porters 5 Generic Strategies:
1.) TYPE 1: Cost leadershiplow cost
2.) TYPE 2: Cost leadershipbest value
3.) TYPE 3: Differentiation
4.) TYPE 4: Focuslow cost
5.) TYPE 5: Focusbest value