Long Term Strategy

Establish Long Term
Objectives
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. The time frame for
objectives and strategies
should be consistent, usually
from two to five years.
The Nature of Long-
Term Objectives
• Objectives should be quantitative, measurable,
realistic, understandable, challenging,
hierarchical, obtainable, and congruent among
organizational units.
• Each objective should also be associated with a
timeline. Objectives are commonly stated in
terms such as growth in assets, growth in sales,
profitability, market share, degree and nature
of diversification, degree and nature of vertical
integration, earnings per share, and social
responsibility.
Clearly established objectives offer
many benefits
• They provide direction, establish priorities,
reduce uncertainty, minimize conflicts, and
aid in both the allocation of resources and
the design of jobs.
• Objectives provide a basis for consistent
decision making by managers whose values
and attitudes differ. Objectives serve as
standards by which individuals, groups,
departments, divisions, and entire
organizations can be evaluated.
Without long-term objectives, an
organization would drift aimlessly
toward some unknown end.
• It is hard to imagine an
organization or individual
being successful without clear
objectives. Success only rarely
occurs by accident; rather, it is
the result of hard work
directed toward achieving
certain objectives.
Financial versus
Strategic Objectives
Two types of objectives are especially common in
organizations:
financial and strategic objectives.
• Financial objectives include those associated with growth
in revenues, growth in earnings, higher dividends, larger
profit margins, greater return on investment, higher
earnings per share, a rising stock price, improved cash
flow, and so on; while
• Strategic objectives include things such as a larger market
share, quicker on-time delivery than rivals, shorter design-
to-market times than rivals, lower costs than rivals, higher
product quality than rivals, wider geographic coverage
than rivals, achieving technological leadership,
consistently getting new or improved products to market
ahead of rivals, and so on.
Types of • Forward Integration
Alternative • Backward Integration
• Horizontal Integration
Strategies
• Market Penetration
• Market Development
• Product Development
• Many, if not most, organizations simultaneously
pursue a combination of two or more strategies,
but a combination strategy can be exceptionally
risky if carried too far. No organization can afford
to pursue all the strategies that might benefit the
firm. Difficult decisions must be made. Priority
must be established. Organizations, like
individuals, have limited resources. Both
organizations and individuals must choose among
alternative strategies and avoid excessive
indebtedness.
Forward Integration
• Forward integration involves gaining ownership or

increased control over distributors or retailers. Increasing
numbers of manufacturers (suppliers) today are pursuing a
forward integration strategy by establishing Web sites to
directly sell products to consumers.
• An effective means of implementing forward integration is

franchising.
• Businesses can expand rapidly by franchising because costs
and opportunities are spread among many individuals.
Backward Integration
• Both manufacturers and retailers purchase

needed materials from suppliers. Backward
integration is a strategy of seeking
ownership or increased control of a firm’s
suppliers. This strategy can be especially
appropriate when a firm’s current suppliers
are unreliable, too costly, or cannot meet
the firm’s needs.
Horizontal Integration
• Horizontal integration refers to a strategy of

seeking ownership of or increased control
over a firm’s competitors. One of the most
significant trends in strategic management
today is the increased use of horizontal
integration as a growth strategy. Mergers,
acquisitions, and takeovers among
competitors allow for increased economies
of scale and enhanced transfer of resources
and competencies.
Market Penetration
• A market penetration strategy seeks to

increase market share for present products
or services in present markets through
greater marketing efforts. This strategy is
widely used alone and in combination with
other strategies. Market penetration
includes increasing the number of
salespersons, increasing advertising
expenditures, offering extensive sales pro-
motion items, or increasing publicity efforts.
Market Development
• Market development involves introducing

present products or services into new
geographic areas.
Product Development
• Product development is a strategy that

seeks increased sales by improving or
modifying present products or services.
Product development usually entails
large research and development
expenditures.

Long Term Strategy

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Establish Long Term

• Forward integration involves gaining ownership or

• An effective means of implementing forward integration is

• Both manufacturers and retailers purchase

• Horizontal integration refers to a strategy of

• A market penetration strategy seeks to

• Market development involves introducing

• Product development is a strategy that

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