chapter 6 organizational strategy. learning outcomes after reading this chapter, you should be able...

Chapter 6

Organizational Strategy

Learning OutcomesAfter reading this chapter, you should beable to:1. Specify the components of sustainable competitive

advantage and explain why it is important.2. Describe the steps involved in the strategy-

making process. 3. Explain the different kinds of corporate-level

strategies.4. Describe the different kinds of industry-level

strategies.5. Explain the components and kinds of firm-level

strategies.

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Sustainable Competitive Advantage

Resources• the assets, capabilities, processes,

information, and knowledge that theorganization controls

Competitive Advantage• providing greater value for customers

than competitors canSustainable Competitive Advantage • a competitive advantage that other

companies have tried unsuccessfullyto duplicate

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Requirements forSustainable Competitive Advantage

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SustainableCompetitiveAdvantage

SustainableCompetitiveAdvantage

ValuableResourcesValuable

Resources

Non-Substitutable

Resources

Non-Substitutable

Resources

ImperfectlyImitable

Resources

ImperfectlyImitable

Resources

RareResources

RareResources

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Strategy-Making Process

1. Assess the need for strategic change.2. Conduct situational analysis.3. Choose strategic alternatives.

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Avoid Competitive Inertia

Look for

Strategic

Dissonance

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Situational Analysis

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Situational Analysis

• Distinctive competence• Core capability• Shadow-strategy task force• Environmental scanning• Strategic groups• PEST analysis

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Class Activity: Situational Analysis of Your School

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STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

6-8

Fill in the SWOT analysis for your university/college. What did you learn?

Beyond the Book

Beyond the Book

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STRENGTHS

• Brand image• Cost leader strategy• Product innovation

WEAKNESSES

• Poor intellectual capital• Lagging in e-commerce• No distinctive competencies

OPPORTUNITIES

• QR codes• Minimal barriers of entry • M/A (mergers/

acquisitions)

THREATS

• Inflation• Slowdown in market share• Growing bargaining power of

suppliers and customers

Sample Situational Analysis

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Choosing Strategic AlternativesRisk-Avoiding Strategy• protects an existing competitive advantage

Risk-Seeking Strategy• extends or creates a sustainable competitive

advantageStrategic Reference Points• targets used by managers to determine

whether the firm has developed the core competencies it needs to achieve a sustainable competitive advantage

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Choosing Strategic Alternatives:Strategic Reference Points

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Corporate-Level Strategies

What business(es) are we in or should we be in?

GrandStrategy

PortfolioStrategy

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Corporate-Level Strategies

PORTFOLIO STRATEGY• Acquisitions• Unrelated

diversification• Related

diversification• Single businesses

• BCG matrix– Stars– Question marks– Cash cows– Dogs

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Corporate-Level Strategies

GRAND STRATEGIES• Growth• Stability• Retrenchment/recovery

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Problems with Portfolio Strategy

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Problems with Portfolio Strategy

• Unrelated diversification does not reduce risk.• Present performance is used to predict future

performance.• Cash cows fail to aggressively pursue opportunities

and defend themselves from threats.• Being labelled a “cash cow” can hurt employee

morale.• Companies often overpay to acquire stars.• Acquiring firms often treat stars as “conquered

foes.”

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U-Shaped Relationship Between Diversification and Risk

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Grand Strategies

Growth Strategy• is to increase profits, revenues, market share, or

the number of places (store, offices, locations) in which the company does business

Stability Strategy • focuses on improving the way the company sells

the same products or services to the same customers

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Grand Strategies

Retrenchment Strategy• focuses on turning around very poor company

performance by shrinking the size or scope of the business

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Industry-Level Strategies:How Should We Compete in This Industry?

Five Industry Forces

Positioning Strategies

Adaptive Strategies

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Porter’s Five Industry Forces

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Positioning Strategies

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• Cost leadership • Focus strategy • Differentiation strategy

Adaptive StrategiesDefenders:• seek moderate growth• retain customersAnalyzers:• are a blend of defender

and prospector strategies

• imitate other’s successes

Prospectors:• seek fast growth• emphasize risk-taking

innovationReactors:• use an inconsistent

strategy• respond to changes

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Firm-Level Strategies: How Should We Compete Against a Particular Firm?

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Strategic Moves in

Direct Competition

EntrepreneurshipBasics of

Direct Competition

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Firm-Level Strategies:A Framework of Direct Competition

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Strategic Moves of Direct Competition

Attack Response

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Entrepreneurship

Entrepreneurship• the process of entering new or established

markets with new goods or servicesIntrapreneurship• entrepreneurship within an existing

organizationEntrepreneurial orientation• the set of processes, practices, and decision-

making activities that lead to new entry

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Beyond the Book

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