Chapter 6

Chapter 6
Organizational Strategy
MGMT
Designed & Prepared by
Chuck Williams B-books, Ltd.
1
Copyright 2008 Cengage Learning. All rights reserved
Basics of Organizational
Strategy
After reading these sections,
you should be able to:
1. indicate the components of sustainable

competitive advantage and explain why it is
important.
2. describe the steps involved in the
strategy-making process.
2
Sustainable Competitive Advantage
The
Theassets,
assets,capabilities,
capabilities,processes,
processes,
Resources
Resources information,
information,and
andknowledge
knowledgethatthatthe
the
organization
organizationcontrols
controls
Competitive
Competitive Providing
Providinggreater
greatervalue
valuefor
forcustomers
customers
Advantage
Advantage than
thancompetitors
competitorscan
can
Sustainable
Sustainable AAcompetitive
competitiveadvantage
advantagethat
thatother
other
Competitive
Competitive companies
companieshave
havetried
triedunsuccessfully
unsuccessfully
Advantage
Advantage to
toduplicate
duplicate
1
3
Requirements for Sustainable
Competitive Advantage
Valuable
Valuable Rare
Rare
Resources
Resources Resources
Resources
Sustainable
Sustainable
Competitive
Competitive
Advantage
Advantage
Imperfectly
Imperfectly Non-
Non-
Imitable
Imitable Substitutable
Substitutable
Resources
Resources Resources
Resources
1
4
Strategy-Making Process
Assess need Conduct a Choose

for Situational Strategic
strategic change Analysis Alternatives
2
5
Assessing the Need
for Strategic Change
1. Avoid Competitive Inertia
a reluctance to change strategies or competitive
practices that have been successful in the past
2. Look for Strategic Dissonance
a discrepancy between a companys intended strategy
and the strategic actions managers take when
implementing that strategy
2.1
6
Situational Analysis
SS Strengths
Strengths
Internal
W
W Weaknesses
Weaknesses
O
O Opportunities
Opportunities
External
TT Threats
Threats
2.2
7
Situational Analysis
Strengths Opportunities
I E
N X
T Distinctive
T Environmental
E Competence E Scanning
R R Strategic Groups
N Core Capability N
A A
L Weaknesses L Threats
2.2
8
Strategic Groups
Core Firms
central companies in a strategic group
Secondary Firms
firms that follow related, but somewhat different,
strategies than do core firms
2.2
9
Choosing Strategic Alternatives
Risk-Avoiding Strategy
protect an existing
competitive advantage
Risk-Seeking Strategy
extend or create a sustainable
competitive advantage
Strategic Reference Points
targets used by managers to determine if
the firm has developed the core
competencies it needs to achieve a
sustainable competitive advantage
2.3
10
Strategic Reference Points
2.3
11
Corporate, Industry, and
Firm-Level Strategies
After reading these sections,
you should be able to:
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.
12
Corporate-Level Strategies
The
Theoverall
overallorganizational
organizationalstrategy
strategy
Corporate-Level
Corporate-Level that
thataddresses
addressesthe
thequestion
questionWhat
What
Strategy
Strategy business(es)
business(es)are
arewe
weininor
orshould
shouldwewe
be
bein?
in?
3
13
Corporate-Level Strategies
PORTFOLIO STRATEGY GRAND STRATEGIES
Acquisitions,
Acquisitions, Growth
Growth
unrelated
unrelateddiversification,
diversification,
related
relateddiversification,
diversification,
single
singlebusinesses
businesses
Stability
Stability
BCG
BCGMatrix
Matrix
Stars
Stars
Question
Questionmarks
marks Retrenchment/
Retrenchment/
Cash
Cashcows
cows recovery
recovery
Dogs
Dogs
3
14
Market Growth
BCG Matrix
High Question Marks Stars
Low Dogs Cash Cows
Small Large
3.1 Relative Market Share
15
BCG Matrix
companies
companieswithwithaalarge
largeshare
share
Stars
Stars of
ofaafast-growing
fast-growingmarket
market
Question
Question companies
companieswithwithaasmall
smallshare
share
Marks
Marks of
ofaafast-growing
fast-growingmarket
market
Cash
Cash companies
companieswith
withaalarge
largeshare
share
Cows
Cows of
ofaaslow-growing
slow-growingmarket
market
companies
companieswith
withaasmall
smallshare
share
Dogs
Dogs of
ofaaslow-growing
slow-growingmarket
market
3.1
16
BCG Matrix
Company D
Company A

Market Growth
High Question Marks

Question Marks Stars
Company C
Company B

Company E
Company G
Low Dogs Cash Cows

Company H Company F

Small Large
3.1 Relative Market Share
Adapted from Exhibit 6.3 17
Diversification and Risk
Relationship Between
High Diversification and Risk
Risk
Low
Single Related Unrelated

Business Diversification Diversification
3.1
18
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 labeled a cash cow can hurt employee morale.
Companies often overpay to acquire stars.
Acquiring firms often treat stars as conquered foes.
19
Grand Strategies
focuses
focuseson
onincreasing
increasingprofits,
profits,
Growth
Growth revenues,
revenues,market
marketshare,
share,or
ornumber
number
Strategy
Strategy of
ofplaces
placesto
todo
dobusiness
business
focuses
focusesononimproving
improvingthe
theway
waythe
the
Stability
Stability company
companysells
sellsthe
thesame
sameproducts
products
Strategy
Strategy or
orservices
servicesto
tothe
thesame
samecustomers
customers
focuses
focuseson
onturning
turningaround
aroundvery
verypoor
poor
Retrenchment
Retrenchment company
companyperformance
performancebybyshrinking
shrinking
Strategy
Strategy the
thesize
sizeor
orscope
scopeof
ofthe
thebusiness
business
3.2
20
Industry-Level Strategies
Five
Five
Industry
IndustryForces
Forces Positioning
Positioning
Strategies
Strategies Adaptive
Adaptive
Strategies
Strategies
4
21
Porters Five Industry Forces
Threats
Threatsof
of
New
NewEntrants
Entrants
Bargaining
Bargaining Character
Character Bargaining
Bargaining
Power
Powerofof of
of Power
Power of
of
Suppliers
Suppliers Rivalry
Rivalry Buyers
Buyers
Threat
Threatofof
Substitutes
Substitutes
4.1
22
Positioning Strategies
Cost
Cost Leadership
Leadership
Differentiation
Differentiation
Focus
FocusStrategy
Strategy
4.2
23
Differentiation
24
Adaptive Strategies
Defenders
Defenders Prospectors
Prospectors
seek seek
seekfast
fastgrowth
growth
seekmoderate
moderategrowth
growth
retain emphasize
emphasizerisk-taking
risk-taking
retaincustomers
customers
&&innovation
innovation
Analyzers Reactors
Reactors
Analyzers
blend use
useananinconsistent
inconsistent
blendof
ofdefender
defender& &
prospector strategy
strategy
prospectorstrategies
strategies
imitate respond
respondto tochanges
changes
imitateothers
others
successes
successes
4.3
25
Basics
Basicsofof
Direct Strategic
StrategicMoves
Moves
Direct
Competition in
in
Competition
Direct
Direct Entrepreneurship
Entrepreneurship
Competition
Competition
5
26
STRATEGIC ENTREPRENEURIAL
DIRECT
MOVES OF INTRAPRENEURIAL
COMPETITION
DIRECT COMP. ORIENTATION
Market
Marketcommonality
commonality Attack
Attack Autonomy
Autonomy
Resource
Resourcesimilarity
similarity Response
Response Innovativeness
Innovativeness
Risk
Risktaking
taking
Proactiveness
Proactiveness
Competitive
Competitive
Aggressiveness
Aggressiveness
5
27
Direct Competition
Market Commonality
McDonalds Wendys McDonalds
Burger
High King
II I
McDonalds
III IV
McDonalds
Low
Lubys Cafeteria Subway
Low High
Resource Similarity
5.1
28
Strategic Moves of Direct Competition
Attack
A competitive move designed to reduce a

rivals market share or profits.
Response
A competitive countermove, prompted by

a rivals attack, to defend or improve a
companys market share or profit.
5.2
29
Types
Types of
of Responses
Responses
1.
1. Match
Match or
or mirror
mirror your
your competitors
competitors move.
move.
2. Respond along a different dimension from

your competitors move or attack.
5.2
30
Interfirm Rivalry:
Competitor Analysis
Action & Response
Strong Market Less Likelihood
Commonality of an Attack
Weak Market Greater Likelihood

Commonality of an Attack
Strong Resource Less Likelihood

Similarity of a Response
Low Resource Greater Likelihood

Similarity of a Response
5.2
31
Beyond the Book
Entrepreneurship
Entrepreneurship
the process of entering new or established markets with
new goods or services
Intrapreneurship
entrepreneurship within an
existing organization
Entrepreneurial orientation
the set of processes, practices, and decision-making
activities that lead to new entry
32
Key Dimensions of Beyond the Book
Entrepreneurial Orientation
Risk
Risk Taking
Taking
Autonomy
Autonomy
Innovativeness
Innovativeness
Proactiveness
Proactiveness
Competitive
Competitive
Aggressiveness
Aggressiveness
33

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Chapter 6

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Chapter 6

1. indicate the components of sustainable

Assess need Conduct a Choose

3. explain the different kinds of corporate-level

High Question Marks Stars

Low Dogs Cash Cows

High Question Marks

Low Dogs Cash Cows

Single Related Unrelated

A competitive move designed to reduce a

A competitive countermove, prompted by

2. Respond along a different dimension from

Weak Market Greater Likelihood

Strong Resource Less Likelihood

Low Resource Greater Likelihood

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