MGMT5
6
Organizational
Strategy
© 2012 Cengage Learning
1. specify the components of sustainable
competitive advantage and explain why it’s
important
2. describe the steps involved in the strategymaking process
3. explain the different kinds of corporatelevel strategies
4. describe the different kinds of industrylevel strategies
5. explain the components and kinds of firmlevel strategies
© 2012 Cengage Learning
Basics of Organizational
Strategy
1. specify the components of sustainable
competitive advantage and explain why
it’s important
2. describe the steps involved in the
strategy-making process
© 2012 Cengage Learning
Competitive Advantage
• Resources
– assets, capabilities, processes, employee time,
information, and knowledge that an organization
controls.
• Competitive advantage
– providing greater value for customers than
competitors can
• Sustainable competitive advantage
– when other companies cannot duplicate the value a
firm is providing to customers
© 2012 Cengage Learning
Sustainable Competitive Advantage
Resources must be…
• Valuable
• Rare
• Imperfectly imitable
• Nonsubstitutable
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Three Steps of the
Strategy-Making Process
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Assess
• Difficult because there is a lot of uncertainty in
business.
• Also, top managers are often slow to recognize
the need for strategic change.
– competitive inertia
• Managers must be aware of strategic dissonance.
© 2012 Cengage Learning
Situational Analysis
• Strengths
• Weaknesses
• Opportunities
• Threats
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Internal Analysis
• Distinctive competence
– something that a company can make, do, or perform
better than competitors
• Core capabilities
– less visible, internal decision-making routines,
problem-solving processes, and organizational
cultures that determine how efficiently inputs can be
turned into outputs
© 2012 Cengage Learning
Looking Outside
• Environmental scanning
• Strategic group
– group of companies within an industry that top managers
choose to compare, evaluate, and benchmark strategic
threats and opportunities
• Core firms
– central companies in a strategic group
• Secondary firms
– firms that use strategies related to but somewhat different
from those of core firms
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Choosing Strategic
Alternatives
• Risk-avoiding strategy
• Risk-seeking strategy
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Strategic Reference
Points
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Corporate-, Industry-, and
Firm-Level Strategies
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
© 2012 Cengage Learning
Corporate Level Strategy
“What business or businesses are we in
or should we be in?”
© 2012 Cengage Learning
Portfolio Strategy
A corporate-level strategy that minimizes risk by
diversifying investment among various businesses
or product lines.
Companies can grow through:
•acquisitions
•unrelated diversification
© 2012 Cengage Learning
BCG Matrix
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U-Shaped Relationship
between Diversification and
Risk
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Grand Strategies
Broad strategic plans used to help an
organization achieve its strategic goals
•Growth strategy
•Stability strategy
•Retrenchment strategy
– make significant cuts
– recovery
© 2012 Cengage Learning
Industry-Level Strategies
“How should we compete in this
industry?”
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Porter’s Five Industry
Forces
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Positioning Strategies
• Cost leadership
• Differentiation
• Focus
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Adaptive Strategies
• Defenders
• Prospectors
• Analyzers
• Reactors
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Direct Competition
The rivalry between two companies offering
similar products or services that acknowledge each
other as rivals and take offensive and defensive
positions as they act and react to each other’s
strategic actions.
•Market commonality
•Resource similarity
© 2012 Cengage Learning
A Framework of
Direct Competition
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Strategic Moves of Direct
Competition
• Attack
– a competitive move designed to reduce a rival’s
market share or profits
• Response
– a countermove, prompted by a rival’s attack,
designed to defend or improve a company’s market
share or profit
© 2012 Cengage Learning
REELTOREAL
Field of Dreams
1.
2.
3.
<click screenshot for video>
© 2012 Cengage Learning
If you were Ray, what would you
do in this situation? Would you
be more likely to take Mark’s
advice or Karin’s?
If Ray decides to do what his
daughter Karin suggests with the
field, could you call that an
example of entrepreneurship?
Intrapreneurship?
What are the risks Ray faces if he
acts on Karin’s suggestion?
REELTOREAL
Theo Chocolate
1.
2.
3.
<click screenshot for video>
© 2012 Cengage Learning
Evaluate Theo’s new strategy in
light of the company’s strengths,
weaknesses, opportunities, and
threats.
Using the BCG Matrix, explain
Theo’s decision to offer a classic
line of chocolate bars after having
limited success with Fantasy
Flavor chocolates.
Which of the three competitive
strategies—differentiation, cost
leadership, or focus—do you
think is right for Theo Chocolate?
Explain.