Chapter 8
Organizational
Strategy
Effective Management, by Williams
South-Western College Publishing
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2
What Would You Do?
Kodak’s Diversification Strategy
How can Kodak create a sustainable
advantage over its competitors?
What are Kodak’s opportunities and
threats?
What should their new strategy be?
Effective Management, by Williams
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Learning Objectives
Basics of Organizational
Strategy
After discussing this section,
you should be able to:
explain the components of sustainable
competitive advantage and why it is important.
describe the steps involved in the strategymaking process.
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Sustainable Competitive Advantage
Resources
assets, capabilities, processes, information, &
knowledge
Competitive advantage
providing greater customer value than
competitors
Sustainable Competitive Advantage
when other firms cannot duplicate the value
a firm is providing to customers Effective Management, by Williams
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Achieving Sustainable Competitive
Advantage
5
Resources must be:
Valuable
Rare
Imperfectly
Imitable
Nonsubstitutable
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Strategy-Making Process
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What Really Works?
Strategy-Making for Firms, Big and Small
Strategic Planning & Profits for Big Companies
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
72%
Strategic Planning & Growth for Big Companies
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
75%
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What Really Works? (cont’d)
Strategy-Making for Firms, Big and Small
Strategic Planning & Growth for Small Companies
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
61%
Strategic Planning & Return on Investment for
Small Companies
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success
62%
Effective Management, by Williams
South-Western College Publishing
Copyright © 2002
Assessing the Need for Strategic
Change
9
Competitive Inertia
a reluctance to change strategies or
competitive practices that have been
successful
Strategic Dissonance
discrepancy between top management’s
intended strategy and the actual strategy
implemented by lower management
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Situational Analysis - SWOT
Strengths
•Distinctive
Competency
•Core Capability
Weaknesses
Opportunities
•Environmental
Scanning
•Strategic Groups
•Shadow-Strategy
Task Force
Threats
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Strategic Groups
Core Firms
central companies in a strategic group
Secondary Firms
firms that follow related, but somewhat
different strategies than do core firms
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Choosing Strategic Alternatives
Risk-Avoiding Strategy
protect a competitive advantage
Risk-Seeking Strategy
create a sustainable competitive advantage
Strategic Reference Points
targets used by managers to determine if the
firm has a sustained competitive advantage
Effective Management, by Williams
South-Western College Publishing
Copyright © 2002
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Learning Objectives
Corporate-, Industry-, &
Firm-Level Strategies
After discussing this section,
you should be able to:
explain the different kinds of corporatelevel strategies.
describe the different kinds of industrylevel strategies.
explain the components and strategies of
firm-level competition.
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South-Western College Publishing
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Corporate-Level Strategies
Portfolio
Strategy
Grand
Strategy
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Portfolio Strategy
Minimize risk by diversification
Acquisition
the company purchases another company
Unrelated diversification
creating or acquiring companies in
completely unrelated businesses
BCG Matrix
Effective Management, by Williams
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Market Growth
Boston Consulting Group (BCG)
Matrix
High
Low
Question
Marks
Stars
Dogs
Cash
Cows
Low
Adopted from Figure 8.2
16
High
Relative Market Share
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Related Diversification
Risk
High
Low
Single
Business
Adapted from Figure 8.3
Related
Diversification
Unrelated
Diversification
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Grand Strategy
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Industry-Level Strategy
Five Industry Forces
Positioning Strategies
Adapted Strategies
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Porter’s Five Competitive Forces
20
Threat of
New Entrants
Bargaining
Power of
Suppliers
Character of Rivalry
Threat of
Substitute Products
or Services
Bargaining
Power of
Buyers
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Positioning Strategies
Cost Leadership
Differentiation
Focus Strategy
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Adaptive Strategies
Defenders
 seek moderate growth
 retain customers
Prospectors
 seek fast growth
 emphasize risk taking
and innovation
Analyzers
 blend of defender &
prospector strategies
 imitate the proven
successes of others
Reactors
 use an inconsistent
strategy
 respond to changes
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Firm-Level Strategies
Basics of
Direct Competition
Strategic Moves Involved
in Direct Competition
Firm-Level Strategy
of Entrepreneurship
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Market Commodity
Framework of Direct Competition
High
II
I
III
IV
Low
Low
High
Resource Similarity
Adopted from Figure 8.5
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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
designed to protect a company’s market
share or profits
Effective Management, by Williams
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Likelihood of Attacks & Responses
Competitor Analysis
Interfirm Rivalry:
Action & Response
Strong Market
Commonality
Weak Market
Commonality
Less Likelihood of
an Attack
Greater Likelihood of
an Attack
Strong Market
Commonality
Weak Market
Commonality
Less Likelihood of
an Attack
Greater Likelihood of
an Attack
Adapted from Figure 8.6
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Firm-Level Strategy
Entrepreneurship
the process of entering new or established
markets
use new goods or services
Entrepreneurial Orientation
set of processes, practices, and decisionmaking activities that lead to new entry
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Entrepreneurial Orientation
Autonomy
Innovativeness
Risk-taking
Proactiveness
Competitive Aggressiveness
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What Really Happened?
Kodak’s Strategy
Sustainable competitive advantage is not
clearly evident
Investing in digital technology
Their business is imaging
From retrenchment to growth
Effective Management, by Williams
South-Western College Publishing
Copyright © 2002