Chapter 6
Organizational Strategy
Learning Outcomes
After reading this chapter, you should be
able to:
1. Specify the components of sustainable competitive
advantage and explain why it is important.
2. Describe the steps involved in the strategymaking 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 the
organization controls
Competitive Advantage
• providing greater value for customers
than competitors can
Sustainable Competitive Advantage
• a competitive advantage that other
companies have tried unsuccessfully
to duplicate
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Requirements for
Sustainable Competitive Advantage
Valuable
Resources
Rare
Resources
Sustainable
Competitive
Advantage
Imperfectly
Imitable
Resources
1
NonSubstitutable
Resources
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Strategy-Making Process
1. Assess the need for strategic change.
2. Conduct situational analysis.
3. Choose strategic alternatives.
Avoid
Competitive
Inertia
2
Look for
Strategic
Dissonance
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Situational Analysis
2.2
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Situational Analysis
•
•
•
•
•
•
2.2
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
Beyond the Book
Fill in the SWOT analysis for
your university/college. What did you learn?
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
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Sample Situational Analysis
STRENGTHS
•
•
•
Brand image
Cost leader strategy
Product innovation
Beyond the Book
WEAKNESSES
• Poor intellectual capital
• Lagging in e-commerce
• No distinctive competencies
OPPORTUNITIES
THREATS
• QR codes
• Minimal barriers of entry
• M/A (mergers/
acquisitions)
• Inflation
• Slowdown in market share
• Growing bargaining power of
suppliers and customers
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Choosing Strategic Alternatives
Risk-Avoiding Strategy
• protects an existing competitive advantage
Risk-Seeking Strategy
• extends or creates a sustainable competitive
advantage
Strategic Reference Points
• targets used by managers to determine
whether the firm has developed the core
competencies it needs to achieve a sustainable
competitive advantage
2.3
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Choosing Strategic Alternatives:
Strategic Reference Points
2.3
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Corporate-Level Strategies
What business(es) are we in or
should we be in?
Portfolio
Strategy
3
Grand
Strategy
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Corporate-Level Strategies
PORTFOLIO STRATEGY
• Acquisitions
• BCG matrix
• Unrelated
– Stars
diversification
– Question marks
• Related
– Cash cows
diversification
–
Dogs
• Single businesses
3
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Corporate-Level Strategies
GRAND STRATEGIES
• Growth
• Stability
• Retrenchment/recovery
3
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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
3.1
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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
3.2
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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
3.2
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Industry-Level Strategies:
How Should We Compete in This Industry?
Five
Industry
Forces
Adaptive
Strategies
Positioning
Strategies
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4
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Porter’s Five Industry Forces
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4.1
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Positioning Strategies
• Cost leadership
• Focus strategy
• Differentiation strategy
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4.2
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Adaptive Strategies
Defenders:
• seek moderate growth
• retain customers
Analyzers:
• are a blend of defender
and prospector
strategies
• imitate other’s
successes
4.3
Prospectors:
• seek fast growth
• emphasize risk-taking
innovation
Reactors:
• use an inconsistent
strategy
• respond to changes
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Firm-Level Strategies: How Should
We Compete Against a Particular Firm?
Strategic
Moves in
Direct
Competition
Basics of
Direct
Competition
Entrepreneurship
24
5
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Firm-Level Strategies:
A Framework of Direct Competition
25
5
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Strategic Moves of
Direct Competition
Attack
5.2
Response
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Entrepreneurship
Beyond the Book
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 decisionmaking activities that lead to new entry
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