Chapter 6
Organizational
Strategy
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MGMT7
6-1 specify the components of sustainable
competitive advantage and explain why it’s
important
6-2 describe the steps involved in the strategymaking process
6-3 explain the different kinds of corporate-level
strategies
6-4 describe the different kinds of industry-level
strategies
6-5 explain the components and kinds of firm-level
strategies
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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
6-1
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Sustainable Competitive Advantage
Resources must be…
• Valuable
• Rare
• Imperfectly imitable
• Nonsubstitutable
6-1
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Three Steps of the Strategy-Making Process
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6-2
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.
6-2
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Situational Analysis
• Strengths
• Weaknesses
• Opportunities
• Threats
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6-2
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
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6-2
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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6-2
Choosing Strategic Alternatives
• Risk-avoiding strategy
• Risk-seeking strategy
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6-2
Strategic Reference Points
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6-2
Corporate Level Strategy
“What business or businesses are we
in or should we be in?”
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6-3
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
6-3
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Boston Consulting Group Matrix
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6-3
U-Shaped Relationship between Diversification
and Risk
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6-3
Grand Strategies
Broad strategic plans used to help an
organization achieve its strategic goals
•Growth strategy
•Stability strategy
•Retrenchment strategy
– make significant cuts
– recovery
6-3
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Industry-Level Strategies
“How should we compete in this
industry?”
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6-4
Porter’s Five Industry Forces
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6-4
Positioning Strategies
• Cost leadership
• Differentiation
• Focus
6-4
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Adaptive Strategies
• Defenders
• Prospectors
• Analyzers
• Reactors
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6-4
Firm-Level Strategies
“How should we compete against a
particular firm?”
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6-4
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
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6-5
A Framework of Direct Competition
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6-5
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
6-5
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Theo Chocolate
<click screenshot for video>
1. Evaluate Theo’s new strategy
in light of the company’s
strengths, weaknesses,
opportunities, and threats.
2. Using the BCG Matrix, explain
Theo’s decision to offer a
classic line of chocolate bars
after having limited success
with Fantasy Flavor
chocolates.
3. Which of the three
competitive strategies—
differentiation, cost
leadership, or focus—do you
think is right for Theo
Chocolate? Explain.
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