Chapter 9
Organizational Strategy
What Would You Do?
General Motors’ Strategy



How can GM create a
sustainable advantage over
its competitors?
Are there potential business opportunities
as well as threats?
What should GM’s new strategy be?
2
Learning Objectives
Basics of Organizational
Strategy
After discussing this section,
you should be able to:
1.
2.
explain the components of sustainable competitive
advantage and why it is important.
describe the steps involved in the strategy-making
process.
3
Sustainable Competitive Advantage

Resources


Competitive advantage


assets, capabilities, processes, information, &
knowledge
providing greater value for customers than
competitors can
Sustainable competitive advantage

when other firms cannot duplicate the value a firm
is providing to customers
4
Achieving Sustainable Competitive
Advantage
Resources must be:
Valuable
Rare
Imperfectly
Imitable
Nonsubstitutable
5
Strategy-Making Process
6
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%
7
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%
8
Assessing the Need for Strategic
Change

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
9
Situational Analysis - SWOT
Strengths
•Distinctive
Competency
•Core Capability
Weaknesses
Opportunities
•Environmental
Scanning
•Strategic Groups
•Shadow-Strategy
Task Force
Threats
10
Strategic Groups

Core Firms


Secondary Firms


central companies in a strategic group
firms that follow related, but somewhat different
strategies than do core firms
Transient Firms

companies whose strategies change from one
strategic position to another
11
Strategic Groups for Gannett
Company
Newspapers TV Stations
Web Sites
Other
Gannett
97
22
100
8
Tribune Co.
14
22
29
11
Knight Ridder
32
0
57
0
Dow Jones
25
3
8
3
New York Times
16
8
2
5
Adapted from Exhibit 9.7
12
Choosing Strategic Alternatives

Risk-Avoiding Strategy


Risk-Seeking Strategy


protect a competitive advantage
create a sustainable competitive advantage
Strategic Reference Points

targets used by managers to determine if the firm
has a sustained competitive advantage
13
Strategic Reference Points
Current Situation
• Satisfied
• Sitting on top of
the work
Issues
• Threats
• Potential loss
• Negativity
Response or
Behavior
• Risk Averse
• Conservative
• Defensive
At the top looking down
At the bottom looking up
Current Situation
• Dissatisfied
• At the bottom
looking up
Adapted from Exhibit 9.8
Perception of
New Issues
• Opportunity
• Gain
• Positivity
Response or
Behavior
• Risk taking
• Daring
• Offensive
14
Learning Objectives
Corporate-, Industry-, & FirmLevel Strategies
After discussing this section,
you should be able to:
3.
4.
5.
explain the different kinds of corporate-level
strategies.
describe the different kinds of industry-level
strategies.
explain the components and strategies of
firm-level competition.
15
Corporate-Level Strategies

Corporate-level strategy

overall organizational strategy that addresses the
question “What business or businesses are we in
or should we be in?”
Portfolio
Strategy
Grand
Strategies
16
Portfolio Strategy


Minimize risk by diversification
Acquisition


Unrelated diversification


the company purchases another company
creating or acquiring companies in completely
unrelated businesses
BCG Matrix
17
Market Growth Rate
Boston Consulting Group (BCG)
Matrix
Company A
High Question Marks
Company B
Company G
Low
Dogs
Company H
Small
Company D
Stars
Company C
Company E
Cash Cows
Company F
Large
Relative Market Share
Adapted from Exhibit 9.10
18
Relationship Between
Diversification and Risk
Risk
High
Low
Single
Business
Adapted from Exhibit 9.11
Related
Diversification
Unrelated
Diversification
19
Blast From The Past
Five Decades of Diversification Strategies
1950s & 1960s: Conglomerates and General Management Skills
1970s: Corporate Strategy and Portfolio Planning
1980s: Restructuring and Value-Based Planning
1990s: Synergy and “Core” Portfolios
2000: Too Early to Tell
20
Grand Strategy
21
Been There, Done That
Nestle’s Strategy



Internal growth is now the focus
Diversifying globally
Focus on long-term shareholders
22
Industry-Level Strategies

Industry-level strategy

overall organizational strategy that addresses the
question “How should we compete in this
industry?”
Adaptive
Strategies
Five Industry
Forces
Positioning
Strategies
23
Porter’s Five Competitive Forces
Threat of
New Entrants
Bargaining
Power of
Suppliers
Character of Rivalry
Bargaining
Power of
Buyers
Threat of
Substitute Products
or Services
24
Positioning Strategies
Cost Leadership
Differentiation
Focus Strategy
25
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
26
Firm-Level Strategies
Basics of
Direct Competition
Strategic Moves Involved
in Direct Competition
Firm-Level Strategy
of Entrepreneurship
27
Market Commodity
Framework of Direct Competition
High
II
I
III
IV
Low
Low
High
Resource Similarity
28
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
29
Likelihood of Attacks & Responses
Competitor Analysis
Interfirm Rivalry:
Action & Response
Strong Market
Commonality
Less Likelihood
of an Attack
Weak Market
Commonality
Greater Likelihood of
an Attack
High Resource
Similarity
Greater Likelihood of
a Response
Low Resource
Similarity
Less Likelihood of
a Response
Adapted from Exhibit 9.17
30
Firm-Level Strategy of Entrepreneurship

Entrepreneurship


Intrapreneurship


the process of entering new or established
markets with new goods or services
entrepreneurship within an
existing organization
Entrepreneurial orientation

the set of processes, practices, and decisionmaking activities that lead to new entry
31
Entrepreneurial Orientation
Autonomy
Innovativeness
Risk-taking
Proactiveness
Competitive Aggressiveness
32
What Really Happened?
GM’s Strategy


Significantly improve reliability of its cars
Use cost savings to develop differentiated
products


hot new cars and trucks
Radical retrenchment strategy



close Oldsmobile division
close some European factories
cut the number of different models
33