Management by chuch williams chapter 06

Chapter 6
Organizational Strategy
MGMT
Chuck Williams

Designed & Prepared by
B-books, Ltd.
1

Copyright ©2008 Cengage Learning. All rights reserved


Basics of Organizational
Strategy
After reading these sections,
you should be able to:

1. indicate the components of sustainable
competitive advantage and explain why it is
important.
2. describe the steps involved in the
strategy-making process.
2
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Sustainable Competitive Advantage
Resources
Resources

The

Theassets,
assets,capabilities,
capabilities,processes,
processes,
information,
information,and
andknowledge
knowledgethat
thatthe
the
organization
organizationcontrols
controls

Competitive
Competitive
Advantage
Advantage

Providing
Providinggreater
greatervalue
valuefor
forcustomers
customers
than
thancompetitors
competitorscan
can

Sustainable
Sustainable
Competitive
Competitive
Advantage
Advantage

AAcompetitive
competitiveadvantage
advantagethat
thatother
other
companies
companieshave
havetried
triedunsuccessfully
unsuccessfully
to
toduplicate
duplicate

1
3
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Requirements for Sustainable
Competitive Advantage
Valuable
Valuable

Resources
Resources

Rare
Rare
Resources
Resources
Sustainable
Sustainable
Competitive
Competitive
Advantage
Advantage

Imperfectly
Imperfectly
Imitable
Imitable
Resources
Resources

NonNonSubstitutable
Substitutable
Resources
Resources

1
4
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Strategy-Making Process

Assess need
for
strategic change

Conduct a
Situational
Analysis

Choose
Strategic
Alternatives

2
5
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Assessing the Need
for Strategic Change
1. Avoid Competitive Inertia


a reluctance to change strategies or competitive
practices that have been successful in the past

2. Look for Strategic Dissonance


a discrepancy between a company’s intended strategy
and the strategic actions managers take when
implementing that strategy

2.1
6
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Situational Analysis
SS

Strengths
Strengths
Internal

W
W

Weaknesses
Weaknesses

O
O

Opportunities
Opportunities
External

TT

Threats
Threats

2.2
7
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Situational Analysis
I
N
T
E
R
N
A
L

Strengths
• Distinctive
Competence
• Core Capability
Weaknesses

E
X
T
E

R
N
A
L

Opportunities
• Environmental
Scanning
• Strategic Groups
Threats

2.2
8
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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

2.2
9
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Choosing Strategic Alternatives

• Risk-Avoiding Strategy
– protect an existing
competitive advantage

• Risk-Seeking Strategy
– extend or create a sustainable
competitive advantage

• Strategic Reference Points
– targets used by managers to determine if
the firm has developed the core
competencies it needs to achieve a
sustainable competitive advantage
2.3
10
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Strategic Reference Points

2.3
11
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Corporate, Industry, and
Firm-Level Strategies
After reading these sections,
you should be able to:
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.
12
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Corporate-Level Strategies
The
Theoverall
overallorganizational
organizationalstrategy
strategy
Corporate-Level
Corporate-Level that
thataddresses
addressesthe
thequestion
question“What
“What
Strategy
business(es)
Strategy
business(es)are
arewe
wein
inor
orshould

shouldwe
we
be
bein?”
in?”

3
13
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Corporate-Level Strategies
PORTFOLIO STRATEGY
 Acquisitions,
Acquisitions,
unrelated
unrelateddiversification,
diversification,
related
relateddiversification,
diversification,
single
singlebusinesses
businesses
 BCG
BCGMatrix
Matrix
Stars
Stars
Question

Questionmarks
marks
Cash
Cashcows
cows
Dogs
Dogs

GRAND STRATEGIES

 Growth
Growth

 Stability
Stability
 Retrenchment/
Retrenchment/
recovery
recovery

3
14
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Market Growth

BCG Matrix

3.1

High

Question Marks

Stars

Low

Dogs

Cash Cows

Small

Large

Relative Market Share
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15


BCG Matrix

3.1

Stars
Stars

companies
companieswith
withaalarge
large share
share
of
of aafast-growing
fast-growingmarket
market

Question
Question
Marks
Marks

companies
companieswith
withaasmall
smallshare
share
of
of aafast-growing
fast-growingmarket
market

Cash
Cash
Cows
Cows

companies
companieswith
withaalarge
large share
share
of
of aaslow-growing
slow-growingmarket
market

Dogs
Dogs

companies
companieswith
withaasmall
smallshare
share
of
of aaslow-growing
slow-growingmarket
market
16

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BCG Matrix
Company D

Market Growth

Company A

High


Question Marks

Company G

Dogs
Company H


3.1

Company C

Company B

Low

Stars

Question Marks

Small





Company E

Cash Cows
Company F

Large

Relative Market Share

Adapted from Exhibit 6.3

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17


Diversification and Risk

Risk

High

Relationship Between
Diversification and Risk

Low
Single

Business

Related
Diversification

Unrelated
Diversification

3.1
18
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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 labeled a “cash cow” can hurt employee morale.
• Companies often overpay to acquire stars.
• Acquiring firms often treat stars as “conquered foes.”

19
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Grand Strategies
Growth
Growth

Strategy
Strategy

focuses
focuseson
onincreasing
increasingprofits,
profits,
revenues,
revenues,market
marketshare,
share,or
ornumber
number
of
ofplaces
placesto
todo
dobusiness
business

Stability
Stability
Strategy
Strategy

focuses
focuseson
onimproving
improvingthe

theway
waythe
the
company
companysells
sellsthe
thesame
sameproducts
products
or
orservices
servicesto
tothe
thesame
samecustomers
customers

Retrenchment
Retrenchment
Strategy
Strategy

focuses
focuseson
onturning
turningaround
aroundvery
verypoor
poor
company

companyperformance
performanceby
byshrinking
shrinking
the
thesize
sizeor
orscope
scopeof
ofthe
thebusiness
business

3.2
20
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Industry-Level Strategies

Five
Five
Industry
IndustryForces
Forces

Positioning
Positioning
Strategies
Strategies

Adaptive
Adaptive
Strategies
Strategies

4
21
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Porter’s Five Industry Forces
Threats
Threats of
of
New
NewEntrants
Entrants

Bargaining
Bargaining
Power
Powerof
of
Suppliers
Suppliers

4.1

Character

Character
of
of
Rivalry
Rivalry

Bargaining
Bargaining
Power
Power of
of
Buyers
Buyers

Threat
Threatof
of
Substitutes
Substitutes
22
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Positioning Strategies
Cost
CostLeadership
Leadership

Differentiation
Differentiation

Focus
Focus Strategy
Strategy
4.2
23
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Differentiation

24
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Adaptive Strategies
Defenders
Defenders

Prospectors
Prospectors

 seek
seekmoderate
moderategrowth
growth
 retain
retaincustomers
customers

 seek
seekfast
fastgrowth
growth
 emphasize
emphasizerisk-taking
risk-taking
&
&innovation
innovation

Analyzers
Analyzers

Reactors
Reactors

 blend
blendof
ofdefender
defender&
&
prospector
prospectorstrategies
strategies
 imitate
imitateothers’
others’
successes
successes

 use
usean
aninconsistent
inconsistent
strategy
strategy
 respond
respondto
tochanges
changes

4.3
25
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