Chapter 6 Organizational Strategy. Learning Outcomes After reading this chapter, you should be able to: 1.Specify the components of sustainable competitive

Chapter 6

Organizational Strategy

Learning OutcomesAfter reading this chapter, you should beable to:1. Specify the components of sustainable competitive

advantage and explain why it is important.2. Describe the steps involved in the strategy-

making 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.

Copyright © 2015 by Nelson Education Ltd. 6-2

Sustainable Competitive Advantage

Resources• the assets, capabilities, processes,

information, and knowledge that theorganization controls

Competitive Advantage• providing greater value for customers

than competitors canSustainable Competitive Advantage • a competitive advantage that other

companies have tried unsuccessfullyto duplicate


Requirements forSustainable Competitive Advantage

Copyright © 2015 by Nelson Education Ltd. 4

SustainableCompetitiveAdvantage

SustainableCompetitiveAdvantage

ValuableResourcesValuable

Resources

Non-Substitutable

Resources

Non-Substitutable

Resources

ImperfectlyImitable

Resources

ImperfectlyImitable

Resources

RareResources

RareResources

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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

Look for

Strategic

Dissonance

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Situational Analysis

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Situational Analysis

• Distinctive competence• Core capability• Shadow-strategy task force• Environmental scanning• Strategic groups• PEST analysis


Class Activity: Situational Analysis of Your School


STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

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Fill in the SWOT analysis for your university/college. What did you learn?

Beyond the Book

Beyond the Book

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STRENGTHS

• Brand image• Cost leader strategy• Product innovation

WEAKNESSES

• Poor intellectual capital• Lagging in e-commerce• No distinctive competencies

OPPORTUNITIES

• QR codes• Minimal barriers of entry • M/A (mergers/

acquisitions)

THREATS

• Inflation• Slowdown in market share• Growing bargaining power of

suppliers and customers

Sample Situational Analysis


Choosing Strategic AlternativesRisk-Avoiding Strategy• protects an existing competitive advantage

Risk-Seeking Strategy• extends or creates a sustainable competitive

advantageStrategic Reference Points• targets used by managers to determine

whether the firm has developed the core competencies it needs to achieve a sustainable competitive advantage


Choosing Strategic Alternatives:Strategic Reference Points


Corporate-Level Strategies

What business(es) are we in or should we be in?

GrandStrategy

PortfolioStrategy

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PORTFOLIO STRATEGY• Acquisitions• Unrelated

diversification• Related

diversification• Single businesses

• BCG matrix– Stars– Question marks– Cash cows– Dogs



GRAND STRATEGIES• Growth• Stability• Retrenchment/recovery


Problems with Portfolio Strategy


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.”


U-Shaped Relationship Between Diversification and Risk


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


Grand Strategies

Retrenchment Strategy• focuses on turning around very poor company

performance by shrinking the size or scope of the business


Industry-Level Strategies:How Should We Compete in This Industry?

Five Industry Forces

Positioning Strategies

Adaptive Strategies


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Porter’s Five Industry Forces


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Positioning Strategies


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• Cost leadership • Focus strategy • Differentiation strategy

Adaptive StrategiesDefenders:• seek moderate growth• retain customersAnalyzers:• are a blend of defender

and prospector strategies

• imitate other’s successes

Prospectors:• seek fast growth• emphasize risk-taking

innovationReactors:• use an inconsistent

strategy• respond to changes


Firm-Level Strategies: How Should We Compete Against a Particular Firm?


Strategic Moves in

Direct Competition

EntrepreneurshipBasics of

Direct Competition

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Firm-Level Strategies:A Framework of Direct Competition


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Strategic Moves of Direct Competition

Attack Response


Entrepreneurship

Entrepreneurship• the process of entering new or established

markets with new goods or servicesIntrapreneurship• entrepreneurship within an existing

organizationEntrepreneurial orientation• the set of processes, practices, and decision-

making activities that lead to new entry


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Beyond the Book

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Documents

Chapter 6 Organizational Strategy. Learning Outcomes After reading this chapter, you should be able to: 1.Specify the components of sustainable competitive