Effective Management, by Williams South-Western College Publishing Copyright © 2002 Chapter 8 Organizational Strategy

Effective Management, by Williams South-Western College Publishing Copyright © What Would You Do? Kodak’s Diversification Strategy 4How can Kodak create a sustainable advantage over its competitors? 4What are Kodak’s opportunities and threats? 4What should their new strategy be?

Effective Management, by Williams South-Western College Publishing Copyright © After discussing this section, you should be able to: Learning Objectives Basics of Organizational Strategy ¬explain the components of sustainable competitive advantage and why it is important. ­describe the steps involved in the strategy- making process.

Effective Management, by Williams South-Western College Publishing Copyright © Sustainable Competitive Advantage 4Resources Tassets, capabilities, processes, information, & knowledge 4Competitive advantage Tproviding greater customer value than competitors 4Sustainable Competitive Advantage Twhen other firms cannot duplicate the value a firm is providing to customers

Effective Management, by Williams South-Western College Publishing Copyright © Achieving Sustainable Competitive Advantage Resources must be: ValuableRare Imperfectly Imitable Non- substitutable

Effective Management, by Williams South-Western College Publishing Copyright © Strategy-Making Process

Effective Management, by Williams South-Western College Publishing Copyright © 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 success72% Probability of success75% Strategic Planning & Growth for Big Companies

Effective Management, by Williams South-Western College Publishing Copyright © 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 success61% Probability of success62% Strategic Planning & Return on Investment for Small Companies

Effective Management, by Williams South-Western College Publishing Copyright © Assessing the Need for Strategic Change 4Competitive Inertia Ta reluctance to change strategies or competitive practices that have been successful 4Strategic Dissonance Tdiscrepancy between top management’s intended strategy and the actual strategy implemented by lower management

Effective Management, by Williams South-Western College Publishing Copyright © Situational Analysis - SWOT Strengths Weaknesses Distinctive Competency Core Capability Opportunities Threats Environmental Scanning Strategic Groups Shadow-Strategy Task Force

Effective Management, by Williams South-Western College Publishing Copyright © Strategic Groups 4Core Firms Tcentral companies in a strategic group 4Secondary Firms Tfirms that follow related, but somewhat different strategies than do core firms

Effective Management, by Williams South-Western College Publishing Copyright © Choosing Strategic Alternatives 4Risk-Avoiding Strategy Tprotect a competitive advantage 4Risk-Seeking Strategy Tcreate a sustainable competitive advantage 4Strategic Reference Points Ttargets used by managers to determine if the firm has a sustained competitive advantage

Effective Management, by Williams South-Western College Publishing Copyright © After discussing this section, you should be able to: Learning Objectives Corporate-, Industry-, & Firm-Level Strategies ®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.

Effective Management, by Williams South-Western College Publishing Copyright © Corporate-Level Strategies Portfolio Strategy Grand Strategy

Effective Management, by Williams South-Western College Publishing Copyright © Portfolio Strategy 4Minimize risk by diversification 4Acquisition Tthe company purchases another company 4Unrelated diversification Tcreating or acquiring companies in completely unrelated businesses 4BCG Matrix

Effective Management, by Williams South-Western College Publishing Copyright © Boston Consulting Group (BCG) Matrix Question Marks Stars Dogs Cash Cows Relative Market Share LowHigh Market Growth Low High Adopted from Figure 8.2

Effective Management, by Williams South-Western College Publishing Copyright © Related Diversification Risk Low High Single Business Related Diversification Unrelated Diversification Adapted from Figure 8.3

Effective Management, by Williams South-Western College Publishing Copyright © Grand Strategy

Effective Management, by Williams South-Western College Publishing Copyright © Industry-Level Strategy Five Industry Forces Positioning Strategies Adapted Strategies

Effective Management, by Williams South-Western College Publishing Copyright © Porter’s Five Competitive Forces Character of Rivalry Threat of New Entrants Bargaining Power of Suppliers Threat of Substitute Products or Services Bargaining Power of Buyers

Effective Management, by Williams South-Western College Publishing Copyright © Positioning Strategies Cost Leadership Differentiation Focus Strategy

Effective Management, by Williams South-Western College Publishing Copyright © Adaptive Strategies 4Defenders Tseek moderate growth Tretain customers 4Prospectors Tseek fast growth Temphasize risk taking and innovation 4Analyzers Tblend of defender & prospector strategies Timitate the proven successes of others 4Reactors Tuse an inconsistent strategy Trespond to changes

Effective Management, by Williams South-Western College Publishing Copyright © Firm-Level Strategies Basics of Direct Competition Strategic Moves Involved in Direct Competition Firm-Level Strategy of Entrepreneurship

Effective Management, by Williams South-Western College Publishing Copyright © Framework of Direct Competition Resource Similarity LowHigh Low Market Commodity III IIIIV Adopted from Figure 8.5

Effective Management, by Williams South-Western College Publishing Copyright © Strategic Moves of Direct Competition 4Attack Ta competitive move Tdesigned to reduce a rival’s market share or profits 4Response Ta countermove Tdesigned to protect a company’s market share or profits

Effective Management, by Williams South-Western College Publishing Copyright © 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 Strong Market Commonality Less Likelihood of an Attack Weak Market Commonality Greater Likelihood of an Attack Adapted from Figure 8.6

Effective Management, by Williams South-Western College Publishing Copyright © Firm-Level Strategy 4Entrepreneurship Tthe process of entering new or established markets Tuse new goods or services 4Entrepreneurial Orientation Tset of processes, practices, and decision- making activities that lead to new entry

Effective Management, by Williams South-Western College Publishing Copyright © Entrepreneurial Orientation Autonomy Innovativeness Risk-taking Proactiveness Competitive Aggressiveness

Effective Management, by Williams South-Western College Publishing Copyright © What Really Happened? Kodak’s Strategy 4Sustainable competitive advantage is not clearly evident 4Investing in digital technology 4Their business is imaging 4From retrenchment to growth