1. Chapter 9 Organizational Strategy

2. 2 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?

3. 3 After discussing this section, you should be able to: Learning Objectives Basics of Organizational Strategy 1. explain the components of sustainable competitive advantage and why it is important. 2. describe the steps involved in the strategy-making process.

4. 4 Sustainable Competitive Advantage Resources  assets, capabilities, processes, information, & knowledge Competitive advantage  providing greater value for customers than competitors can Sustainable competitive advantage  when other firms cannot duplicate the value a firm is providing to customers

5. 5 Achieving Sustainable Competitive Advantage Resources must be: ValuableRare Imperfectly Imitable Non- substitutable

6. 6 Strategy-Making Process

7. 7 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

8. 8 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

9. 9 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

10. 10 Situational Analysis - SWOT Strengths Weaknesses Distinctive Competency Core Capability Opportunities Threats Environmental Scanning Strategic Groups Shadow-Strategy Task Force

11. 11 Strategic Groups Core Firms  central companies in a strategic group Secondary Firms  firms that follow related, but somewhat different strategies than do core firms Transient Firms  companies whose strategies change from one strategic position to another

12. 12 Gannett Tribune Co. Knight Ridder Dow Jones New York Times Strategic Groups for Gannett Company Newspapers 97 14 32 25 16 TV Stations 22 0 3 8 Web Sites 100 29 57 8 2 Other 8 11 0 3 5 Adapted from Exhibit 9.7

13. 13 Choosing Strategic Alternatives Risk-Avoiding Strategy  protect a competitive advantage Risk-Seeking Strategy  create a sustainable competitive advantage Strategic Reference Points  targets used by managers to determine if the firm has a sustained competitive advantage

14. 14 At the top looking down At the bottom looking up Strategic Reference Points Current Situation SatisfiedSatisfied Sitting on top ofSitting on top of the work Issues ThreatsThreats Potential lossPotential loss NegativityNegativity Response or Behavior Risk AverseRisk Averse ConservativeConservative DefensiveDefensive Current Situation DissatisfiedDissatisfied At the bottomAt the bottom looking up Perception of New Issues OpportunityOpportunity GainGain PositivityPositivity Response or Behavior Risk takingRisk taking DaringDaring OffensiveOffensive Adapted from Exhibit 9.8

15. 15 After discussing this section, you should be able to: Learning Objectives Corporate-, Industry-, & Firm- Level Strategies 3. explain the different kinds of corporate-level strategies. 4. describe the different kinds of industry-level strategies. 5. explain the components and strategies of firm-level competition.

16. 16 Corporate-Level Strategies Portfolio Strategy Grand Strategies Corporate-level strategy  overall organizational strategy that addresses the question “What business or businesses are we in or should we be in?”

17. 17 Portfolio Strategy Minimize risk by diversification Acquisition  the company purchases another company Unrelated diversification  creating or acquiring companies in completely unrelated businesses BCG Matrix

18. 18 Boston Consulting Group (BCG) Matrix Relative Market Share Market Growth Rate SmallLarge Low High Question Marks Company A Company B Stars Company C Company D Dogs Company H Company G Cash Cows Company F Company E Adapted from Exhibit 9.10

19. 19 Relationship Between Diversification and Risk Risk Low High Single Business Related Diversification Unrelated Diversification Adapted from Exhibit 9.11

20. 20 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

21. 21 Grand Strategy

22. 22 Been There, Done That Internal growth is now the focus Diversifying globally Focus on long-term shareholders Nestle’s Strategy

23. 23 Industry-Level Strategies Five Industry Forces Adaptive Strategies Industry-level strategy  overall organizational strategy that addresses the question “How should we compete in this industry?” Positioning Strategies

24. 24 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

25. 25 Positioning Strategies Cost Leadership Differentiation Focus Strategy

26. 26 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

27. 27 Firm-Level Strategies Basics of Direct Competition Strategic Moves Involved in Direct Competition Firm-Level Strategy of Entrepreneurship

28. 28 Framework of Direct Competition Resource Similarity LowHigh Low Market Commodity III IIIIV

29. 29 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

30. 30 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

31. 31 Firm-Level Strategy of Entrepreneurship Entrepreneurship  the process of entering new or established markets with new goods or services Intrapreneurship  entrepreneurship within an existing organization Entrepreneurial orientation  the set of processes, practices, and decision- making activities that lead to new entry

32. 32 Entrepreneurial Orientation Autonomy Innovativeness Risk-taking Proactiveness Competitive Aggressiveness

33. 33 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