chapter 9 organizational strategy. 2 what would you do? general motors’ strategy how can gm create...
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Chapter 9
Organizational Strategy
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
After discussing this section, you should be able to:
Learning ObjectivesBasics of Organizational Strategy1. explain the components of sustainable competitive
advantage and why it is important.2. describe the steps involved in the strategy-making
process.
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
Achieving Sustainable Competitive Advantage
Resources must be:
Valuable Rare
ImperfectlyImitable
Non-substitutable
6
Strategy-Making Process
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%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success 72%
Probability of success 75%
Strategic Planning & Growth for Big Companies
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%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Probability of success 61%
Probability of success 62%
Strategic Planning & Return on Investment for Small Companies
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
Situational Analysis - SWOT
Strengths
Weaknesses
•Distinctive Competency
•Core Capability
Opportunities
Threats
•Environmental Scanning
•Strategic Groups•Shadow-Strategy Task Force
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
Gannett
Tribune Co.
Knight Ridder
Dow Jones
New York Times
Strategic Groups for Gannett Company
Newspapers
97
14
32
25
16
TV Stations
22
22
0
3
8
Web Sites
100
29
57
8
2
Other
8
11
0
3
5
Adapted from Exhibit 9.7
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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
At the top looking down
At the bottom looking up
Strategic Reference PointsCurrent SituationCurrent Situation• SatisfiedSatisfied• Sitting on top ofSitting on top of
the workthe work
IssuesIssues• ThreatsThreats• Potential lossPotential loss• NegativityNegativity
Response orResponse orBehaviorBehavior• Risk AverseRisk Averse• ConservativeConservative• DefensiveDefensive
Current SituationCurrent Situation• DissatisfiedDissatisfied• At the bottom At the bottom
looking uplooking up
Perception ofPerception ofNew IssuesNew Issues• OpportunityOpportunity• GainGain• PositivityPositivity
Response orResponse orBehaviorBehavior• Risk takingRisk taking• DaringDaring• OffensiveOffensive
Adapted from Exhibit 9.8
15
After discussing this section, you should be able to:
Learning ObjectivesCorporate-, Industry-, & Firm-Level Strategies3. 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
Corporate-Level Strategies
PortfolioStrategy
GrandStrategies
Corporate-level strategy overall organizational strategy that addresses the
question “What business or businesses are we in or should we be in?”
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
Boston Consulting Group (BCG) Matrix
Relative Market ShareRelative Market Share
Mar
ket
Gro
wth
Rat
eM
arke
t G
row
th R
ate
Small Large
Low
High Question MarksQuestion Marks
Company A
Company B
StarsStarsCompany C
Company D
DogsDogs
Company H
Company G
Cash CowsCash Cows
Company F
Company E
Adapted from Exhibit 9.10
19
Relationship Between Diversification and Risk
Ris
kR
isk
Low
High
SingleBusiness
RelatedDiversification
UnrelatedDiversification
Adapted from Exhibit 9.11
20
Blast From The PastFive Decades of Diversification Strategies1950s & 1960s: Conglomerates and General Management Skills1950s & 1960s: Conglomerates and General Management Skills
1970s: Corporate Strategy and Portfolio Planning1970s: Corporate Strategy and Portfolio Planning
1980s: Restructuring and Value-Based Planning1980s: Restructuring and Value-Based Planning
1990s: Synergy and “Core” Portfolios1990s: Synergy and “Core” Portfolios
2000: Too Early to Tell2000: Too Early to Tell
21
Grand Strategy
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Been There, Done That
Internal growth is now the focus Diversifying globally Focus on long-term shareholders
Nestle’s Strategy
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?”
PositioningStrategies
24
Porter’s Five Competitive Forces
Character of Rivalry
Threat ofNew Entrants
BargainingPower ofSuppliers
Threat ofSubstitute Products
or Services
BargainingPower ofBuyers
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Positioning Strategies
Cost Leadership
Differentiation
Focus Strategy
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
Firm-Level Strategies
Basics ofDirect Competition
Strategic Moves Involvedin Direct Competition
Firm-Level Strategyof Entrepreneurship
28
Framework of Direct Competition
Resource SimilarityResource Similarity
Low High
High
Low
Mar
ket
Co
mm
od
ity
Mar
ket
Co
mm
od
ity
III
III IV
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
Likelihood of Attacks & ResponsesCompetitor AnalysisCompetitor Analysis Interfirm Rivalry:Interfirm Rivalry:
Action & ResponseAction & ResponseStrong Market Commonality
Less Likelihood of an Attack
Weak Market Commonality
Greater Likelihood of an Attack
High ResourceSimilarity
Greater Likelihood of a Response
Low Resource Similarity
Less Likelihood of a Response
Adapted from Exhibit 9.17
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
Entrepreneurial Orientation
Autonomy
Innovativeness
Risk-taking
Proactiveness
Competitive Aggressiveness
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
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