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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Chapter 8Chapter 8
Organizational Strategy
2
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
What Would What Would YouYou Do? Do? Kodak’s Diversification StrategyKodak’s Diversification Strategy
How can Kodak create a sustainable advantage over its competitors?
What are Kodak’s opportunities and threats?
What should their new strategy be?
3
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
After discussing this section, you should be able to:
Learning ObjectivesLearning ObjectivesBasics of Organizational Basics of Organizational StrategyStrategy
explain the components of sustainable competitive advantage and why it is important.
describe the steps involved in the strategy-making process.
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Sustainable Competitive AdvantageSustainable Competitive Advantage
Resources assets, capabilities, processes,
information, & knowledge Competitive advantage
providing greater customer value than competitors
Sustainable Competitive Advantage when other firms cannot duplicate the
value a firm is providing to customers
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Achieving Sustainable Competitive Achieving Sustainable Competitive Advantage Advantage Resources must be:
Valuable Rare
ImperfectlyImitable
Non-substitutable
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Strategy-Making ProcessStrategy-Making Process
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
What Really Works?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
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
What Really Works? (cont’d)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
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Assessing the Need for Strategic Assessing the Need for Strategic ChangeChange
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
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Situational Analysis - SWOTSituational Analysis - SWOT
Strengths
Weaknesses
•Distinctive Competency
•Core Capability
Opportunities
Threats
•Environmental Scanning
•Strategic Groups•Shadow-Strategy Task Force
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Strategic GroupsStrategic Groups
Core Firms central companies in a strategic group
Secondary Firms firms that follow related, but somewhat
different strategies than do core firms
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Choosing Strategic AlternativesChoosing 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
13
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
After discussing this section, you should be able to:
Learning ObjectivesLearning ObjectivesCorporate-, Industry-, & Corporate-, Industry-, & Firm-Level StrategiesFirm-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.
14
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Corporate-Level StrategiesCorporate-Level Strategies
PortfolioStrategy
GrandStrategy
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Portfolio StrategyPortfolio Strategy
Minimize risk by diversification Acquisition
the company purchases another company
Unrelated diversification creating or acquiring companies in
completely unrelated businesses BCG Matrix
16
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Boston Consulting Group (BCG) Boston Consulting Group (BCG) MatrixMatrix
QuestionMarks
Stars
DogsCashCows
Relative Market Share
Low High
Mar
ket
Gro
wth
Low
High
Adopted from Figure 8.2
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Related DiversificationRelated DiversificationR
isk
Low
High
SingleBusiness
RelatedDiversification
UnrelatedDiversification
Adapted from Figure 8.3
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Grand StrategyGrand Strategy
19
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Industry-Level StrategyIndustry-Level Strategy
Five Industry Forces
Positioning Strategies
Adapted Strategies
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Porter’s Five Competitive ForcesPorter’s Five Competitive Forces
Character of Rivalry
Threat ofNew Entrants
BargainingPower ofSuppliers
Threat ofSubstitute Products
or Services
BargainingPower ofBuyers
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Positioning StrategiesPositioning Strategies
Cost Leadership
Differentiation
Focus Strategy
22
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Adaptive StrategiesAdaptive 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
23
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Firm-Level StrategiesFirm-Level Strategies
Basics ofDirect Competition
Strategic Moves Involvedin Direct Competition
Firm-Level Strategyof Entrepreneurship
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Framework of Direct CompetitionFramework of Direct Competition
Resource Similarity
Low High
High
Low
Mar
ket
Com
mod
ity
III
III IV
Adopted from Figure 8.5
25
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Strategic Moves of Direct CompetitionStrategic 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
26
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Likelihood of Attacks & ResponsesLikelihood of Attacks & Responses
Competitor AnalysisInterfirm Rivalry:
Action & ResponseStrong 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
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Firm-Level StrategyFirm-Level Strategy
Entrepreneurship the process of entering new or
established markets use new goods or services
Entrepreneurial Orientation set of processes, practices, and
decision-making activities that lead to new entry
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Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
Entrepreneurial OrientationEntrepreneurial Orientation
Autonomy
Innovativeness
Risk-taking
Proactiveness
Competitive Aggressiveness
29
Effective Management, by WilliamsSouth-Western College PublishingCopyright © 2002
What What ReallyReally Happened? Happened? Kodak’s StrategyKodak’s Strategy
Sustainable competitive advantage is not clearly evident
Investing in digital technology Their business is imaging From retrenchment to growth
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