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Chapter 9. Organizational Strategy. 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?.

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chapter 9

Chapter 9

Organizational Strategy

what would you do general motors strategy
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?
learning objectives basics of organizational strategy
Learning ObjectivesBasics of Organizational Strategy
  • explain the components of sustainable competitive advantage and why it is important.
  • describe the steps involved in the strategy-making process.

After discussing this section, you should be able to:

sustainable competitive advantage
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
achieving sustainable competitive advantage
Achieving Sustainable Competitive Advantage

Resources must be:

Valuable

Rare

Imperfectly

Imitable

Non-substitutable

strategy making process

Step 1:

Assessing the need for strategic change

Step 2:

Conduct a situational analysis

Step 3:

Choose strategic alternatives

Strategy-Making Process
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%

Probability of success

72%

Strategic Planning & Growth for Big Companies

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success

75%

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%

Probability of success

61%

Strategic Planning & Return on Investment for Small Companies

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Probability of success

62%

assessing the need for strategic change
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
situational analysis swot

Strengths

  • Distinctive Competency
  • Core Capability

Opportunities

  • Environmental Scanning
  • Strategic Groups
  • Shadow-Strategy Task Force

Weaknesses

Threats

Situational Analysis - SWOT
strategic groups
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
strategic groups for gannett company

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

choosing strategic alternatives
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
strategic reference points

Current Situation

  • Satisfied
  • Sitting on top of
  • the work
  • Issues
  • Threats
  • Potential loss
  • Negativity
  • Response or
  • Behavior
  • Risk Averse
  • Conservative
  • Defensive
  • Current Situation
  • Dissatisfied
  • At the bottom
  • looking up
  • Perception of
  • New Issues
  • Opportunity
  • Gain
  • Positivity
  • Response or
  • Behavior
  • Risk taking
  • Daring
  • Offensive
Strategic Reference Points

At the top looking down

At the bottom looking up

Adapted from Exhibit 9.8

learning objectives corporate industry firm level strategies
Learning ObjectivesCorporate-, 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.

After discussing this section, you should be able to:

corporate level strategies
Corporate-Level Strategies
  • Corporate-level strategy
    • overall organizational strategy that addresses the question “What business or businesses are we in or should we be in?”

Grand

Strategies

Portfolio

Strategy

portfolio strategy
Portfolio Strategy
  • Minimize risk by diversification
  • Acquisition
    • the company purchases another company
  • Unrelated diversification
    • creating or acquiring companies in completely unrelated businesses
  • BCG Matrix
boston consulting group bcg matrix

Company D

Company A

High

Question Marks

Stars

Company C

Company B

Market Growth Rate

Company E

Company G

Low

Dogs

Cash Cows

Company F

Company H

Small

Large

Relative Market Share

Boston Consulting Group (BCG) Matrix

Adapted from Exhibit 9.10

relationship between diversification and risk
Relationship Between Diversification and Risk

High

Risk

Low

Single

Business

Related

Diversification

Unrelated

Diversification

Adapted from Exhibit 9.11

blast from the past five decades of diversification strategies
Blast From The PastFive 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

grand strategy
Grand Strategy

Growth Strategy

Stability Strategy

Recovery/Retrenchment Strategy

been there done that
Been There, Done That

Nestle’s Strategy

  • Internal growth is now the focus
  • Diversifying globally
  • Focus on long-term shareholders
industry level strategies
Industry-Level Strategies
  • Industry-level strategy
    • overall organizational strategy that addresses the question “How should we compete in this industry?”

Adaptive

Strategies

Five Industry

Forces

Positioning

Strategies

porter s five competitive forces
Porter’s Five Competitive Forces

Threat of

New Entrants

Bargaining

Power of

Suppliers

Bargaining

Power of

Buyers

Character of Rivalry

Threat of

Substitute Products

or Services

positioning strategies
Positioning Strategies

Cost Leadership

Differentiation

Focus Strategy

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

Adaptive Strategies
firm level strategies
Firm-Level Strategies

Basics of

Direct Competition

Strategic Moves Involved

in Direct Competition

Firm-Level Strategy

of Entrepreneurship

framework of direct competition
Framework of Direct Competition

High

II

I

Market Commodity

III

IV

Low

Low

High

Resource Similarity

strategic moves of direct competition
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
likelihood of attacks responses
Likelihood of Attacks & Responses

Competitor Analysis

Interfirm Rivalry:

Action & Response

Less Likelihood of an Attack

Strong Market

Commonality

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

firm level strategy of entrepreneurship
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
entrepreneurial orientation
Entrepreneurial Orientation

Autonomy

Innovativeness

Risk-taking

Proactiveness

Competitive Aggressiveness

what really happened gm s strategy
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