Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 1 CHAPTER EIGHT CHAPTER EIGHT Organizational Strategy Prepared by Deborah Baker Texas Christian University Effective Management 2nd Edition Chuck Williams Effective Management 2nd Edition Chuck Williams

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 2 CHAPTER EIGHT Sustainable Competitive Advantage Resources The assets, capabilities, processes, information, and knowledge that the organization controls The assets, capabilities, processes, information, and knowledge that the organization controls Competitive Advantage Providing greater value for customers than competitors can Sustainable Competitive Advantage Sustainable Competitive Advantage A competitive advantage that other companies have tried unsuccessfully to duplicate 1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 3 CHAPTER EIGHT Requirements for Sustainable Competitive Advantage Sustainable Competitive Advantage Sustainable Competitive Advantage Valuable Resources Non- Substitutable Resources Imperfectly Imitable Resources Rare Resources Adapted from Exhibit 8.1 1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 4 CHAPTER EIGHT Strategy-Making Process Assess need for strategic change Conduct a situational analysis Choose strategic alternatives 123 2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 5 CHAPTER EIGHT 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 2.1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 6 CHAPTER EIGHT Situational Analysis S S W W O O T T Strengths Weaknesses Opportunities Threats Internal External 2.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 7 CHAPTER EIGHT 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 2.3

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 8 CHAPTER EIGHT Corporate-Level Strategies Corporate-Level Strategy Corporate-Level Strategy The overall organizational strategy that addresses the question “What business(es) are we in or should we be in?” The overall organizational strategy that addresses the question “What business(es) are we in or should we be in?” Portfolio Strategy Grand Strategies Grand Strategies 3

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 9 CHAPTER EIGHT Portfolio Strategy  Portfolio Strategy  Reduce risk by diversification  Acquisitions  the company purchases another company  Unrelated diversification  creating or acquiring companies in completely unrelated businesses  Boston Consulting Group (BCG Matrix) 3.1

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 10 CHAPTER EIGHT Grand Strategies Growth Strategy focuses on increasing profits, revenues, market share, or number of places to do business Stability Strategy Stability Strategy focuses on improving the way in which the company sells the same products or services to the same customers focuses on improving the way in which the company sells the same products or services to the same customers Retrenchment Strategy focuses on turning around very poor company performance by shrinking the size or scope of the business focuses on turning around very poor company performance by shrinking the size or scope of the business 3.2

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 11 CHAPTER EIGHT Industry-Level Strategies Five Industry Forces Positioning Strategies Positioning Strategies Adaptive Strategies How should we compete in this industry? 4

Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved 12 CHAPTER EIGHT Firm-Level Strategies Basics of Direct Competition Strategic Moves in Direct Competition Strategic Moves in Direct Competition How should we compete against a particular firm? 5