University:
Massachusetts Institute of Technology
Course:
15.992 | S-Lab: Laboratory for Sustainable Business
Academic year:

2023
Views:

58

Pages:

30
Author:

Patricia Pena

Chapter 9 Organizational Strategy What Would You Do?      Sobeys is a national player in the grocery industry Faced integration, cash flow, and IT problems Has 12% of the market Increasing competition and tough market outlook How do you respond to these challenges? Learning Objectives: Basics of Organizational Strategy After reading the next two sections, you should be able to: 1. explain the components of sustainable competitive advantage and why it is important 2. describe the steps involved in the strategy-making process Sustainable Competitive Advantage  Resources   Competitive advantage   assets, capabilities, process, information, and knowledge providing greater value for customers than competitors can Sustainable competitive advantage  when other companies have tried unsuccessfully to duplicate, and have, for the moment, stopped trying to duplicate Achieving a Sustainable Competitive Advantage Resources must be: Valuable Rare Imperfectly imitable Non-substitutable Strategy-Making Process Step 1 Assess need for strategic change Step 2 Conduct situation analysis Step 3 Choose strategic alternatives What Really Works Strategy-making for Firms, Big and Small What Really Works Assessing the Need for Strategic Change  Competitive inertia   a reluctance to change strategies or competitive practices that have been successful in the past Strategic dissonance  discrepancy between upper management’s intended strategy and the strategy actually implemented by lower levels of management Situational Analysis (SWOT) Strengths and Weaknesses  distinctive competence   what a company can do, or perform better than competitors core capabilities  internal routines, processes, and culture that determine how efficiently inputs can be turned into outputs Situational Analysis (SWOT) Environmental scanning  strategic groups   a group of companies within an industry that top managers choose to compare, evaluate, and benchmark strategic opportunities and threats shadow-strategy task force  a committee within the company that analyzes the company’s own weaknesses to determine how competitors could exploit them Strategic Groups Core firms  the central companies in a strategic group Secondary firms  firms that follow related but somewhat different strategies than do core firms Choosing Strategic Alternatives Strategic reference points  targets used by managers to determine if the firm has a sustainable competitive advantage Risk-avoiding strategy  protects an existing competitive advantage Risk-seeking advantage  create or sustain a sustainable competitive advantage Strategic Reference Points Learning Objectives: Corporate-, Industry-, & Firm-Level Strategies After reading the next three sections, you should be able to: 3. explain the different kinds of corporate-level strategies 4. describe the different kinds of industrylevel strategies 5. explain the components and kinds of firmlevel strategies Corporate-Level Strategies Corporate-level strategy  overall organizational strategy that addresses the question “What business are we in or should we be in?” Portfolio Strategy Grand Strategies Portfolio Strategy   Minimize risk by diversification Acquisition   Unrelated diversification    purchase of a company by another company creating or acquiring companies in completely unrelated businesses BCG matrix Related diversification Boston Consulting Group Matrix Diversification and Risk There is a U-shaped relationship between diversification and risk:    Single businesses with no diversification are extremely risky Competing in a variety of different businesses can lower risk. Conglomerates composed of completely unrelated businesses are riskier than undiversified companies. Grand Strategies Growth Retrenchment Stability Recovery Industry-Level Strategies  Industry-level strategy     overall organizational strategy that addresses the question “How should we compete in this industry?” Five industry forces Positioning strategies Adaptive strategies Porter’s Five Industry Forces      Character of the rivalry Threat of new entrants Threat of substitute products or services Bargaining power of suppliers Bargaining power of buyers Positioning Strategies Cost leadership  producing a quality product or service at a price lower than competitors Differentiation  accentuating difference between a product or service and those of competitors Focus  Using cost leadership or differentiation for a specific target market Adaptive Strategies Defenders   seek growth retain customers Prospectors   seek fast growth encourage risk-taking and innovation Analyzers   minimize risk and maximize profit imitate proven successes of prospectors Reactors   Inconsistent strategy React to changes Firm-Level Strategies    Direct competition Strategic moves of direct competition Entrepreneurship: A firm-level strategy Direct Competition Direct competition  rivalry between two firms that offer similar products and services that acknowledge each other as rivals and take offensive and defensive positions in response to each other Two factors determine extent of competition:   market commonality resource similarity Strategic Moves of Direct Competition Attack   a competitive move designed to reduce a rival’s market share or profits Response   a counter move to defend or improve a company’s market share or profit Attacks and Responses Entrepreneurship: A Firm-Level Strategy Entrepreneurship  process of entering new or established markets with new goods or services Entrepreneurial orientation   set of processes, practices and decisionmaking activities that lead to new entry characterized by autonomy, innovativeness, risk-taking, proactiveness, and competitive aggressiveness What Really Happened?     Focused product lines Improved store network Removed costs from its structure Revenues, share price, and operating earnings all increased