Chapter 6 Organizational Strategy
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Transcript of Chapter 6 Organizational Strategy
Chapter 6Organizational Strategy
Management Principles
Craig W. Fontaine, Ph.D.
Organizational/Business Strategy
The approach a company takes to create
a:
Competitive Advantage
Competitive Advantage
The reason why a customer would choose your product or service over the competition:
• Price• Superior customer services• Innovative technology• etc….
A sustainable competitive advantage is when other companies cannot duplicate the value
your company is providing to customers
Strategic Moves of Direct Competition
• Attack– a competitive move designed to reduce a rival’s market
share or profits
• Response– a countermove, prompted by a rival’s attack, designed
to defend or improve a company’s market share or profit
Before you can decide….
Managers must be aware….
In order to create and/or maintain a sustainable advantage companies must ….
1. Assess need for strategic change (Don’t allow competitive inertia)2. Conduct assessment(s) 3. Choose an alternative strategy – if needed
There are systematic processes for this…
Situational (SWOT) Analysis
• Strengths
• Weaknesses
• Opportunities
• ThreatsImplied/related are.....
Internal Analysis
• Distinctive competence– something that a company can make,
do, or perform better than competitors
• Core capabilities– less visible, internal decision-making
routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs
External Analysis• Environmental scanning • Approaches
– Strategic groups• group of companies within an industry that top
managers choose to compare, evaluate, and benchmark strategic threats and opportunities
– Core firms• companies of particular interest strategic group
– Secondary firms• firms that use strategies related to but somewhat
different from those of core firms
Choosing Strategic Alternatives
There are two distinct alternatives:
• Risk-avoiding strategy– Safer, but less potential
• Risk-seeking strategy– Less safe, but greater potential
Grand Strategies
A corporate-level strategy that minimizes risk by diversifying investment among various
businesses or product lines.
Grand StrategiesBroad strategic plans used to help
an organization achieve its strategic goals
– Stability strategy– Retrenchment strategy– Growth strategy
• A strategy where the organization maintains its current size and current level of business operations
• When is stability an appropriate strategy?– Industry is in a period of rapid upheaval with several key industry &
external forces drastically changing, making future highly uncertain– Industry is facing slow or no growth opportunities– Many small business owners follow stability strategy indefinitely
Stability Strategy
Corporate Level Restructuring Corporate restructuring is the process of
redesigning one or more aspects of a company. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, survive a currently adverse economic climate, or poise the organization to move in an entirely new direction
Retrenchment strategies
• Turnaround: Eliminating unprofitable outputs, reducing size of work force, rethinking firm’s products lines and customer groups.
• Divestment: sell one of business units• Liquidation: last resort strategy
Growth strategiesGrowth strategies:• Internal growth: Increase internal capacity of
organization without acquiring other firms.• Conglomerate Diversification: Acquiring unrelated
business. • Merger: Two roughly similar size firms combine
into one. To benefit of synergy.• Strategic alliance: Temporary partnerships