Chapter 6 Organizational Strategy

1. Management Principles Chapter 6Organizational Strategy Craig W. Fontaine, Ph.D.

2. Organizational/Business Strategy The approach a company takes to create a: Competitive Advantage

3. 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

4. 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….

5. Managers must be aware…. In order to create and/or maintain a sustainable advantage companies must …. • Assess need for strategic change (Don’t allow competitive inertia) • Conduct assessment(s) 3. Choose an alternative strategy – if needed There are systematic processes for this…

6. Situational (SWOT) Analysis • Strengths • Weaknesses • Opportunities • Threats Implied/related are.....

7. 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

8. 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

9. Choosing Strategic Alternatives There are two distinct alternatives: • Risk-avoiding strategy • Safer, but less potential • Risk-seeking strategy • Less safe, but greater potential

10. Grand Strategies A corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines.

11. Grand Strategies Broad strategic plans used to help an organization achieve its strategic goals • Stability strategy • Retrenchment strategy • Growth strategy

12. Stability 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

13. 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

14. 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

15. Growth strategies Growth 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