Chapter 9

1. Chapter 9 Organizational Strategy

2. What Would You Do?Kodak’s Diversification Strategy • How can Kodak create a sustainable advantage over its competitors? • What are Kodak’s opportunities and threats? • What should their new strategy be?

3. 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:

4. Sustainable Competitive Advantage • Resources • assets, capabilities, processes, information, & knowledge • Competitive advantage • providing greater customer value than competitors • Sustainable Competitive Advantage • when other firms cannot duplicate the value a firm is providing to customers

5. Achieving Sustainable Competitive Advantage Resources must be: Valuable Rare Imperfectly Imitable Non-substitutable

6. Step 1: Assessing the need for strategic change Step 2: Conduct a situational analysis Step 3: Choose strategic alternatives Strategy-Making Process

7. 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%

8. 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%

9. 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

10. Strengths • Distinctive Competency • Core Capability Opportunities • Environmental Scanning • Strategic Groups • Shadow-Strategy Task Force Weaknesses Threats Situational Analysis - SWOT

11. 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

12. 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

13. 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:

14. Corporate-Level Strategies Portfolio Strategy Grand Strategy

15. Portfolio Strategy • Minimize risk by diversification • Acquisition • the company purchases another company • Unrelated diversification • creating or acquiring companies in completely unrelated businesses • BCG Matrix

16. High Market Growth Low Low High Relative Market Share Boston Consulting Group (BCG) Matrix Question Marks Stars Dogs Cash Cows

17. Related Diversification High Risk Low Single Business Related Diversification Unrelated Diversification Adapted from Figure 9.3

18. 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

19. Grand Strategy Growth Strategy Stability Strategy Recovery/Retrenchment Strategy

20. Been There, Done That Nestle’s Strategy • Internal growth is now the focus • Diversifying globally • Focus on long-term shareholders

21. Industry-Level Strategy Five Industry Forces Positioning Strategies Adapted Strategies

22. 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

23. Positioning Strategies Cost Leadership Differentiation Focus Strategy

24. 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

25. Firm-Level Strategies Basics of Direct Competition Strategic Moves Involved in Direct Competition Firm-Level Strategy of Entrepreneurship

26. Framework of Direct Competition High II I Market Commodity III IV Low Low High Resource Similarity

27. 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

28. 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 Strong Market Commonality Less Likelihood of an Attack Weak Market Commonality Greater Likelihood of an Attack Adapted from Figure 9.6

29. Firm-Level Strategy • Entrepreneurship • the process of entering new or established markets • use new goods or services • Entrepreneurial Orientation • set of processes, practices, and decision-making activities that lead to new entry

30. Entrepreneurial Orientation Autonomy Innovativeness Risk-taking Proactiveness Competitive Aggressiveness

31. What Really Happened?Kodak’s Strategy • Sustainable competitive advantage is not clearly evident • Investing in digital technology • Their business is imaging • From retrenchment to growth