Chapter 6

Organizational Strategy

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6-1 specify the components of sustainable competitive
advantage and explain why it’s important
6-2 describe the steps involved in the strategy-making
process
6-3 explain the different kinds of corporate-level
strategies
6-4 describe the different kinds of industry-level
strategies
6-5 explain the components and kinds of firm-level
strategies

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 Competitive Advantage
• Resources
– assets, capabilities, processes, employee time,
information, and knowledge that an organization
controls.
• Competitive advantage
– providing greater value for customers than competitors
can
• Sustainable competitive advantage
– when other companies cannot duplicate the value a
firm is providing to customers

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6-1
Sustainable Competitive Advantage
Resources must be…
• Valuable
• Rare
• Imperfectly imitable
• Nonsubstitutable

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6-1
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6-2
 Assess
• Difficult because there is a lot of uncertainty in
business.

• Also, top managers are often slow to recognize

the need for strategic change.
– competitive inertia

• Managers must be aware of strategic dissonance.

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6-2
 Situational Analysis
• Strengths

• Weaknesses

• Opportunities

• Threats

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6-2
 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
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6-2
 Looking Outside
• Environmental scanning
• Strategic group
– group of companies within an industry that top
managers choose to compare, evaluate, and benchmark
strategic threats and opportunities
• Core firms
– central companies in a strategic group
• Secondary firms
– firms that use strategies related to but somewhat
different from those of core firms

6-2 © 2014 Cengage Learning

 Choosing Strategic Alternatives
• Risk-avoiding strategy

• Risk-seeking strategy

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6-2
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6-2
 Corporate Level Strategy

“What business or businesses are we in or

should we be in?”

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6-3
 Portfolio Strategy

A corporate-level strategy that minimizes risk by

diversifying investment among various
businesses or product lines.

Companies can grow through:

•acquisitions
•unrelated diversification

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6-3
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6-3
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6-3
 Grand Strategies
Broad strategic plans used to help an
organization achieve its strategic goals

•Growth strategy
•Stability strategy
•Retrenchment strategy
– make significant cuts
– recovery

6-3 © 2014 Cengage Learning

 Industry-Level Strategies

“How should we compete in this industry?”

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6-4
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6-4
 Positioning Strategies
• Cost leadership

• Differentiation

• Focus

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6-4
 Adaptive Strategies
• Defenders

• Prospectors

• Analyzers

• Reactors

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6-4
 Firm-Level Strategies

“How should we compete against a

particular firm?”

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6-4
 Direct Competition
The rivalry between two companies offering similar
products or services that acknowledge each other as
rivals and take offensive and defensive positions as
they act and react to each other’s strategic actions.

•Market commonality

•Resource similarity

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6-5
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6-5
 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

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6-5
 Theo Chocolate
1. Evaluate Theo’s new strategy in
light of the company’s strengths,
weaknesses, opportunities, and
threats.
2. Using the BCG Matrix, explain
Theo’s decision to offer a classic
line of chocolate bars after having
limited success with Fantasy Flavor
chocolates.
3. Which of the three competitive
strategies—differentiation, cost
<click screenshot for video>
leadership, or focus—do you think
is right for Theo Chocolate?
Explain.

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