Chapter 6 Organizational Strategy
Core firms
the central companies in a strategic group
Secondary firms
the firms in a strategic group that follow strategies related to but somewhat different from those of the core firms
Core Capabilities
the internal decision-making routines, problem-solving processes, and organizational cultures that determine how efficiently inputs can be turned into outputs
Corporate-level strategy
the overall organizational strategy that addresses the question "What business or businesses are we in or should we be in?"
Cost leadership
the positioning strategy of producing a product or service of acceptable quality at consistently lower production cots than competitors can, so that the firm can offer the product or service at the lowest price in the industry
Resources
the assets, capibilities, processes, employee time, information, and knowledge that an organization uses to improve its effectiveness and efficiency and create and sustain competitive advantage
Differentiation
the positioning strategy of providing a product or service that is sufficiently different from competitors' offerings that customers are willing to pay a premium price for it
Focus Strategy
the positioning strategy of using cost leadership or differentiation to produce a specialized product or service for a limited, specially targeted group of customers in a particular geographic region or market segment.
Acquisition
the purchase of a company by another company
Recovery
the strategic actions taken after retrenchment to return to a growth strategy
Strategic reference points
the strategic targets managers use to measure whether a firm has developed the core competencies it needs to achieve a sustainable competitive advantage.
Industry-lvl strategy
a corporate strategy that addresses the question "How should we compete in this industry?"
Portfolio strategy
a corporate-level strategy that minimizes risk by diversifying investment among various businesses or product lines
Strategic dissonance
a discrepancy between a company's intended strategy and the strategic actions managers taken when implementing that strategy
Strategic group
a group of companies within an industry against which top managers compare, evaluate, and benchmark strategic threats and opportunities.
Threat of new entrants
a measure of the degree to which barriers to entry make it easy or difficult for new companies to get started in an industry
Threat of substitute products of services
a measure of the ease with which customers can find substitutes for an industry's products or services
Bargaining power of buyers
a measure of the influence that customers have on a firm's prices
Bargaining power for suppliers
a measure of the influence that suppliers of parts, materials, and services to firms in an industry have on the prices of these inputs.
Character of the rivalry
a measure of the intensity of competitive behavior between companies in an industry
BCG (Boston Consulting Group) matrix
a portfolio strategy that categorizes a corporation's businesses by growth rate and relative market share and helps managers decide how to invest corporate funds
Competitive inertia
a reluctance to change strategies or competitive practices that have been successful in the past
Valuable Resources
a resource that allows companies to improve efficiency and effectiveness
Imperfectly imitable resources
a resource that is impossible or extremely costly or difficult for other firms to duplicate
Rare Resources
a resource that is not controlled or possessed by many competing firms
Nonsubstitutable resources
a resource that produces value or competitive advantage and has no equivalent substitutes or replacements
Diversification
a strategy for reducing risk by buying a variety of items (stocks or, in the case of a corporation, types of businesses) so that the failure of one stock or one business does not doom the entire portfolio.
Stability strategy
a strategy that focuses on improving the way in which the company sells the same products or services to the same customers
Growth strategy
a strategy that focuses on increasing profits, revenues, market share, or the number of places in which the company does business
Retrenchment strategy
a strategy that focuses on turning around very poor company performance by shrinking the size or scope of the business
Situational Analysis (SWOT)
an assessment of the strengths and weaknesses in an organization's internal environment and the opportunities and threats in its external environment.
Opportunities and threats are part of the
external environment
Strategic reference point theory
managers choose between two basic alternative strategies. They can choose a conservative, risk-avoiding strategy that aims to protect an existing competitive advantage. Or They can choose an aggressive, risk-seeking strategy that aims to extend or create a sustainable competitive advantage.
Two major approaches to corporate-level strategy
portfolio strategy grand strategies
Competitive advantage
providing greater value for customers than competitors can
The five industry forces that determine overall levels of competition in an industry as well as the positioning strategies and adaptive strategies that companies can use to achieve sustained competitive advantage and above-average profits
Character of the rivalry Threat of new entrants Threat of substitute products of services Bargaining power of suppliers Bargaining power of buyers
Positioning Strategies
Cost leadership Differentiation Focus strategy
Adaptive Strategies
Defenders Prospectors Analyzers Reactors
Four conditions that must be met for a firm's resources to achieve a sustainable competitive advantage
Resources must be Valuable, Rare, Imperfectly imitable, and Nonsubstitutable
SWOT stands for
Strengths, weaknesses, opportunities, and threats
Three questions to formulate an effective strategy
What business are we in? How should we compete in this industry? Who are our competitors, and how should we respond to them?
Grand Strategy
a broad corporate-level strategic plan used to achieve strategic goals and guide the strategic alternatives that managers of individual businesses or subunits may use
Shadow-strategy task force
a committee within a company that analyzes the company's own weaknesses to determine how competitors could exploit them for competitive advantage
Star
a company with a large share of a fast-growing market
Cash cow
a company with a large share of a slow-growing market
Question mark
a company with a small share of a fast-growing market
Dog
a company with a small share of a slow-growing market
Sustainable competitive advantage
a competitive advantage that other companies have tried unsuccessfully to duplicate and have, for them moment, stopped trying to duplicate
Reactors
companies that do not follow a consistent adaptive strategy but instead react to changes in the external environment after they occur
Defenders
companies using an adaptive strategy aimed at defending strategic positions by seeking moderate, steady growth and by offering a limited range of high-quality products and services to a well-defined set of customers
Prospectors
companies using an adaptive strategy that seeks fast growth by searching for new market opportunities, encouraging risk taking, and being the first to bring innovative new products to market
Analyzers
companies using an adaptive strategy that seeks to minimize risk and maximize profits by following or imitating the proven successes of prospectors
Unrelated diversification
creating or acquiring companies in completely unrelated businesses
Strengths and weaknesses are part of the
internal environment
Distinctive competence
what a company can make, do, or perform better than its competitors