Organizational Strategy - Chapter 6 PDF

MGMT Organizational Strategy Chapter 6 ORGANIZATIONAL STRATEGY  is the comprehensive plan a company develops to achieve its long-term goals and objectives, aligning its resources, processes, and actions to maintain a competitive advantage and succeed in its market or industry....

MGMT Organizational Strategy Chapter 6 ORGANIZATIONAL STRATEGY  is the comprehensive plan a company develops to achieve its long-term goals and objectives, aligning its resources, processes, and actions to maintain a competitive advantage and succeed in its market or industry.  It serves as a roadmap for decision- making and helps the organization respond to changes in the external environment while ensuring that the company's mission, vision, and core values are met. 2 COMPETITIVE ADVANTAGE  refers to the attributes or factors that allow a company to outperform its competitors.  It is what makes an organization unique and more successful in delivering greater value to its customers, either through lower prices or by offering better products or services that justify higher prices. 3 Types of Competitive Advantage:  Cost Advantage (Cost Leadership): A company can produce goods or services at a lower cost than its competitors, allowing it to offer lower prices or achieve higher profit margins.  Differentiation Advantage: A company offers products or services with unique features, quality, or customer service that distinguish it from competitors.  Focus/Niche Advantage: A company targets a specific, narrower market segment, often serving it better than competitors through specialization. 4 Sources of Competitive Advantage:  Innovation: Offering new and unique products or technologies (e.g., Tesla’s innovation in electric vehicles).  Operational Efficiency: Using superior processes or technology to reduce costs or improve product quality.  Customer Loyalty: Building a strong relationship with customers that leads to repeat business and brand loyalty (e.g., Starbucks’ loyal customer base).  Brand Reputation: Having a strong, positive image in the market that gives the company credibility and trust (e.g., Nike’s brand strength in the sports apparel market). 5 Three Steps of the Strategy- Making Process 6 Steps of the Strategy-Making Process Step 1: Assess the need for strategic change  Difficult because there is a lot of uncertainty in business  Companies should avoid competitive inertia and look for strategic dissonance  Competitive inertia: refers to a situation where a company or organization becomes resistant to change in its competitive strategies and practices, often due to previous successes or a stable market position. 7 Steps of the Strategy-Making Process Step 2: Conduct a situational analysis SWOT  SWOT analysis is a strategic planning tool used to identify and evaluate the Strengths, Weaknesses, Opportunities, and Threats related to a business, project, or individual. It provides a framework for understanding internal and external factors that can impact success.  Internal Analysis – S (strengths) & W (weaknesses) 8  Strengths:Internal attributes and resources that support a successful outcome. Examples: Strong brand reputation Skilled workforce Unique technology or intellectual property Efficient processes or operations Strong financial position or resources Weaknesses:Internal factors that may hinder performance or success. Examples: Lack of experienced staff Limited resources or funding Poor location or distribution network Outdated technology Weak marketing strategy 9 Steps of the Strategy-Making Process Step 2: Conduct a situational analysis SWOT continued  External Analysis – O (opportunities) & T (threats) 10  Opportunities:External factors that the organization can capitalize on to grow or improve. Examples: Emerging market trends or customer needs Technological advancements Regulatory changes that favor the business Potential partnerships or collaborations Expansion into new markets Threats:External challenges that could pose risks to the organization. Examples: Intense competition Economic downturns Changing consumer preferences Regulatory challenges or changes Supply chain disruptions 11 Steps of the Strategy-Making Process Step 3: Choosing Strategic Alternatives  Decision is based on whether the company falls above or below strategic reference points  Used to measure whether their firm has developed the core competencies that it needs to achieve a sustainable competitive advantage  Should be frequently revised to better focus on new challenges and opportunities 12 LEVEL OF STRATEGIES 13 CORPORATE LEVEL  These strategies define the overall scope and direction of the organization, determining which markets and industries to compete in.  Corporate-level strategies address questions related to overall resource allocation, diversification, and long- term growth. 14 Types of Corporate-Level Strategies:  Growth Strategy: Expanding the business by increasing the company's operations, entering new markets, or introducing new products.  Market Penetration: Expanding sales of existing products in the current market.  Market Development: Entering new markets with existing products.  Product Development: Developing new products for the current market.  Diversification: Expanding into new products or markets, either related or unrelated. 15  Stability Strategy: Focusing on maintaining the current status and operating without significant changes. This is often used when the market is stable or after a period of growth.  Retrenchment Strategy: Reducing the size or scope of operations to stabilize the business, often through downsizing, selling off unprofitable divisions, or restructuring. 16 INDUSTRY LEVEL STRATEGY  Strategies focus on how an organization competes within a specific industry.  These strategies are concerned with how to gain a competitive advantage, meet market demands, and navigate the challenges of the industry.  Industry-level strategies are influenced by external factors, such as the competitive environment, customer demands, and regulatory conditions. 17 Types of Industry-Level Strategies:  Porter’s Generic Strategies:  Cost Leadership: Competing on price by being the lowest-cost producer in the industry while maintaining acceptable quality.  Differentiation: Offering unique products or services that provide added value, allowing for higher prices.  Focus Strategy: Targeting a specific market niche with tailored products or services. 18  Cooperative Strategies: Collaborating with competitors or partners within the industry through alliances, joint ventures, or partnerships to share resources, enter new markets, or innovate.  Innovation Strategy: Leveraging new technologies, processes, or business models to disrupt the industry and gain a competitive edge. 19 FIRM LEVEL STRATEGIES  These strategies are specific to the firm and involve its day-to-day operations, customer relationships, and positioning against competitors within its industry. 20  Types of Firm-Level  Strategies: Competitive Advantage Strategies:  Customer Intimacy: Building strong relationships with customers through personalized services, tailored solutions, and high levels of customer support.  Operational Excellence: Streamlining operations to maximize efficiency, reduce costs, and deliver consistent quality at lower prices. 21  Positioning Strategies: Determining where the firm will position itself in relation to competitors and market trends. This could involve:  Branding: Establishing a strong brand identity that resonates with the target market.  Value Proposition: Offering a clear benefit that differentiates the firm from competitors. 22