Page 164 - Fundamentals of Management Myths Debunked (2017)_Flat

Renewal strategy. Organization is in trouble and needs to
3
address declining performance.
• Retrenchment strategy: Minor performance problems—need to stabilize operations, revitalize organiza-
tional resources and capabilities, and prepare organization to compete once again.
• Turnaround strategy: More serious performance problems requiring more drastic action.
In both renewal strategies, managers can (1) cut costs and (2) restructure organizational operations,
but actions are more extensive in turnaround strategy.
Corporate Multibusiness
2 Competitive Strategy Business Unit 1 Business Unit 2 Business Unit 3
Corporation
Competitive
Strategic
Strategic
Strategic
How an organization will compete in its business(es).
Functional Research and Manufacturing Marketing Human Finance
• A small organization in only one line of business OR a large organization that has not diversified: Resources
Development
Competitive strategy describes how it will compete in its primary or main market.
• Organizations in multiple businesses:
Each business will have its own competitive strategy.

▪ ▪ Those single businesses that are independent and formulate their own competitive
▸ Important Role of Competitive Advantage:
strategies are often called strategic business units (sbus).

Developing an effective competitive strategy requires understanding competitive advantage, which is what sets an
organization apart; that is, its distinctive edge, which comes from:
• The organization’s core competencies—doing something that others cannot do or doing it better than others can do it.
• The company’s resources—having something that its competitors do not.

Types of Competitive Strategies:
▸
Porter’s competitive strategies framework: 16

1 Cost leadership strategy 2 Differentiation strategy 3 Focus strategy 4 stuck in the middle
Having the lowest costs in its Offering unique products that are A cost advantage (cost focus) What happens if an organiza-
industry and aimed at broad market. widely valued by customers and or a differentiation advantage tion can’t develop a cost or
aimed at broad market. (differentiation focus) in a narrow differentiation advantage—bad
• Highly efficient. segment or niche (which can be place to be.
• Overhead kept to a minimum. • Product differences: exception- based on product variety, customer
• Does everything it can to cut ally high quality, extraordinary type, distribution channel,
costs. service, innovative design, or geographical location).
• Product must be perceived as technological capability, or an
comparable in quality to that unusually positive brand image.
offered by rivals or at least
acceptable to buyers.

Artursfoto/Fotolia
▸ ▸ ▸ sustainable competitive advantage.
Use strategic management to get a

Multibusiness
Corporate
Corporation
3 Functional STRATEGY Research and Business Unit 1 Business Unit 2 Business Unit 3 Finance
Strategic
Strategic
Strategic
Competitive
Human
Functional
Manufacturing
Marketing
Resources
Development
Those strategies used by an organization’s various functional departments (marketing, operations, finance/accounting,
human resources, and so forth) to support the competitive strategy.
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