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Chapter 6: Organizational Strategy
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter, followed by a
set of lesson plans for you to use to deliver the content in Chapter 6.
• Lesson Plan for Lecture (for large sections)
• Lesson Plan for Group Work (for smaller classes)
• Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment – Walt Disney Company
Self-Assessment – Strategy Questionnaire
Management Decision – Dealing with Competition
Highlighted Assignments
Key Points
What Would You Do?
The Walt Disney Company must resolve several strategic
questions as it faces struggling brands and products.
schools.
Management Team Decision
A management team must decide if a cell phone company
needs to adopt a new strategy for selling cell phones in India.
Practice Being a Manager
Students consider competitive advantage as they work to win
a “Most Likely to Succeed” award.
plan their future.
Supplemental Resources
Where to Find Them
Course Pre-Assessment
IRCD
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Course Post-Assessment
IRCD
Learning Outcomes
1 Specify the components of sustainable competitive advantage and explain why it is
important.
Firms can use their resources to create and sustain a competitive advantage, that is, to provide greater
2 Describe the steps involved in the strategy-making process.
The first step in strategy making is determining whether a strategy needs to be changed to sustain a
3 Explain the different kinds of corporate-level strategies.
Corporate-level strategies such as portfolio strategy and the grand strategies help managers determine
4 Describe the different kinds of industry-level strategies.
Industry-level strategies focus on how companies choose to compete in their industry. Five industry
forces determine an industry’s overall attractiveness to corporate investors and its potential for long-term
Who Wants to Be a Manager game
IRCD and online
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5 Explain the components and kinds of firm-level strategies.
Firm-level strategies are concerned with direct competition between firms. Market commonality and
resource similarity determine whether firms are in direct competition and thus likely to attack each other
Terms
acquisition
analyzers
attack
bargaining power of buyers
bargaining power of supplies
BCG matrix
cash cow
diversification
dog
firm-level strategy
focus strategy
grand strategy
growth strategy
imperfectly imitable resources
resources
response
retrenchment strategy
secondary firms
situational (SWOT) analysis
stability strategy
star
Lesson Plan for Lecture
Pre-Class Prep for You:
Pre-Class Prep for Your Students:
• Review chapter and determine what points to
cover.
• Bring PPT slides.
• Bring book.
Begin Chapter 6 by asking your students the following questions: “Name a company that
has a strategic competitive advantage?” Then push them to articulate what they think
gives that company a strategic advantage.
Topics
PowerPoint Slides
Activities
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Basics of Organizational
Strategy
1 Sustainable
Competitive
1: Organizational
Strategy
2: What Would You Do?
3: Basics of
Ask students to respond to
this statement: Sustainable
competitive advantage only
functions well as a theory
2 Strategy-Making
Process
2.1 Assessing the
7: Strategy-Making
Process
8: Assessing Need for
Strategic Change
Use your college’s sports
conference to illustrate
Corporate-, Industry-,
and Firm-Level
Strategies
14: Corporate, Industry,
and Firm-Level Strategies
15: Corporate-Level
Strategies
4 Industry-Level
Strategies
4.1 Five Industry
Forces
4.3 Adaptive
Strategies
21: Industry-Level
Strategies
22: Porter’s Five Industry
Forces
The adaptive strategy of
prospectors pushes
managers to think about the
future. Ask students, “What
to the party of the future?”
5 Firm-Level Strategies
5.1 Direct
25: Firm-Level Strategies
26: Firm-Level Strategies
Managers often visit
competitors’ stores or
Intrapreneurship:
Entering New
Markets
31: Bix Flix – Field of
Dreams
32: Management
Workplace – Theo
Chocolate
boost your performance as
a student, an athlete, or
hobbyist of any sort? What
do you do and how does it
help?”
Adjust lecture to include the activities in the right column. *Some activities should be
done before introducing the concept, some after.
Assignments:
1. Assign students to diagram the framework of direct competition for the movie
rental industry. Students first need to create the list of companies to plot – like
Remind students about any upcoming events.
Lesson Plan for Group Work
Pre-Class Prep for You:
Pre-Class Prep for Your Students:
• Review material to cover and modify lesson
plan to meet your needs.
• Set up the classroom so that small groups of
4-5 students can sit together.
• Bring book.
company has a sustainable advantage.
Lecture on Sustainable Competitive Advantage (Section 1).
Break for group activity:
sustainable competitive advantage. If they decide “no,” then tell them to push harder
poised to create one (how).
“iPod Advantage / Sirius Advantage”
Divide the class into small groups (3-4 students) and have them think about digital
music players or satellite radio. Whichever industry they choose, have them list the
mean that their strategy-making process is flawed. As you learned in Chapter 3, the
Lecture on the Strategy-Making Process (Section 2).
“Even if companies can’t produce a sustainable competitive advantage, that doesn’t
Break for group activity:
“Risky Business”
Divide the class into small groups of 3 to 4 students and tell each group that it
represents the management team of a locally owned and operated water park, The
Beach, which has been in business for 15 years.* Revenues are $5 million per season;
Come back together as a class to share results from the group activity.
Segue into a lecture on Corporate-Level Strategies – Portfolio Strategy (Section 3.1).
Break for the following activity:
“Portfolio Strategy”
Divide the class into groups of 2-3 students to map the portfolio of a well-known,
diversified company such as Disney, Procter & Gamble, or HBO. Before doing the
Remind students of the disadvantages with portfolio strategy, and move into a discussion
of grand strategies (3.2).
Lecture on Industry- and Firm-Level Strategies (Sections 4-5).
As you move through the section on direct competition, refer back to the activity with
The Beach and Paramount’s King’s Island. Use it as a basis for talking about direct
“Framework for Direct Competition”
Divide students into small groups of 3-4 students and have them diagram the
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Assignments:
chemical industry.
2. If you have finished covering Chapter 6, assign students to review the chapter and
read the next chapter on your syllabus.
Remind students about any upcoming events.
Assignment Teaching Tips and Solutions
Case Assignment – What Would You Do?
[insert wwyd text]
What Really Happened? Solution
WALT DISNEY COMPANY
In the case, you learned that Disney’s acquisition of Pixar Studios was the key factor in saving Disney’s
animated film business, which had struggled and lost money over the last decade. While giving Pixar
With many of Disney’s brands and products clearly suffering, you face a basic decision. Should Disney
grow, stabilize or retrench? Disney is an entertainment conglomerate with Walt Disney Studios (films),
parks and resorts (including Disney Cruise lines and vacations), consumer products (i.e., toys, clothing,
books, magazines, and merchandise), and media networks such as TV (ABC, ESPN, shows and channels
(ABC, ESPN, Disney Channels, ABC Family), radio, and the Disney Interactive Media Group (online,
mobile, and video games and products). If Disney should grow, where? Like Pixar, is another strategic
acquisition necessary? If so, who? If stability, how do you improve quality to keep doing what Disney
has been doing, but even better? Finally, retrenchment would mean shrinking Disney’s size and scope. If
you were to do this, what divisions would you shrink or sell?
The purpose of a growth strategy is to increase profits, revenues, market share, or the number of
places (stores, offices, locations) in which a company does business. Companies can grow externally by
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Should Disney grow, stabilize or retrench? Soon after Bob Iger became CEO, Disney found itself in
So, faced with losses and decreasing revenues, Iger employed a retrenchment strategy. For example,
with operating income also down sharply at Disney parks and resorts, Disney offered voluntary buyouts
While the first step of retrenchment includes significant cost reductions, the next step is recovery,
taking strategic actions to return to a growth strategy. Indeed, after cutting costs, Iger “doubled down” on
While those investments were intended to grow Disney organically, that is, to create growth in current
lines of business, Disney spent $4.3 billion to buy Marvel Entertainment, home to well know Comic book
Disney’s acquisition of Playdom helps the company in terms of technology and online games. Iger
noted that, “Playdom gives us access to technology and to experience in a space that we felt we wanted
Next, given the number of different entertainment areas that Disney has, what business is Disney really
in? Is Disney a content business, creating characters and stories? Or is it a technology/distribution
business that simply needs to find ways to buy content wherever it can, for example, buying Pixar, and
then delivering that content in ways that customers want (i.e., DVDs, cable channels, iTunes, Netflix,
social media, Internet TV, etc.)?
Corporate-level strategy is the overall organizational strategy that addresses the question “What
business or businesses are we in or should we be in?”There are two major approaches to corporate-level
strategy, portfolio strategy and grand strategies, the latter of which is also discussed in question 3.
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A grand strategy is a broad strategic plan used to help an organization achieve its strategic goals.
Grand strategies guide the strategic alternatives that managers of individual businesses or subunits may
use in deciding what businesses they should be in. As discussed in question 1, there are three kinds of
grand strategies: growth, stability, and retrenchment/recovery.
Disney is an entertainment conglomerate with Walt Disney Studios (films), parks and resorts
Disney, says Iger, is in the content business, and that creative content, not distribution, is Disney’s
“heart and soul.” “My goal is to make more great content, deliver it to more people, in more places, more
often.” Creating content in the form of storytelling, not technology, is why Disney bought Pixar Studies.
Finally, from a strategic perspective, how should Disney’s different entertainment areas be managed?
Should there be one grand strategy (i.e., growth, stability, retrenchment) that every division follows, or
should each division have a focused strategy for its own market and customers? Likewise, how much
discretion should division managers have to set and execute their strategies, or does that need to be
controlled and approved centrally by the strategic planning department at Disney headquarters?
As mentioned in question 2, a grand strategy is a broad strategic plan used to help an organization
achieve its strategic goals. Grand strategies guide the strategic alternatives that managers of individual
So, does that mean that Disney doesn’t have a grand strategy? No. Disney does in fact possess a
It was a textbook example of the “Disney way” of doing business: a new movie that set off a fountain
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No, this isn’t just the well-recognized strategy that Disney used with Toy Story 3, the release of the first
Winnie the Pooh movie in 50 years, or The Pirates of the Caribbean: On Stranger Tides, it’s the strategy
Iger, however, added one important dimension to Disney’s integrative portfolio strategy, brand
management. Each successful Disney movie (Beauty and the Beast), TV show (High School Musical), or
character (Winnie the Pooh) is a Disney brand. And, at Disney, under Iger, the strategy is to manage and
integrate those brands across the different parts of Disney’s businesses. Iger explains how it works:
These great character franchises were all brands unto themselves. But nobody was really
managing those brands, and decisions were being made in a vacuum. So if we determine that Toy
So, with an integrative strategy that leverages key brands across Disney’s various businesses, how much
discretion are Disney’s division managers given to execute their strategies? On first thought, it would
seem that Disney’s strategic planning department would keep a tight rein to effectively execute the
That tight integration, however, is balanced by tremendous creative autonomy for Disney’s division
managers and content creators. Remember, first and foremost, Disney is in the business of creating
Sources: D. Fonda, L. Locke, J. Ressner, & R. Corliss, “When Woody Met Mickey,” Time, 6 February 2006, 46-47;
R. Grover, “How Bob Iger Unchained Disney,” BusinessWeek, 5 February 2007, 74-79; M. Gunther & C. Hajim,
“The Iger Sanction,” Fortune, 23 January 2006, 47–50; M. Marr, “Better Mousetrap: In Shakeup, Disney Rethinks
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Self-Assessment
STRATEGY QUESTIONNAIRE
In-Class Use
Have students open their books to page 234 of the text and give them 5 to 7 minutes to complete the
Scoring
The inventory is a competitiveness index designed to determine interpersonal competitiveness in
Management Decision
DEALING WITH COMPETITION
Purpose
The purpose of this activity is to push students to think about how companies respond to the decisions
made by their closest competitors.
Setting It Up
This activity works well as either a paired or individual activity. For more background information, ask
students to research Coca-Cola’s and Pepsi’s sales and revenues in primary and secondary schools.
Questions
1. Using Porter’s five industry forces, map the soft-drink industry.
According to Michael Porter, five industry forces determine an industry’s overall attractiveness and
potential for long-term profitability. These are the character of the rivalry, the threat of new entrants,
the threat of substitute products or services, the bargaining power of suppliers, and the bargaining
power of buyers.
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2. What are the risks and opportunities of the strategies followed by Pepsi? Of Coca-Cola?
For Pepsi, the primary benefit of its decision not to sell is developing the reputation that it cares about
public-health issues and is taking an active role in insuring that children get a proper diet. Even
3. How would you respond to Coca-Cola’s change in sales policy? How would you ensure Pepsi’s board
that this response will allow you to remain competitive and profitable?
The text defines a “response” as a countermove, prompted by a rival’s attack, that is designed to
Management Team Decision
A NEW STRATEGY FOR INDIA?
Purpose
In this case, students are asked to decide how what a global company should do to increase its sales in a
foreign market. The most cost effective way to do global business is to sell the same product line in all of
the different markets. This approach, however, can be risky, since different consumers in different
markets may not be attracted to the same products.
Setting It Up
A creative way to introduce this case to students would be to show them pictures of various products sold
in other countries. Examples might include food products or clothing that are generally unknown to
American consumers. After showing them the pictures, ask students “What would a company have to do
to get you to buy these products?”
Questions
1. What do you think would be more effective strategy for Nokia to respond to Micromax –
differentiate itself from Micromax or replicate what it is doing?
2. How could a shadow strategy task force help Nokia identify the best way to proceed?
A shadow-strategy task force actively seeks out its own company’s weaknesses and then, thinking
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3. What positioning strategy should Nokia use to gain an advantage against Micromax and other
competitors?
Students’ responses will vary, but they should choose one of the three positioning strategies in the
text and discuss why it is the best option for Nokia’s efforts in India. There are three positioning
strategies: cost leadership, differentiation, and focus. Cost leadership means producing a product
Practice Being a Manager
MOST LIKELY TO SUCCEED
Exercise Overview and Objective
The objective of this exercise is to apply the concepts of sustainable competitive advantage and strategic
groups in a setting familiar to students—the local restaurant market. Student work groups will each
Preparation
This exercise will work best if students are encouraged to give some attention to the local restaurant
market in advance of conducting the exercise. You may stimulate such attention a session or two before
conducting the exercise by asking students to consider the following three (3) items:
• Are you aware of any restaurants in our (local) market that have failed/closed over the past few
years? If so, why do you think that these restaurants failed/closed?