Chapter 8

3. The differences between a low cost strategy and a differentiation

strategy are in the price and market segments.
Organization applies low cost strategy by producing low-priced goods
and services for all customer groups.
While differentiation strategy is a plan whereby an organization
produces high-priced, quality products aimed at particular market
segments.

A differentiated biotechnology organization should design its

organizational structure:

- Complex structure ( matrix structure; product team structure; or

product, market, geographic structure)
- Decentralized decision making
- High differentiation
- High integration
- Organic structure

It must develop values that promote innovation, quality, excellence,

and uniqueness.

A low-cost fast-food organization should design its organizational

structure in:

- Simple structure (functional structure)

- Centralized decision making
- Low differentiation
- Low integration
- Mechanistic structure

Values that must be developed by low-cost organization is the values

of economy and frugality.

5. Corporate-level strategy involves a search for new domains in which to

exploit and defend an organization’s ability to create value from the
use of its low-cost or differentiation core competencies.

Organization takes its existing core competences and applies them in

new domains.
Example:
An organization pursuing a corporate-level strategy of vertical
integration establishes its suppliers or its distributors. It may be able to
keep for itself the profits previously earned by its input suppliers.
 Control of overlapping input and output domains enhances an
organization’s competitive advantage in its core domain and creates
new opportunity for value creation.

When an organization begins to enter new domains, the organization’s

structure and culture might change to adapt its diversification.
The appropriate organizational structure must be chosen in order to
realize the value associated with corporate-level strategies.
Example:
Organizations with a strategy of unrelated diversifications are likely to
use a conglomerate structure.

6. As a company moves from a multidomestic to an international to a

global and then to a transnational strategy, the need to coordinate and
integrate global activities increases.
Example:
The multidomestic strategy does not require coordination of activities
on a global level.
But in a transnational strategy, a company must transfer its distinctive
competences to the global location, and establish a global network to
coordinate its divisions.
Thus the bureaucratic costs associated with solving communications
and measurement problems that arise in managing transfers across
countries to pursue a transnational strategy are much higher than
those of pursuing the other strategies.
The international and global strategies fit between multidomestic
strategy and transnational strategy.