Post on 16-Dec-2015
Part 2:Strategic Choices
6-2Exploring Corporate Strategy 8e, © Pearson Education 2008
The Focus of Part 2: Strategic Choices (1)
How an organisation positions itself in relation to competitors in terms of its overall competitive strategy
The scope and diversity of an organisation’s products and therefore the nature of its corporate portfolio and how that portfolio is managed
The geographic scope of the organisation and the bases of its international strategy
6-3Exploring Corporate Strategy 8e, © Pearson Education 2008
The Focus of Part 2: Strategic Choices (2)
The extent to which and how it seeks to foster innovation and entrepreneurial endeavour
Ways in which it might pursue strategic options in terms of organic development, acquisitions or joint ventures
The criteria and tools by which these choices might be evaluated
Strategic Choices6: Business-Level Strategy
6-5Exploring Corporate Strategy 8e, © Pearson Education 2008
Learning Outcomes (1)
Identify strategic business units (SBUs) in organisations
Explain bases of achieving competitive advantage in terms of ‘routes’ on the strategy clock
Assess the extent to which these are likely to provide sustainable competitive advantage
6-6Exploring Corporate Strategy 8e, © Pearson Education 2008
Learning Outcomes (2)
Identify strategies suited to hyper-competitive conditions
Explain the relationship between competition and collaboration
Employ principles of game theory in relation to competitive strategy
6-7Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 6.1 Business-Level Strategies
6-8Exploring Corporate Strategy 8e, © Pearson Education 2008
What is a Strategic Business Unit?
A strategic business unit (SBU) is a part of an organisation for which there is a distinct external
market for goods or services that is different from another SBU.
6-9Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 6.2 The Strategy Clock
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Route 1: No Frills Strategy
Low price combined with low perceived product benefits focusing on price-sensitive market segments
Commodity markets
Price-sensitive customers
High power, low switching costs among buyers
Opportunity to avoid major competitors
6-11Exploring Corporate Strategy 8e, © Pearson Education 2008
EasyJet’s No Frills Strategy (1)
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EasyJet’s No Frills Strategy (2)
Upon what are the bases for easyJet’s ‘no frills’ strategy?
How easy would it be for larger airlines such as BA to imitate the strategy?
On what bases could other low-price airlines compete with easyJet?
6-13Exploring Corporate Strategy 8e, © Pearson Education 2008
Route 2: Low-Price Strategy
Lower price than competitors while offering similar product benefits
Pitfalls
Margin reductions
Inability to reinvest
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Morrison’s Low Price Strategy
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Route 3: Hybrid Strategy
Seeks to simultaneously achieve differentiation and low price relative to competitors
Advantageous when
Greater volumes can be achieved
Cost reductions outside differentiated activities are available
Used as an entry strategy
6-16Exploring Corporate Strategy 8e, © Pearson Education 2008
Route 4: Differentiation Strategy
Seeks to provide products that offer benefits that differ from those offered by competitors
Dependent upon
Identifying and understanding strategic customer needs
Identifying key competitors’ strategies
6-17Exploring Corporate Strategy 8e, © Pearson Education 2008
Route 5: Focused Differentiation
Seeks to provide high perceived product benefits, justifying price premiums
Key issues
Choice between focus strategy and broad differentiation
Tensions between focus strategy and other strategies
Market changes
6-18Exploring Corporate Strategy 8e, © Pearson Education 2008
Routes 6-8: Failure Strategies
6 – Increase prices without increasing service/product benefits
7 – Reduction in product/service benefits with increase in relative price
8 – Reduction in benefits whilst maintaining price
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Exhibit 6.3 Sustaining Competitive Advantage
Sustainablecompetitiveadvantage
Price-based strategies
Lock-in
Differentiation
6-20Exploring Corporate Strategy 8e, © Pearson Education 2008
Achieving Low Prices
Operate with lowermargins
Develop a unique cost structure
Create efficiency inorganisational
capabilities
Focus on market segments with
low expectations
6-21Exploring Corporate Strategy 8e, © Pearson Education 2008
Ryanair
6-22Exploring Corporate Strategy 8e, © Pearson Education 2008
Dangers of Low Price Strategies
Competitors might follow suit
Customers associate low price with low benefits
Cost reductions may result in inability to pursue differentiation strategy
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Ways of attempting to Sustain Advantage through Differentiation
Create difficultiesof imitation
Create a situation of imperfect mobility
Establish a lowercost position
6-24Exploring Corporate Strategy 8e, © Pearson Education 2008
Yellow Tail
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Establishing Strategic Lock-In
Size or marketdominance
First-moverdominance
Self-reinforcingcommitment
Insistence on preservation
of position
6-26Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 6.5 Competitive Strategies in Hypercompetitive Conditions
6-27Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 6.6 Competition and Collaboration
6-28Exploring Corporate Strategy 8e, © Pearson Education 2008
What is Game Theory?
Game theory is concerned with the interrelationships between the competitive moves of a set of
competitors.
6-29Exploring Corporate Strategy 8e, © Pearson Education 2008
Exhibit 6.7 A Prisoner’s Dilemma
6-30Exploring Corporate Strategy 8e, © Pearson Education 2008
Case Example: Madonna
Describe and explain Madonna’s competitive strategy.
Why has she experienced sustained success?