Part 2: Strategic Choices

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
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Exploring 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

Exploring Corporate Strategy 8e, © Pearson Education 2008

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Exhibit II.i Strategic Choices Exploring Corporate Strategy 8e. © Pearson Education 2008 6-4 .

Exhibit II.ii The TOWS Matrix Exploring Corporate Strategy 8e. © Pearson Education 2008 6-5 .

Strategic Choices 6: Business-Level Strategy .

© Pearson Education 2008 6-7 .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 Exploring Corporate Strategy 8e.

Learning Outcomes (2)  Identify strategies suited to hypercompetitive conditions  Explain the relationship between competition and collaboration  Employ principles of game theory in relation to competitive strategy Exploring Corporate Strategy 8e. © Pearson Education 2008 6-8 .

1 Business-Level Strategies Exploring Corporate Strategy 8e.Exhibit 6. © Pearson Education 2008 6-9 .

© Pearson Education 2008 6-10 . Exploring Corporate Strategy 8e.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.

© Pearson Education 2008 6-11 .2 The Strategy Clock Exploring Corporate Strategy 8e.Exhibit 6.

© Pearson Education 2008 6-12 .Route 1: No Frills Strategy  Low price combined with low perceived product benefits focusing on pricesensitive market segments  Commodity markets  Price-sensitive customers  High power. low switching costs among buyers  Opportunity to avoid major competitors Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-13 .EasyJet’s No Frills Strategy (1) Exploring Corporate Strategy 8e.

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? Exploring Corporate Strategy 8e. © Pearson Education 2008 6-14 .

Route 2: Low-Price Strategy  Lower price than competitors while offering similar product benefits  Pitfalls Margin reductions Inability to reinvest Exploring Corporate Strategy 8e. © Pearson Education 2008 6-15 .

Morrison’s Low Price Strategy Exploring Corporate Strategy 8e. © Pearson Education 2008 6-16 .

© Pearson Education 2008 6-17 .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 Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-18 .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 Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-19 . justifying price premiums  Key issues  Choice between focus strategy and broad differentiation  Tensions between focus strategy and other strategies  Market changes Exploring Corporate Strategy 8e.Route 5: Focused Differentiation  Seeks to provide high perceived product benefits.

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 Exploring Corporate Strategy 8e. © Pearson Education 2008 6-20 .

© Pearson Education 2008 .Exhibit 6.3 Sustaining Competitive Advantage Price-based strategies Sustainable competitive advantage Differentiation Lock-in 6-21 Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-22 .Achieving Low Prices Operate with lower margins Develop a unique cost structure Create efficiency in organisational capabilities Focus on market segments with low expectations Exploring Corporate Strategy 8e.

Ryanair Exploring Corporate Strategy 8e. © Pearson Education 2008 6-23 .

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 Exploring Corporate Strategy 8e. © Pearson Education 2008 6-24 .

© Pearson Education 2008 6-25 .Ways of attempting to Sustain Advantage through Differentiation Create difficulties of imitation Create a situation of imperfect mobility Establish a lower cost position Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-26 .Yellow Tail Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-27 .Establishing Strategic Lock-In Size or market dominance First-mover dominance Self-reinforcing commitment Insistence on preservation of position Exploring Corporate Strategy 8e.

5 Competitive Strategies in Hypercompetitive Conditions Exploring Corporate Strategy 8e.Exhibit 6. © Pearson Education 2008 6-28 .

Exhibit 6.6 Competition and Collaboration Exploring Corporate Strategy 8e. © Pearson Education 2008 6-29 .

Exploring Corporate Strategy 8e. © Pearson Education 2008 6-30 .What is Game Theory? Game theory is concerned with the interrelationships between the competitive moves of a set of competitors.

Exhibit 6. © Pearson Education 2008 6-31 .7 A Prisoner’s Dilemma Exploring Corporate Strategy 8e.

low-price. differentiation. hybrid.Chapter Summary (1)  Competitive strategy is concerned with seeking competitive advantage  Competitive strategy must be defined in terms of SBUs  The bases of competitive strategy include no frills. © Pearson Education 2008 6-32 . and focused differentiation strategies Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-33 .Chapter Summary (2)  Managers must consider the bases upon which price-based or differentiation strategies can be sustained on strategic capabilities  Sustainable competitive advantage is difficult to achieve in hypercompetitive conditions  Strategies of collaboration may offer alternatives to or complement competitive strategies  Game theory provides a basis for examining possible competitive moves Exploring Corporate Strategy 8e.

© Pearson Education 2008 6-34 .Key Debate: To Be Different or the Same ? To what extent do universities compete by being different or the same? Car manufacturers? Considering the nature of their industries and key players within them. why might these organisations adopt these approaches to conformity or differentiation? Exploring Corporate Strategy 8e.

Case Example: Madonna (1) Exploring Corporate Strategy 8e. © Pearson Education 2008 6-35 .

 Why has she experienced sustained success?  What might threaten the sustainability of her success? Exploring Corporate Strategy 8e.Case Example: Madonna (2)  Describe and explain Madonna’s competitive strategy. © Pearson Education 2008 6-36 .

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