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Part 2: Strategic Choices

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Presentation on theme: "Part 2: Strategic Choices"— Presentation transcript:

1 Part 2: Strategic Choices

2 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 6-2

3 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 6-3

4 Strategic Choices 6: Business-Level Strategy

5 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 6-5

6 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 6-6

7 Exhibit 6.1 Business-Level Strategies

8 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. 6-8

9 Exhibit 6.2 The Strategy Clock

10 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 6-10

11 EasyJet’s No Frills Strategy (1)
Use easyJet video, start with 6:05 through 6:55 or 7:12 on pricing. 6-11

12 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? 6-12

13 Route 2: Low-Price Strategy
Lower price than competitors while offering similar product benefits Pitfalls Margin reductions Inability to reinvest 6-13

14 Morrison’s Low Price Strategy

15 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 6-15

16 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 6-16

17 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 6-17

18 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 6-18

19 Exhibit 6.3 Sustaining Competitive Advantage
Price-based strategies Differentiation Sustainable competitive advantage Lock-in 6-19

20 Achieving Low Prices Operate with lower margins Develop a unique
cost structure Create efficiency in organisational capabilities Focus on market segments with low expectations Use easyJet clip, start with 9:35 through 9:52 on lower cost structure 6-20

21 Ryanair 6-21

22 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 6-22

23 Ways of attempting to Sustain Advantage through Differentiation
Create difficulties of imitation Create a situation of imperfect mobility Establish a lower cost position 6-23

24 Yellow Tail 6-24

25 Establishing Strategic Lock-In
First-mover dominance Size or market dominance Insistence on preservation of position Self-reinforcing commitment 6-25

26 Exhibit 6.5 Competitive Strategies in Hypercompetitive Conditions

27 Exhibit 6.6 Competition and Collaboration

28 What is Game Theory? Game theory is concerned with the interrelationships between the competitive moves of a set of competitors. 6-28

29 Exhibit 6.7 A Prisoner’s Dilemma

30 Case Example: Madonna Describe and explain Madonna’s competitive strategy. Why has she experienced sustained success? 6-30

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