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Part 2: Strategic Choices. Exploring Corporate Strategy 8e, © Pearson Education 2008 6-2 The Focus of Part 2: Strategic Choices (1)  How an organisation.

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Presentation on theme: "Part 2: Strategic Choices. Exploring Corporate Strategy 8e, © Pearson Education 2008 6-2 The Focus of Part 2: Strategic Choices (1)  How an organisation."— Presentation transcript:

1 Part 2: Strategic Choices

2 Exploring Corporate Strategy 8e, © Pearson Education 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

3 Exploring Corporate Strategy 8e, © Pearson Education 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

4 Strategic Choices 6: Business-Level Strategy

5 Exploring Corporate Strategy 8e, © Pearson Education 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 Exploring Corporate Strategy 8e, © Pearson Education 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

7 Exploring Corporate Strategy 8e, © Pearson Education Exhibit 6.1 Business-Level Strategies

8 Exploring Corporate Strategy 8e, © Pearson Education 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.

9 Exploring Corporate Strategy 8e, © Pearson Education Exhibit 6.2 The Strategy Clock

10 Exploring Corporate Strategy 8e, © Pearson Education 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

11 Exploring Corporate Strategy 8e, © Pearson Education EasyJet’s No Frills Strategy (1)

12 Exploring Corporate Strategy 8e, © Pearson Education 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?

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

14 Exploring Corporate Strategy 8e, © Pearson Education Morrison’s Low Price Strategy

15 Exploring Corporate Strategy 8e, © Pearson Education 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

16 Exploring Corporate Strategy 8e, © Pearson Education 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

17 Exploring Corporate Strategy 8e, © Pearson Education 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

18 Exploring Corporate Strategy 8e, © Pearson Education 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

19 Exploring Corporate Strategy 8e, © Pearson Education Exhibit 6.3 Sustaining Competitive Advantage Sustainable competitive advantage Price-based strategies Lock-in Differentiation

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

21 Exploring Corporate Strategy 8e, © Pearson Education Ryanair

22 Exploring Corporate Strategy 8e, © Pearson Education 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

23 Exploring Corporate Strategy 8e, © Pearson Education Ways of attempting to Sustain Advantage through Differentiation Create difficulties of imitation Create a situation of imperfect mobility Establish a lower cost position

24 Exploring Corporate Strategy 8e, © Pearson Education Yellow Tail

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

26 Exploring Corporate Strategy 8e, © Pearson Education Exhibit 6.5 Competitive Strategies in Hypercompetitive Conditions

27 Exploring Corporate Strategy 8e, © Pearson Education Exhibit 6.6 Competition and Collaboration

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

29 Exploring Corporate Strategy 8e, © Pearson Education Exhibit 6.7 A Prisoner’s Dilemma

30 Exploring Corporate Strategy 8e, © Pearson Education Case Example: Madonna  Describe and explain Madonna’s competitive strategy.  Why has she experienced sustained success?


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