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
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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
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4. Exhibit II.i Strategic Choices
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5. Exhibit II.ii The TOWS Matrix
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6. Strategic Choices 6: Business-Level Strategy

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
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8. 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
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9. Exhibit 6.1 Business-Level Strategies
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10. 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.
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11. Exhibit 6.2 The Strategy Clock
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12. 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
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13. EasyJet’s No Frills Strategy (1)
Use easyJet video, start with 6:05 through 6:55 or 7:12 on pricing.
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14. 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?
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15. Route 2: Low-Price Strategy
Lower price than competitors while offering similar product benefits
Pitfalls
Margin reductions
Inability to reinvest
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16. Morrison’s Low Price Strategy
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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
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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
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19. 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
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20. 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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21. Exhibit 6.3 Sustaining Competitive Advantage
Price-based
strategies
Differentiation
Sustainable
competitive
advantage
Lock-in
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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
Use easyJet clip, start with 9:35 through 9:52 on lower cost structure
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23. Ryanair
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24. 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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25. Ways of attempting to Sustain Advantage through Differentiation
Create difficulties
of imitation
Create a situation
of imperfect mobility
Establish a lower
cost position
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26. Yellow Tail
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27. Establishing Strategic Lock-In
First-mover
dominance
Size or market
dominance
Insistence on
preservation
of position
Self-reinforcing
commitment
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28. Exhibit 6.5 Competitive Strategies in Hypercompetitive Conditions
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29. Exhibit 6.6 Competition and Collaboration
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30. What is Game Theory?
Game theory is concerned with the interrelationships between the competitive moves of a set of competitors.
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31. Exhibit 6.7 A Prisoner’s Dilemma
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32. 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, low-price, differentiation, hybrid, and focused differentiation strategies
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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
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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?
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35. Case Example: Madonna (1)
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36. Case Example: Madonna (2)
Describe and explain Madonna’s competitive strategy.
Why has she experienced sustained success?
What might threaten the sustainability of her success?
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