1. Business-Level Strategy
Chapter 5
Strategic Position
Strategy into Action
Strategic Choices
Present By Group 4
Janaka Heenkenda Pgia
Vipula Jayakody Pgia
Dilupi Lihinipita Pgia
A. Krishnakumar Pgia

2. Brief Content Introduction Identify Strategic Business Units
Bases of Competitive Advantage : the “Strategy clock”
Sustaining Competitive Advantage
Competitive Strategy in Hypercompetitive Conditions
Competition and Collaboration
Game Theory
Price-base strategies
Differentiation strategies
The hybrid strategies
Focused differentiation
Failure strategies
Sustaining price-based advantage
Sustaining differentiation-based advantage
The delta model and lock-in
Repositioning
Overcoming competitors’ market-based moves
Overcoming competitors’ barriers
Ingredients of successful hypercompetitive strategies
Simultaneous games
Sequential games
Repeated games
Changing the rule of the game
Pg. X

3. 5.1 Introduction SBU Strategies
Ways to Achieving Competitive Advantage
Sustainability
Hyper competition
Collaboration
Game Theory
Bases of Competition
Price
Differentiation
Hybrid
Focus
More Detailed Choices
(Chapter 7)
Directions
Methods
Completive Advantage
If gov. Underpin best value in service
Pg.240

4. 5.2 Strategic Business Unit (SBU)
External Criteria :
Target same customer types through same channel facing similar competitors.
Individual SBU
Internal Criteria : Strategic capability – Resources and Competences Similar products/ build in similar technology and share similar resources and competencies. Means cost structure of the ‘units’ is similar
Each product and each geographical branch, Diversity of product
SBU is part of an organization for which there is a distinct external market for goods or services that is different from another SBU.
Pitfall
Pg.241

5. 5.3 Bases of Competitive Advantage: Strategy Clock
1: Likely to be segment specific.
2 : Risk of price war and low margins/need to be a 'cost leader'.
3 : Low cost base and reinvestment in low price and differentiation.
4: (a) Without a price premium:
perceived added value by user, yielding market share benefits.
(b)With a price premium:
perceived added value sufficient to bear price premium.
Perceived Product/ Service
benefits
Differentiation
5: Perceived added value to a 'particular segment' warranting a premium price.
6: Std Value/ Increased Price : Higher margins if competitors do not value follow/risk of losing market share.
‘No frills’
Likely Failure
7: Low Value/ Increased Price : Only feasible in a monopoly situation.
Price
8: Low Value/ Std Price : Loss of market share.
Pg.242

6. 5.3.1 Price Based Strategies (Routes 1 & 2)
P&S, Remarko, Fast food
Route 1: ‘No Frills Strategy’ Combines a low price, low perceived product/ services benefits and a focus on a price sensitive market segment
- Like Commodities
Price Sensitive Customers
Buyer have high power and/ low switching cost
Small number of providers with similar market share
Avoid Major competitors
Route 2 : ‘Low Price Strategy’
Seeks to achieve a lower price than competitors whilst trying to maintain similar perceived product / service benefits to those offered by competitors
- Margin Reduction
Inability to reinvest
Low cost base

7. 5.3.2 Differentiation Strategies (Route 4)
Anchor, Raththi, Nespray, Highland, Lukspray
Route 4: ‘Differentiation Strategy’ Seeks to provide product or service benefits that are different from those of competitors and that are widely value by buyers
- Who is the strategic customer ?
What is valued ?
Who are the competitors ?

8. 5.3.3 The Hybrid Strategy (Route 3)
IKEA
Route 3: ‘Hybrid Strategy’ Seeks simultaneously to achieve differentiation and a price lower that of competitors
Greater volumes than competitors
Entry strategy with established competitors, Ensures overall low cost base
Follow-through strategy

9. 5.3.4 Focused Differentiation (Route 5)
Jaguar, Mercedes, BMW
Route 5: ‘Focus Differentiation Strategy’ Seeks to provide high perceived product/service benefits justifying a substantial price premium, usually to a selected market segment (niche)
- Choice between focus or differentiation
Difficult when it is part org org. st.
May conflict with stakeholder expectation
New ventures often starts focus way
Market situation may change

10. 5.3.5 Failure Strategies (Routes 6,7 & 8 )
Guess !!
Route 6,7& 8 : ‘Failure Strategy’ That does not provide perceived value-for-money in terms of product features, price or both
- Suggest withdrawal from the market
6 to increase the price without improving the product/ service
7 & 8 to increase price even when the product/ service value is low

11. 5.4 Competitive Advantage
Price Based Strategies
Accept reduced margin
Win a price war
Reduce costs
Focus on specific segments
Differentiation
Create Difficulties of imitation
Achieve imperfect mobility (of resources/ competencies)
Reinvest Margin
Sustaining
Competitive
Advantage
Lock In
Achieve size/market dominance
First-mover advantage
Reinforcement
Regional enforcement
Pg.252

12. 5.4.1 Sustaining Price Based Advantage
Reduce margin
Win a price war
Cost advantage through organisationally specific capabilities – low cost producer in the industry
Focusing on market segment where low price values – associate low price with low product/ service benefits (route 2 strategy slipping to route 1)

13. 5.4.2 Sustaining Differentiation – based Advantage
Create difficulties of imitating
Imperfect mobility
Intangible Assets
Switching
Co-specialization

14. 5.4.3 The Delta Model and Lock-In
E.g. : Microsoft, IBM, Intel, Bata
Lock in is where an organisation achieves a proprietary position in its industry; it becomes an industry standard
Size or market dominance
Early in life cycles of markets
Self-reinforcing
Insistence on the preservation

15. 5.5 Competitive Strategy in Hypercompetitive Conditions
Repositioning
Competing successfully
Pre-empt competition (New Strategies)
Do not attack competitors weaknesses
Disrupt the market
Be unproductive
Mislead competitors
A series of smaller moves
Overcoming competitors‘ barriers
Shorter life cycles
Undermine strongholds
Counter ‘deep pocket’ advantages
Competitive strategies in hypercompetitive condition
Overcoming competitors‘ Market-based moves
Block first move advantage
Imitate Product/ Market moves
Pg.258

16. 5.5.1 Repositioning Repositioning without changing price
Position 1 or 2 move to Position 3

17. 5.5.2 Overcoming Competitors'’ Market Based Moves
Blocking first-mover advantage.
Eliminate the market dominant of the competitor by
Launching product with enhanced features (not to be an imitated product.)
Attack a particular market segment
Erode the market power of 1st mover
Capture down markets first with a cheaper product and move into the main market of the 1st mover. (No frills)
Imitate competitors' product/market moves.
Competitors seek the advantages by developing new markets or new products. This can be easily imitated & competitor face problem of sustaining in the original product/market.

18. 5.5.3 Overcoming Competitors’ Barriers
Build competitive barriers to prevent other organizations entering their domains
By short life cycles
Competitive advantage through strengthof their resources & competences.
Rapid outdating of technological advance & knowledge advantage.
Undermining competitors' strongholds
Economics of scale e.g. Promotions
Countering competitors' deep pockets
Surplus resources (deep pockets).
Recourses to preserve the interest of the company or to tackle the competition.

19. 5.5.4 Ingredients of Successful Hypercompetitive Strategies
Pre-empt imitation by others
Sustaining in old advantages is a distraction for developing new strategies.
Do not attack competitors' weaknesses
Competitor learn strengths & weaknesses
Disrupt the market
A series of smaller moves
More effective than a bigger one-off change
Flexibility and gives a series of temporary advantages.
Be unpredictable
Current behavior would help to predict the next move.
It'll let them to imitate or outflank the organization.
Mislead competitors
This is the strategy of “Game Theory”.

20. 5.6 Competition and Collaboration
Increased selling power
Increased baying power
Stakeholder expectation
Competitiveness might be improved by collaboration to achieve
Increased barrier to enter
Shared work with customer
Decreased risk of substitution
Entry to new market
Pg.261

21. 5.6 Competition and Collaboration
Increased selling power – Manufacture build close link with customers.
Eg: Aerospace Industry – High level of product quality
Increased baying power - Tying suppliers to into their “Enterprise Resource Planning”.
Eg: Collaboration with doctors & Government.
Increased barrier to enter of substitution- – Threatened entry or substitute products.
Eg: Trade associations promoting industry's generic features like safety standards/technical specifications.
Entry to new market – When developing beyond their traditional boundaries they need collaboration.
Eg: Entering to a new segment
Shared work with customer- When comes to public services like assessment like income taxes, to gain cost efficiency/quality & reliability need the corporation.
Stakeholder expectation- To raise overall standards or to address public issue like drugs or community safety

22. 5.7 Game Theory
Is concerned with the interrelationships between moves of a set of competitors
Source:
Game theory is concerned with interrelationships between the competitive move of a set of competitors.
Game theory more popular because the application have been developed for situations in which competing players are business organization, teams, political candidates , armies, and contract bidders.
The central idea is that the strategist has to anticipate the reaction of competitors.
Pg.264

23. 5.7.1 Simultaneous Games A Prisoner’s Dilemma Competitor A
Heavy Marketing
spent
Low Marketing
Heavy Marketing
spent
Low Marketing
B= A=5
L/U
B= A=2
R/U
B= A=12
L/L
B= A=9
R/L
Competitor B
Competitors don’t know each others strategy in a competitive move
R/L- both spending low-get mutual benefit
R/U & L/L- one take advantage over the other by spending more
L/U- both spend more but return is less

24. 5.7.1 Simultaneous Games
A dominant strategy is one that outperforms all strategies whatever rivals choose
A dominated Strategy is a competitive strategy that, pursued by the competitors, is bound to outperform the company.
Equilibrium is a situation where each competitor contrives to get the best possible strategic situation for themselves given the response from the other.

25. 5.7.1 A Simultaneous move game
DOLLA investment
Low
High
Low
A DOLLA=3
INNOVA=4
B DOLLA=4
INNOVA=2
C DOLLA =2
INNOVA=3
D DOLLA=1
INNOV=1
INNOVA
investment
High
A- Innova dominant strategy – low investment  pay- off more
B- Dolla- dominated strategy – pay-off more
Innova- equilibrium

26. 5.7.2 Sequential Games Guiding Principle:
-Thing forwards and then reason backwards.
-Start by trying to think through the sequence of moves that competitors might make based on reasonable assumption about what that competitors desires as the outcome.
The key strategic component to be considered when making assumption :
-Identifying dominant and Dominated strategies.
-The timing in strategic moves.
-The careful weighing of risk,
-Establishing credibility and commitment

27. 5.7.2 Sequential Games Pay off INNVA DOLLA 1 3 2 4 A High DOLLA LowB
INNOVA
High C
Low
DOLLA
Low
-Innova’s dominant strategy is RD
-Dolla’s Dominated strategy is Finnance D

28. 5.7.3 Repeated Games
Competitors interact repeatedly and the equilibrium outcome is much more likely to favor cooperation/ accommodation of both parties’ best interest Experience
Implicit cooperation depends on
Number of competitions
Size of the competitors
Substantial differences
Transparency

29. 5.7.4 Changing the Rule of the Game
Competitor might find difficult to compete with in the rules of the game
Go for alternatives
e.g – instead of heavy marketing expenditure/ investment
Base differentiation
Making price more transparent
Incentive for customer loyalty

30. Learning Outcomes
How to identify Strategic Business Units (SBUs) in organisations.
Different bases of achieving competitive advantage in terms of ‘routes’ on the strategy clock:
price-based strategies;
differentiation strategies;
hybrid and focus strategies.
The factors influencing the sustainability of competitive advantage.
The relationship between competition and collaboration.
The principles of game theory in relation to competitive strategy.

31. End of the Presentation
Thank You !