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Chapter05
- 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-3
- 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-6
- 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.
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-8
- 9. Exhibit 6.2
The Strategy Clock
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-9
- 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-10
- 11. EasyJet’s No Frills Strategy (1)
Exploring Corporate Strategy 8e, © Pearson Education 2008 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?
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-12
- 13. 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 6-13
- 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-18
- 19. Exhibit 6.3 Sustaining
Competitive Advantage
Sustainable
competitive
advantage
Price-based
strategies
Lock-in
Differentiation
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-20
- 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 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
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-23
- 25. Establishing Strategic Lock-In
Size or market
dominance
First-mover
dominance
Self-reinforcing
commitment
Insistence on
preservation
of position
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-25
- 26. Exhibit 6.5 Competitive Strategies
in Hypercompetitive Conditions
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-26
- 28. What is Game Theory?
Game theory is concerned with the
interrelationships between the
competitive moves of a set of
competitors.
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-28
- 29. Exhibit 6.7 A Prisoner’s Dilemma
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-29
- 30. Case Example: Madonna
Describe and explain Madonna’s
competitive strategy.
Why has she experienced sustained
success?
Exploring Corporate Strategy 8e, © Pearson Education 2008 6-30
Editor's Notes
- Use easyJet video, start with 6:05 through 6:55 or 7:12 on pricing.
- Use easyJet clip, start with 9:35 through 9:52 on lower cost structure