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Part 2:
Strategic Choices
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Exploring Corporate Strategy 8e, Pearson Education 2008 6-3
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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Exploring Corporate Strategy 8e, Pearson Education 2008 6-4
Exhibit II.i Strategic Choices
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Exploring Corporate Strategy 8e, Pearson Education 2008 6-5
Exhibit II.ii The TOWS Matrix
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Strategic Choices
6: Business-Level Strategy
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Learning Outcomes (1)
Identify strategic business units (SBUs) in
organisations
Explain bases of achieving competitiveadvantage in terms of routes on the
strategy clock
Assess the extent to which these are likelyto provide sustainable competitive
advantage
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Learning Outcomes (2)
Identify strategies suited to hyper-
competitive conditions
Explain the relationship betweencompetition and collaboration
Employ principles of game theory in relation
to competitive strategy
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Exhibit 6.1 Business-Level Strategies
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What is a
Strategic Business Unit?
Astrategic 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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Exhibit 6.2
The Strategy Clock
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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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EasyJets No Frills Strategy (1)
http://www.easyjet.com/http://www.easyjet.com/7/30/2019 24174570-Exploring-Corporate-Strategy-8th-Edition-06(2).ppt
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EasyJets No Frills Strategy (2)
Upon what are the bases for
easyJets no frills strategy?
How easy would it be for largerairlines such as BA to imitate the
strategy?
On what bases could other low-price
airlines compete with easyJet?
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Route 2: Low-Price Strategy
Lower price than competitors while offering
similar product benefits
Pitfalls
Margin reductions
Inability to reinvest
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Morrisons Low Price Strategy
http://www.morrisons.co.uk/http://www.morrisons.co.uk/7/30/2019 24174570-Exploring-Corporate-Strategy-8th-Edition-06(2).ppt
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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 activitiesare available
Used as an entry strategy
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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 needsIdentifying key competitors strategies
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Route 5: Focused Differentiation
Seeks to provide high perceived product benefits,justifying price premiums
Key issuesChoice between focus strategy and broad
differentiation
Tensions between focus strategy and other
strategiesMarket changes
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Routes 6-8: Failure Strategies
6 Increase prices without increasingservice/product benefits
7 Reduction in product/service benefits
with increase in relative price
8 Reduction in benefits whilstmaintaining price
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Exhibit 6.3 Sustaining
Competitive Advantage
Sustainable
competitive
advantage
Price-based
strategies
Lock-in
Differentiation
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Achieving Low Prices
Operate with lower
margins
Develop a unique
cost structure
Create efficiency in
organisational
capabilities
Focus on market
segments with
low expectations
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Exploring Corporate Strategy 8e, Pearson Education 2008 6-23
Ryanair
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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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Exploring Corporate Strategy 8e, Pearson Education 2008 6-26
Yellow Tail
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Establishing Strategic Lock-In
Size or market
dominance
First-mover
dominance
Self-reinforcing
commitment
Insistence on
preservation
of position
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Exhibit 6.5 Competitive Strategies
in Hypercompetitive Conditions
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Exhibit 6.6 Competition
and Collaboration
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What is Game Theory?
Game theoryis concerned with the
interrelationships between the
competitive moves of a set ofcompetitors.
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Exploring Corporate Strategy 8e, Pearson Education 2008 6-33
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 toachieve 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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Exploring Corporate Strategy 8e, Pearson Education 2008 6-35
Case Example: Madonna (1)
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Case Example: Madonna (2)
Describe and explain Madonnas
competitive strategy.
Why has she experienced sustainedsuccess?
What might threaten the sustainability of
her success?