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6BE003
STRATEGIC MANAGEMENT
Session 8
Levels of Stragety, Competitive
Advantage and Strategic Direction
Slides from Johnson, Whittington, Scholes, Exploring Strategy
Launch Assignment 2
Use relevant strategic management tools and techniques
to evaluate the current strategy of the organisation based
on what you know of their strengths, weaknesses,
opportunities and threats, derived from your analysis in
assignment 1. Analyse why this strategy might be suitable,
acceptable and feasible. Evaluate how the strategic
direction relate to growth, innovation or international
expansion. Briefly identify and justify another potential
strategic direction for the organisation. Given the nature of
this analysis there must be a contemporary and inventive
flavour to much of the relevant data.
Business strategy
Generic strategies
Porter introduced the term Generic Strategy to
mean basic types of competitive strategy that hold
across many kinds of business situations.
Competitive strategy is concerned with how a
strategic business unit achieves competitive
advantage in its domain of activity.
Competitive advantage is about how an SBU
creates value for its users both greater than the
costs of supplying them and superior to that of
rival SBUs.
Source: Adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from Competitive Advantage: Creating and Sustaining Superior Performance
by Michael E. Porter. Copyright 1985, 1998 by Michael E. Porter. All rights reserved
Cost-leadership
Cost-leadership strategy involves becoming
the lowest-cost organisation in a domain of
activity.
Four key cost drivers that can help deliver cost
leadership:
Lower input costs.
Economies of scale.
Experience.
Product process and design.
Differentiation strategies
Differentiation involves uniqueness along some
dimension that is sufficiently valued by
customers to allow a price premium.
Two key issues:
The strategic customer on whose needs the
differentiation is based.
Key competitors who are the rivals and who
may become a rival.
Generic Strategy
WOLVERHAMPTON BUSINESS SCHOOL
Differentiation Drivers
Service quality and levels
Product features
Delivery time
Image
Source: Simplified from Figure 1, in D. Gursoy, M. Chen and H. Kim (2005), The US airlines relative positioning, Tourism Management, 26, 5, 5767: p. 62
Strategy clock
Source: Adapted from D. Faulkner and C. Bowman, The Essence of Competitive Strategy, Prentice Hall, 1995
Strategic lock-in
Strategic lock-in is where users become
dependent on a supplier and are unable to use
another supplier without substantial switching
costs.
Lock-in can be achieved in two main ways:
First-mover
dominance
Self-reinforcing
commitment
Insistence on
preservation
of position
6BE003
STRATEGIC MANAGEMENT
Strategic Direction
Developing Strategy
WOLVERHAMPTON BUSINESS SCHOOL
Developing
Strategies
On What
basis?
Basis of Choice
In Which
direction?
Alternative Directions
Corporate
purpose and
aspirations
SBU generic
competitive
strategies
Product development
Market penetration
Adapted from: G.
Johnson and K.
Scholes Exploring
Corporate Strategy
4th edition
How?
Alternative methods
Internal
development
Acquisition
Market development
Diversification:
related
unrelated
Joint development
alliances
Competence
Existing
Existing
Markets
New
Adapted from: G.
Johnson and K.
Scholes Exploring
Corporate Strategy
4th edition
Products
Protect/Build
withdrawal
consolidation
market penetration
Market Development
new segments
new territories
new users
New
Product Development
on existing competences
with new competences
Diversifaction
on existing competences
with new competences
Development
Ansoff Explained
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Strategic Options
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Withdrawal - ? Whitbread
Consolidation - ? Sainsburys
Market Penetration - ? Northern Rock
Market Development - ? Imperial
Diversification - ? Sony
Unrelated Diversification - ? Hanson
Internal Development - ? Tesco
Mergers & Acquisitions ? Lloyds/HBOS (ABN)
Joint Developments and Strategic Alliances - ? BA
Intermediate Growth - ?
De-merger - Daimler
Market penetration
Market penetration refers to a strategy of
increasing share of current markets with the
current product range.
This strategy:
Market Penetration
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Constraints of
market penetration
Retaliation
from
competitors
Legal
constraints
Economic
Constraints
(recession or
funding crisis)
Product development
Product development
WOLVERHAMPTON BUSINESS SCHOOL
http://web.mit.edu/evhippel/www/
Wikieconomics
http://news.bbc.co.uk/player/nol/newsid_6980000/newsid_6980900/6980955.stm?bw=bb&mp=wm&asb=1&new
s=1#
Market development
Diversification
The key objective of diversification is to strengthen the
value chain, obtain synergy and spread risks.