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Strategic management Business administration T.5 Business level Strategy

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Title: Strategic management Business administration T.5 Business level Strategy


1
Strategic managementBusiness administrationT.5
Business level Strategy
  • Prof.Dr. E. Vatchkova

2
Contents JSh, 2002
  1. Forces, influencing BS
  2. The strategy clock
  3. Sustaining competitive advantage
  4. Competition and collaboration
  5. Game theory
  6. Competitive strategy under hypercompetitive
    conditions

3
What is it about?
  • Bases of strategic choice at this level
  • Generation of rents, superprofits, economic
    profit

4
Why is it important?
  • How to compete effectively in a market?
  • How value is realized?
  • To what extent is it possible to achieve
    competitive advantage?
  • How the investments depend on the value created
    by constituent business units?

5
Bases of strategic choice at the business level
  • The influence of environment, capabilities,
    expectations
  • Gaining competitive advantage - generic
    competitive strategies price-based,
    differentiation, focus
  • Sustaining competitive advantage low price
    advantage, differentiation, lock-in
  • Co-operative and competitive strategies
  • Games theory and hypercompetition

6
  • 4.
  • Differentiation
  • 3.
  • Hybrid
  • 5.
  • Focused
  • Differentiation
  • 6.
  • 2.
  • Low price
  • failure
  • 7.
  • 1.
  • No frills
  • 8.

7
The strategy clock
  • Price-based strategy(routes1 2)
  • The hybrid strategy (route 3)
  • Add value, or differentiation strategy (route 4)
  • Focused differentiation(route5)
  • Failure strategy (route 6,7 8

8
NO FRILLS STRATEGY
  • It combines
  • Low price
  • Low perceived added value
  • Focus on a price sensitive market segment
  • Risks- likely to be segment specific

9
LOW PRICE STRATEGY
  • Lower price for similar value
  • Low cost base
  • Focusing on unattractive market segment
  • Risk price war
  • low margins
  • need to be cost leader

10
HYBRID STRATEGY
  • Low cost base, reinvestment in low price and
    differentiation
  • Entry strategy market segment, facilitating
    low-price approach
  • Core competencies, on which differentiation can
    be built
  • Greater volumes achieved, margins kept because of
    low cost price

11
DIFFERENTIATION STRATEGY (with or without price
premium)
  • Uniqueness or improvements in products
  • Marketing based approach
  • Competence-based approach

12
Focused differentiation
  • Perceives added value to a particular segment
  • Warranting price premium

13
LOCK-IN STRATEGY
  • The organization has achieved a proprietary
    position in its industry
  • It has become an industry standard
  • Microsoft, IBM

14
Ultimate failure strategies
  • Increased price/standard value
  • Higher margins if competitors do not follow
  • Risk of loosing market share
  • Increased price/low value
  • Feasible only in monopoly situation
  • Low values/standard price
  • Loss of market share

15
COLLABORATION STRATEGY
  • Buyer-seller
  • To increase buying power
  • To build barriers to entry or avoid substitution
  • To gain entry and competitive power
  • To share work with customers

16
GAMES THEORY
  • THE STRATEGIST IS TO ANTICIPATE THE REACTIONS
    OF OTHERS
  • COMPETITORS WILL BEHAVE RATIONALLY
  • INTERDEPENDANT RELATIONSHIP OF COMPETITORS
  • THE NEED TO BE IN THE POSITION OF COMPETITOR TO
    BE INFORMED

17
TYPES OF GAMES
  • Simultaneous games
  • Sequential games
  • Repeated games
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