strategic choice

1
Learning Outcomes
At the end of this session you will

• Explain the relationship between forms of
  ownership and strategic choice
• Explain the importance of clarity of mission or
  strategic intent on strategic choice
• Explain the importance of determining what
  business we are in
• Explain different bases of competitive advantage
  in terms of routes on the strategic clock

2
Figure 6.1 Bases of strategic choice
Corporate purpose and aspirations
Ownership Mission and strategic intent Scope and
diversity The global dimension
Bases of SBU strategy
Achieving competitive advantage Price-based
strategies Differentiation strategies Focus
strategies
Enhancing SBU strategy corporate parenting
Portfolio management Financial strategy The role
of the corporate parent The parenting matrix
3
Figure 6.2 Development strategies

DEVELOPMENT STRATEGIES
Which direction?
What basis?
How?
Alternative Directions
Alternative Methods
Bases of choice
Corporate purpose and aspirations
Protect and build
Internal development
Market penetration
Acquisition
Product development
SBU generic competitive strategies
Market development
Joint Development/ alliances
Diversification related unrelated
The role of the corporate parent
4
Figure 6.4(i) The strategy clock Bowmans
competitive strategy options
High
Differentiation
Focused differentiation
Hybrid
4
5
3
PERCEIVED ADDED VALUE
Low price
6
2
7
1
Strategies destined for ultimate failure
Low price/ low added value
8
Low
Low
PRICE
High
Source Based on the work of Cliff Bowman. See
C.Bowman and D.Faulkner. Competitive and
Corporate Strategy, Irwin, 1996.
5
Figure 6.4(ii) The strategy clock
1 Low price/low added value Likely to be
segment specific 2 Low price Risk of price
war and low margins/need to be cost
leader 3 Hybrid Low cost base and
reinvestment in low price and
differentiation 4 Differentiation (a)
Without price premium Perceived added value by
user, yielding market share benefits
(b) With price premium Perceived added value
sufficient to bear price premium 5
Focused differentiation Perceived added value to
a particular segment, warranting price
premium 6 Increased price/standard Higher
margins if competitors do not value
follow/risk of losing market share 7
Increased price/low value Only feasible in
monopoly situation 8 Low value/standard
price Loss of market share
6
Low price strategies could be successful if

• The competitor is the cost leader
• ... but is this sustainable?
• All sources of cost advantages are exploited,
  developing competences in low cost management
• ... but the danger is a low (perceived) value
  product or service
• A competitor has cost advantage over competitors
  in a price sensitive markets segment
• ... but this may mean focusing on that market
  segment

7
The Success of Differentiation Strategies depends
on

• Clear identification of who the customer is
• Understanding what is valued by the customer
• Clear identification of who the competitors are
  and the value they offer
• Bases of differentiation which are difficult to
  imitate
• The recognition that bases of differentiation may
  need to change

8
Focused Differentiation

• Global market developments increase the need for
  focus
• Clear definition of market segments in terms of
  customers needs is required
• Within a market segment choices of strategic
  direction relate to competitors within that
  segment
• Multi-focused strategies may be possible in some
  markets
• New ventures started through focus strategies may
  be difficult to grow
• Differences between segments may be eroded making
  bases of focus redundant

9
Key Questions in Strategic Choice

• Strategic choices need to take account of the
  environment and build on core competences
• Strategic choices need to take account of the
  expectations and influence of stakeholders
• Strategic direction and methods should build on
  broad strategic choices
• Resources and competences should be developed to
  deliver and sustain the chosen strategies