Strategic management Business administration T.5 Business level Strategy

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

2. ContentsJ&Sh, 2002 • Forces, influencing BS • The “strategy clock” • Sustaining competitive advantage • Competition and collaboration • Game theory • 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