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Learning Outcomes

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’

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Learning Outcomes

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  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. 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. Development strategies DEVELOPMENT STRATEGIES What basis? Which direction? 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. The strategy clock: Bowman’s 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 High PRICE Source: Based on the work of Cliff Bowman. See C.Bowman and D.Faulkner. Competitive and Corporate Strategy, Irwin, 1996.

  5. 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

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