chapter 5

1. Part 2:
Strategic Choices

2. Strategic Choices
5: Business-Level Strategy

3. Learning Outcomes (1)
6-3
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Identify strategic business units (SBUs) in
organisations
𝖮Explain bases of achieving competitive
advantage in terms of ‘routes’ on the
strategy clock
𝖮Assess the extent to which these are likely
to provide sustainable competitive
advantage

4. Learning Outcomes (2)
6-4
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Identify strategies suited to hyper-
competitive conditions
𝖮Explain the relationship between
competition and collaboration
𝖮Employ principles of game theory in relation
to competitive strategy

5. Exhibit 6.1 Business-Level
Strategies
6-5
Exploring Corporate Strategy 8e, © Pearson Education 2008

6. What is a
Strategic Business Unit?
A strategic business unit (SBU)
is a part of an organisation for
which there is a distinct external
market for goods or services that is
different from another SBU.
6-6
Exploring Corporate Strategy 8e, © Pearson Education 2008

7. Exhibit 6.2
The Strategy Clock
6-7
Exploring Corporate Strategy 8e, © Pearson Education 2008

8. Route 1: No Frills Strategy
6-8
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Low price combined with low
perceived product benefits focusing on
price- sensitive market segments
𝖮Commodity markets
𝖮Price-sensitive customers
𝖮High power, low switching costs among buyers
𝖮Opportunity to avoid major competitors

9. Route 2: Low-Price Strategy
6-9
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Lower price than competitors while
offering similar product benefits
𝖮Pitfalls
𝖮Margin reductions
𝖮Inability to reinvest

10. Route 3: Hybrid Strategy
6-10
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Seeks to simultaneously achieve
differentiation and low price relative to
competitors
𝖮Advantageous when
𝖮Greater volumes can be achieved
𝖮Cost reductions outside differentiated activities
are available
𝖮Used as an entry strategy

11. Route 4: Differentiation Strategy
6-11
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Seeks to provide products that offer
benefits that differ from those offered by
competitors
𝖮Dependent upon
𝖮Identifying and understanding
strategic customer needs
𝖮Identifying key competitors’ strategies

12. Route 5: Focused Differentiation
6-12
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮 Seeks to provide high perceived product benefits,
justifying price premiums
𝖮 Key issues
𝖮Choice between focus strategy and broad
differentiation
𝖮Tensions between focus strategy and other
strategies
𝖮Market changes

13. Routes 6-8: Failure Strategies
6-13
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮 6 – Increase prices without increasing
service/product benefits
𝖮 7 – Reduction in product/service benefits
with increase in relative price
𝖮 8 – Reduction in benefits whilst
maintaining price

14. Exhibit 6.3 Sustaining
Competitive Advantage
Sustainable
competitive
advantage
Price-based
strategies
Lock-in
Differentiation
6-14
Exploring Corporate Strategy 8e, © Pearson Education 2008

15. Achieving Low Prices
Operate with lower
margins
Create efficiency in
organisational
capabilities
Develop a unique
cost structure
Focus on market
segments with
low expectations
6-15
Exploring Corporate Strategy 8e, © Pearson Education 2008

16. Dangers of Low Price Strategies
6-16
Exploring Corporate Strategy 8e, © Pearson Education 2008
𝖮Competitors might follow suit
𝖮Customers associate low price with
low benefits
𝖮Cost reductions may result in inability
to pursue differentiation strategy

17. Ways of attempting to Sustain
Advantage through Differentiation
Create difficulties
of imitation
Create a situation
of imperfect mobility
Establish a lower
cost position
6-17
Exploring Corporate Strategy 8e, © Pearson Education 2008

18. Establishing Strategic Lock-In
Size or market
dominance
Self-reinforcing
commitment
First-mover
dominance
Insistence on
preservation
of position
6-18
Exploring Corporate Strategy 8e, © Pearson Education 2008

19. Exhibit 6.5 Competitive Strategies
in Hypercompetitive Conditions
6-19
Exploring Corporate Strategy 8e, © Pearson Education 2008

20. Exhibit 6.6 Competition
and Collaboration
6-20
Exploring Corporate Strategy 8e, © Pearson Education 2008

21. What is Game Theory?
Game theory is concerned with the
interrelationships between the
competitive moves of a set of
competitors.
6-21
Exploring Corporate Strategy 8e, © Pearson Education 2008