2.Strategic Business Unit
A strategic business unit is a par of an organization for which there is a distinct external market for goods or services that is different from another SBU.
- External criteria: customers type, market
competition, sorts of channels
- Internal criteria: strategic capabilities
resources and competences
3. Bases of competitive advantage
Competitive strategy is connected with the basis on which a business unit might achieve competitive advantage in its market.
Porter proposed three generic strategies to achieve competitive advantage:
- Cost leadership
- product / service features differentiation
- Offer different product or service features
8. Hybrid Strategy (route 3)
A hybrid strategy seeks simultaneously to achieve
differentiation and a price lower than that of
Hybrid strategy is following two advantages
- High volumes of production than competitors produces
- Entry strategy in a new market
9. Focused differentiation (route 5)
A focused differentiation strategy seeks to provide
high perceived product / service benefits justifying a
sustainable price premium, usually to a selected
market segment (niche). For example: Wastin hotel,
10. Failure Strategies (routes 6, 7 and 8)
A failure strategy is one that does not provide perceived value-for-money in terms of product features, price or both.
Route 6 suggests increasing price without increasing product/service benefits to customers.
Route 7 is involving the reduction in product/service benefits whilst increasing relative price.
Route 8, reduction in benefits whilst maintaining price, is also dangerous, though firms have tried to follow
11. Sustaining competitive advantage
12. Sustaining price-based advantage
• Pursuing low-price strategies may be prepared to accept the reduced margin either because it can sell more volume than competitors or it can cross-subsidies that business unit from else where in its portfolio.
• Win a price war with competitors either because it has a lower cost structure or deeper pockets to fund short to medium-term loss with the aim of driving out competitors in the longer term. Supermarkets have been accused of pursuing such strategies
13. An organization has cost advantages through organizationally specific capabilities driving down cost throughout the value chain. For example : cost advantage might be achieved because a business is able to obtain raw materials at lower prices than competitors, or to produce more efficiently, or because it is located in an area where labour cost is low, or because its distribution costs provide advantages. Or it may be possible to reduce substantially the costs of activities by outsourcing their provision. An international example is MacDonals or easyjet.
14. Focusing on market segments where low price is particularly valued by customers. An example here is the success of dedicated producers of own brand grocery products for supermarkets. i.e. Lux for middle and lower middle class people.
15. Sustaining differentiation-based advantage
• Create difficulties of imitation : It involves identifying capabilities that are likely to be durable and which competitors find difficulties to imitate or obtain. Indeed the criterion of robustness is sometimes referred to as ‘non-imitability’.
• Imperfect mobility :
Effectively manage and maintain intangible assets like: brand value, image or reputation as this not readily transfer given new ownership.
Switching costs: are the actual or perceived...