Theme 6: Competitive Strategies PDF

Theme 6 : Competitives strategies LEVELS OF STRATEGY Corportate level strategy Business level strategy Operational strategy Concerned with...

Theme 6 : Competitives strategies LEVELS OF STRATEGY Corportate level strategy Business level strategy Operational strategy Concerned with how different parts Concerned with the overall scope of an Concerned with the way a business of the organisation deliver the organisation and how value is added to the seek to compete successfully in its strategy in terms of managing constituent business units particular market resources, processes and people Corporate strategy : Higher level managers Competitive strategy : SBU Functional strategies Which sector ? How do we compete ? THE STRATEGIC BUSINESS UNITS A SBU supplies goods or services for a distinct domain of activity A small businnes = 1 SBU A large diversified corporation = +++ SBU Can be called “DIVISIONS” or “PROFIT CENTRES” SBU can be indentify by : Market-based criteria (similar customers, channels and competitors) Capabilities-based criteria (similar strategic capabilities) The Competitive advantages Concept Characteristics Basic problems Any aspect of the firm that Needs to be related to a key factor of success in distinguishes it from others the market The origin of a A relatively better position for Needs to be sufficiently substantial to truly competitive advantage competing make a difference The sustainability of the It allows the firms to obtain a It needs to be sustainable in face of changes in advantage along the time superior performance the environment and competitors’movements Competitive strategy is concerned with HOW a SBU achieves competitive advantage in its domain of activity Competitive advantage is about HOW a SBU creates value for its users, both greater than the costs of supplying them and superior to that of rival SBUs SOURCES OF COMPETITIVE ADVANTAGE External factors REQUIREMENTS Ability to detect changes Imperfect competition market Responding quickly and flexibly Capacity to identify changes at the environment Better ecploitation of opportunities Flexibility to rellocate R&C Internal factors Efficiency ( que du cost leadeship) REQUIREMENTS Ressources and capabilities Quality (les 2) Internal Analysis Innovation (proces = cost learde et produit = differentiation) Capacity for customer satisfaction ( les 2) SUSTAINING A COMPETITIVE ADVANTAGE Imitation barriers Competitor capabilities Industry dynamism Identification Dynamic environments Obstacles that stop other competitors from Incentives / Disincentives Reinforce advantage reproducing the competitive advantage Diagnosis (casual ambiguity) Seek new advantage Ressource acquisition EXAMPLES OF ORGANISATIONAL CAPABILITIES Benchmarking : as a means of understanding the relative performance of organisations VRIO analysis of strategic capabilities as a tool to evaluate if they contribute to competitive advantage Analysing an organisation’s value chain and value system as a basis for understanding how value to a customer is created and can be developped SWOT analysis as a way of drawing together an understanding of strengths, weaknesses, opportunities and threats an organisation faces Generic competitive strategies competitive advantage Cost Differentiation Industry COST LEADERSHIP DIFFERENTIATION Particulary COST FOCUS DIFFERENTIATION FOCUS strategy target segment only COST LEADERSHIP Classic strategy (70) Its costs are lower than its competitors for a product or service of similar or comparable quality If a firm have a lower cost per unit for a similar product than its competitor and sell it at the same price = + margin SOURCES Related with size Economies of scale Experience effect (learning effect) Economies of scope Production capacity Others Links Firm location Inside the value chain favourable conditions for Outside the value chain accessing raw materials CONDITIONS OF APPLICATION New process technology MARKET SHARE Economies of scale (économies d’échelle) ECONOMIES OF SCALE : When the increase in the Experience effect number of inputs used in production gives rise to a Cost structure Economies of scope (économie de more than proportional increase in the total number of champ) outputs produced EFFICIENCY  EXPERIENCE EFFECT Learning Effect: time taken to manufacture one unit of product is reduced as a greater number of units are produced. The reduction in time produces a lower unitary costs of direct labour Experience Effect: Generalisation of the learning effect, as it applies to other operating costs. Cette diminution est mesurée en termes "réels", c’est-à-dire en tenant compte de l’inflation pour se concentrer uniquement sur les gains liés à l’expérience. Lien entre expérience, part de marché et avantage concurrentiel : Si les coûts diminuent avec l'expérience, et que l'expérience est liée à la part de marché, alors l'entreprise avec la plus grande part de marché aura un avantage en termes de coûts par rapport à ses concurrents. Stratégie de prix pour augmenter la part de marché : Une entreprise peut fixer un prix inférieur à son coût initial, car elle sait qu'elle réduira ses coûts grâce à l'expérience. Un prix bas permettra de gagner une plus grande part de marché. Différences dans les effets d'expérience entre entreprises : CONDITIONS OF APPLICATION Toutes les entreprises d'un même secteur bénéficient d'une baisse des coûts grâce à l'expérience, mais cette baisse peut varier d'une entreprise à l'autre en fonction de leur efficacité et de leur apprentissage. Price competence is a key factor of success ADVANTAGES OF THE COST LEADERSHIP STRATEGY The product is standardised and tendered by numerous firms Increases the bargaining power with suppliers and customers Increase our profits Few ways of differentiating between products The customers have hugh bargaining We can start a price war Creates barriers of entry power RISKS Requires constant monitoring of le cost leadership pourrait bientôt être annulé en raison de l'apparition de produits de substitution, de costs changements dans le produit ou le processus, de la différenciation des produits par les concurrents, Excessive use of the Rapid or low cost learning or imitation Competitors focused in exeperience effect by establised competitors certain segments Inflation of costs DIFFERENTIATION Involves UNIQUENESS along some dimension that is sufficiently valued by customers to allow a price premium 2 key issues The strategic customer on whose needs the differentiation is based CONDITIONS OF APPLICATION Key competitors who are the rivals and who may become rivals Customers give special importance to the quality or DIFFRENTATION = HOW enterprise compete differentiate themselves socially Few competitors choose the same criterion of SEGMENTATION = WHERE enterprise compete differentiation Mass Markets : Recherche de certains attributs que beaucoup de personnes The distinctive characteristics are difficult to imitate Product / service complexity apprécient (exemple : McDonald's). Selective Markets : Recherche de certains attributs qui permettent de différencier des groupes spécifiques de personnes SOURCES Product characteristics Market characteristics Firm characteristics Other variables ADVANTAGES RISKS The firm can establish high It reduces the bargaining Competitors with a focused strategy Price difference between prices power of customer strategy may achieve a higher competitors may be too high for differentiation in the market segments customers they cater Generate barriers to entry : brand loyalty Imitation by competitors If the factor of differentiation vanishes (contrefaçons) the purchasers appreactiation reduced  DIFFERENTIATION FOCUS Une stratégie de focalisation cible un segment ou un domaine d'activité restreint et adapte ses produits ou services aux besoins spécifiques de ce segment, à l'exclusion des autres. 2 types : Le succes des focus stratégies depend de 3 facteurs Cost focus strategy Distinct segment needs Differentiation focus strategy Distinct segment value chains Viable segment economies Michael Porter affirme que lorsqu'une entreprise est "stuck in the middle" (coincée au milieu), elle n’a pas de stratégie claire et cohérente. Elle échoue à choisir entre : La domination par les coûts (être le moins cher). La différenciation (offrir un produit ou service unique). En restant indécise, l’entreprise risque de perdre face à des concurrents qui maîtrisent mieux l’une de ces deux approches, car elle n'offre ni les prix les plus bas, ni une réelle valeur ajoutée. Cela entraîne souvent une faible performance et un désavantage concurrentiel. Leadership par les coûts (être le plus efficient) et prix bas (réduire les prix) sont différents : les coûts sont internes à l'entreprise, tandis que les prix sont externes. Une entreprise peut avoir les coûts les plus bas sans nécessairement avoir les prix les plus bas. De plus, une stratégie de coûts bas n'est efficace que si la qualité du produit est suffisante. Concernant la différenciation, elle n’entraîne pas forcément un prix plus élevé. Une entreprise peut combiner coûts bas et différenciation pour offrir un bon rapport qualité-prix, ce qui est souvent une stratégie gagnante. Ces modèles sont principalement appliqués au secteur manufacturier et non au secteur des services. Ils sont typiques des environnements stables. Ainsi, la stratégie de leadership par les coûts est moins pertinente dans des environnements dynamiques et innovants, où les besoins changent rapidement et l'innovation est clé. The strategic clock No frills Focusing on low prices Focusing on differentation “Nofrills” = Low price +Low value Differentiation= High value + high price Focusing on price sensitive market segments Industry wide differentiation Exemple : Ryanair Focused differentation = High value + high price Cost leadership = Low price / medium value High purchasin power Needs a cost advantage to be sustainable LUXURY Similar with porter cost leadership Hybrid stategies High value + low price Strategies destined for ultimate failure Difficult to achieve Options 6 et 7 = High price + low value Stuck in the middle Loose of customers Good quality-price ratio Option 8 = Medium price + low value Seeks to simultaneously achieve higher benefits Firms with a high reputation but with and lower prices relative to those of difficulties in terms of performance competitors IKEA