Slide 1

STRATEGIC MANAGEMENT
Lesson 6
Corporate and Competitive Strategies

Hello and welcome to your sixth lesson in your strategic management module. In this
lesson, we shall be considering different corporate and competitive strategies which an
organisation can adopt.
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Lesson 6 Contents

SECTION 1 SWOT analysis

SECTION 2 Competitive strategy
SECTION 3 Generic strategies
SECTION 4 Hybrid strategy
SECTION 5 Value disciplines
SECTION 6 Growth strategies
SECTION 7 Routes to growth
SECTION 8 Strategic choice
SECTION 9 Decision making and risk

We shall be looking a little more closely at the SWOT analysis, competitive strategy, generic
strategies, hybrid strategies and the value disciplines which an organisation can generate
strategy around before considering alternative growth strategies, the routes available to
achieving that growth, which I sometimes consider as being implementation options, before
coming back to considering the strategic choices which strategic managers need to make
and how they take those decisions whilst considering risk.
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SWOT Analysis

Considers both internal and external factors:

Strengths and Weaknesses
Opportunities and Threats

Leading to:

So, the SWOT analysis as mentioned in earlier lessons considers both internal and external
factors.
Strengths and weaknesses are internal, opportunities and threats are external. As also
previously mentioned, organisations can just undertake a subjective SWOT analysis on the
organisation, sometimes considering these factors in conjunction with their competitors, or
they can use the results of their external and internal analysis and feed that into a SWOT for
a more objective approach.
However, having considerations of what is happening externally and internally is all well and
good but, to be effective, strategic managers need to do something with this information.
They need to make a strategic choice about how to compete, direction of growth and
method of growth.
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Competitive strategy
Corporate Strategy – Where do we want to be?

Competitive Strategy – how will the organisation compete – how do we get

there?

Generic Strategies
• cost leadership
• differentiation
• Focus

Hybrid strategy – different strategies across different products/services OR

different strategies at different times

Value disciplines
• operational excellence
• product leadership
• customer intimacy

• Growth strategies – Ansoff

• How to grow?
• Merits of different options

How to compete requires an organisation to consider where they want to be. Competitive
strategy is about how they get there.
Porter suggests that there are three generic strategies which an organisation can follow –
cost leadership, differentiation and focus.
The hybrid strategic approach, however, considers that different strategies can be taken for
alternative products and services or that an organisation might adopt different strategies at
different times. For example, if a competitor makes an aggressive move by suddenly
reducing their prices, or if the organisation already had a cost leadership approach they
may decide to differentiate in order to not reduce their margins further.

The value disciplines consider whether an organisation wants to compete based upon
operational excellence e.g. Amazon, product leadership, BMW or Customer Intimacy, First
Direct Bank in the UK.
Growth strategies, i.e. the direction in which an organisation should grow, is frequently
considered using Ansoff’s model which offers different methods for consideration.
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Generic strategy

Porter’s Generic strategy suggests that organisations can compete based upon their current
competencies or look to develop alternative competencies. It also considers the markets
where an organisation competes. Do they seek to differentiate themselves from their
competition or is their competitive advantage the cost at which they supply the market?
With regards to the market, they can look to focus their activities on a narrower market
segment or seek to compete within numerous segments or the entire market itself. You can
see that this gives the organisation options to differentiate or take a focus strategy with the
option for cost leadership within both of these options.
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Hybrid strategy

The hybrid strategic approach considers Porter’s model to be too simplistic and unrealistic in
the real world. Whilst Porter argued that failing to choose a generic strategy left
organisations ‘stuck in the middle’, the hybrid approach suggests that this in practice is
actually quite normal and that whilst a high price and low perceived added value can lead to
organisations following a strategy which is destined for ultimate failure, there are a range of
alternatives for an organisation to compete against when you consider price and value
orientations.
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Value disciplines

Operational excellence
• Lead the industry, lean and mean

Product leadership
• First to market, innovative and creative

Customer intimacy
• Solution development for customers
• development of core competencies and distinctive capabilities,
• requires customer insight and flexibility

There are 3 value disciplines against which organisations can differentiate themselves.
They can seek to achieve operational excellence – lead the industry and be lean and mean.
An example here could be the Japanese car manufacturers who seek to offer high-quality
vehicles at competitive prices and have led the industry in terms of continuous improvement
and quality.
Organisations can seek to lead in terms of product development – be first to market, be
innovative and creative. Pharmaceutical companies make their money this way by
developing new medications, seeking patents for the same and therefore securing income
from buyers before generic alternatives are allowable. Technology-based organisations also
tend to compete this way seeking to be first to market with new features. For example,
Apple phones and gaming boxes.
Alternatively, organisations can seek to develop customer intimacy. This is where they focus
on the customer and seek to provide solutions for them. The customer is at the core of their
competencies and distinctive capabilities, these being developed around what customers
want and need. This approach, however, does require great customer insight and flexibility
to change the organisation to meet ever-changing customer needs.
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Growth strategies

Market penetration/Withdrawal

Product Development

Market Development

Diversification

Growth strategies. This is where Ansoff’s model is frequently used. The model considers
existing products and new products, existing markets and new markets and where an
organisation may choose to compete.
Existing markets and existing products is where an organisation chooses to continue to
penetrate their current marketplace. However, that may be declining and hence, market
penetration can also include market withdrawal.
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Routes to growth / methods of growth / choice of

implementation

Include:

Organic growth
• Use internal resources to expand
Mergers and acquisitions
• Good for entering new geographical markets or new industries sectors
where organisation does not have capability
Strategic alliances
• Alternative method of developing capability and competence to enter
new markets
• By combining competencies and capabilities, distinctive capabilities can
be created

After choosing where and how to compete, the strategic choice which needs to be made is
with regards to how to grow or decline the organisation or part of the organisation.
Remember, having considered the organisation and its products and services in its entirety
under a hybrid approach, an organisation may choose to decline some products and services
and grow others.
With regards to growth, the organisation can choose organic growth and use their internal
resources to expand.
Mergers and acquisitions are good for entering new geographical areas or new industry
sectors where the organisation does not currently have capability.
Strategic alliances are an alternative method of developing capability and competence to
enter new markets. Organisations have found that combining competencies and capabilities
with other organisations, distinctive capabilities can be created. Organisations can seek to
grow into new sectors or within their value chain – horizontal or vertical diversification.
Growing into the value chain is frequently seen as a weakness strengthening or strength
strengthening strategy. Horizontal diversification can be to help expand products and
services offered into new markets, which is ‘related diversification’ or can be new products
and services, which is ‘unrelated diversification’.
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Strategic choice

Suitability
• Does choice match the culture?
• Does it exploit organisational strengths?
• Does it address the threats/internal weaknesses?

Feasibility
• Is it realistic and achievable?
• Are resources and competencies available OR able to obtain?

Acceptability
• Will it be acceptable to stakeholders?
• Are the risks acceptable?

However, after deciding which is the preferred option for the organisation, before decisions
can be finalised, strategic managers need to consider the suitability, feasibility and
acceptability of their preferred choice. Does what they propose match the current culture of
the organisation? If not, it could be met with strong resistance which can make change
difficult. Does it exploit the organisation’s strengths? If not, it could be that either the
organisation now has the wrong strengths or they could be missing opportunities to
capitalise on their strengths. Does it address the threats identified from the environment
and internal weaknesses? If not, the strategy may not be successful.
Feasibility. Is it realistic and achievable? Are the finances, competencies and capabilities
available to achieve what the organisation seeks to achieve in its preferred method? If not,
an alternative approach may be required. For example, if a small organisation wishes to
grow but has limited finances and access to further finance, they may need to seek a
strategic alliance. If an organisation wants to expand into new geographical areas but
doesn’t have the current capability to do so, a merger or acquisition may be a better option.
Finally, the organisation needs to consider whether the proposed strategy will be acceptable
to stakeholders. If not acceptable to those who ‘own’ the organisation, they may sell their
shares and seek to invest elsewhere. If not acceptable to employees, the organisation may
face difficulty in implementing the required changes smoothly.
What about risk? How risky is the strategy and how risk adverse is the organisational
culture?
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Decision-making and managing risk

What are the risks, how likely are they to be realised and are they acceptable?

• Sensitivity Analysis

• Decision Tree Analysis

• Gaining Stakeholder Support

When considering risk, the strategic manager needs to undertake a risk assessment. What
are the risks, how likely are they to be realised and how significant are they? The latter will
help to determine whether the risks are acceptable given the organisation’s culture and
approach to risk.
Here, sensitivity analysis needs to be undertaken to consider how acceptable they are. A
decision tree analysis can aid in calculating the probability of the risk being realised and
causing an organisation implementation difficulties whilst gaining stakeholder support is
considered important for any significant change. Even if on paper it seems to be feasible,
you are considering changing what people do and how they undertake their jobs and this
can be seen as a major threat to their own security and so are more likely to challenge
strategy changes and implementation if their support has not been obtained. For example,
look at the Junior Doctor strikes in the UK in 2016.
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THANK YOU

Well, that is all that I am going to consider within this recorded lesson. Do consult the notes
on the learning platform as these contain further evaluation of the concepts highlighted
along with links to further reading. The further reading and research which you are
encouraged to undertake will help to further your understanding of corporate and
competitive strategies and how strategic managers may choose the future direction of an
organisation. Thank you for listening and I will see you in lesson 7.