ST4S38

Strategic Analysis; Tools and

Techniques

Gaining Competitive Advantage

Workshop 3
© University of South Wales
 This Week’s Aim
Is to…
• Introduce sources of competitive advantage
• Explore factors that impact on the way companies compete
• Look at generic competitive strategy
• Introduce competitive position analysis
About the Assignment…
• Strategic Position of the company
• Stakeholder Analysis
• External Analysis
• Industry Analysis
• Internal Analysis
Classic generic strategies: How
organisations compete
Competitive Advantage
Lower cost Differentiation

Broad Target
Cost Leadership Differentiation

Competitive Scope

Differentiation
Cost Focus
Narrow Target Focus

Porter, 1985
 Have you had a think about…

Where your chosen organisation’s products/services sit

in the Porter’s Generic Strategy Model.

Where do your competitor’s products/services sit in

Porter’s Generic Strategy Model?
Sources of differentiation: What
makes it difficult to imitate
Unique or rare Product design/
resources/ Brand image
capabilities

Product/ Differentiation State-of-the-art

Service technology
complexity

Marketing Customer
ability service

Porter, 1985; Henry, 2018

Differential strategies
• Could be successful depending on….
• Clear identification of…
• Who is the customer
• Who are the competitors
• What value the competitors offer
• Understanding what is valued by the customer
• Bases of differentiation which are difficult to imitate
• The recognition that bases of differentiation may need to change
Task
1. Choose an industry (e.g. Clothing, mobile phones, laptops, restaurants… it’s up to you!)
• Identify the companies within that industry who follow:
• Cost Leadership (What do they do?)
• Differentiation (How do they differentiate?)
• Focus (Cost or Differentiation) (Who are their target market?)

We will then discuss these as a group!

 The Strategy Clock
• Another (extended) way of
approaching generic strategies
• Focusing on prices to customers
rather than costs to the
organisation & Perceived value by
customers
• Show a full range of incremental
adjustments

Faulkner and Bowman, 1995)

Low price strategies

Lower price than competitors:

Perceived
Low price + standard products
(low cost leaders) Value
While offering similar product benefits, aimed at
increasing market share. Risk of price war

Low perceived product benefits:

Low price + low added value
(bargain basement)
Focusing on price sensitive market segments
Hybrid strategies
Simultaneously achieve differentiation & relatively low price to
competitors:
Fair price + reasonable products. Can build customer loyalty

Could be used…
- To enter markets and build position quickly
- As an aggressive attempt to win market share
- To build volume sales and gain from mass production
Differentiation
Differentiation without price
premium:
Used to increase market share

Differentiation with price

premium:
Based on branding and
customer loyalty
Used to increase profit margin

Focused differentiation:
Used for customers that demand top
quality and will pay a big premium
e.g. Luxury goods
Non-competitive
strategies

Increased price +
standard products

High price + low value

products (Monopoly pricing)

Standard price + low value products

Activity
• Select an industry of your interest as a group (if possible)
• List a range of companies working in the industry (small & big)
• Where do they belong on the Strategy Clock?

Present your findings

Competitive Position Analysis
• How does an organisation compete if it has the same resources, or
customers as itself?
• It is essential to ascertain the relative competitive position of an
organisation (6-8 on the strategic clock)
• Questions to the strategist…
• How and where do organisations compete?
• Which organisations should be used as comparators?

• Leading to Competitor Analysis based on Strategic Business Unit

Identification, Strategic Group Analysis & Market Segmentation
Competitor Analysis
• Once the direct competition to the organisation have been identified
the following features of the competition should be analysed:
• Their objectives
• Their resource strengths
• Their performance
• Their current strategy
• The underlying assumptions behind their strategy
• And consider the following questions:
• How will the above effect your organisation?
• How might the features change in the future (scenarios)?
Strategic Group Analysis
• Strategic group: a group of firms in the same industry that follow the
same or similar strategies (Porter, 1980)

• Strategic Group Analysis is useful to:

• Identify firms with similar strategic characteristics
• Therefore identify the most direct competitors
• Identify mobility barriers
• Identify strategic opportunities (“strategic spaces”)
• Identify threats and problems
Mobility barriers
• What prevents an organisation from entering an industry (Barriers to
entry)

• Factors that defer movement of firms from one strategic position to

another (Porter, 1980)
• A limitation on replicability or imitation (McGee and Thomas, 1986)
 Strategic Map
• Useful tool to compare strategies of organisations in an industry
• Mapping of strategic groups based on characteristics such as…
• Product/Service diversity
• Geographic coverage
• Market segments served
• Distribution channels
• Branding
• Marketing effort
• Vertical integration
• Quality
• Technological leadership
• R&D Capability
• Size
Strategic group mapping: Examples
Restaurant

Average
Money
Spend
£ High class

Quality
Chain
Simple
Chain

Fast food

0
Average Time spent (hrs)
Activity
• Based on the strategy clock you created in Activity 1, can you create a
strategic map?

• First decide what characteristics you want to use for two axes
(horizontal and vertical)
• Group companies based on characteristics and put them to the map

• What does it tell you about the industry and competition?

 Market segments: Customer
markets
• Based on characteristics of people such as…
• Age
• Gender
• Family size
• Life-cycle stage
• Location
• Lifestyle
• Based on purpose/use situation  Based on user needs
• Size of purchase  Product similarity
• Brand loyalty  Price preference
• Purpose of use
 Brand preference
• Purchasing behaviour
 Desired features
• Importance of purchase
• Choice criteria  Quality
 Market segments:
Industrial/Organisational markets
• Based on characteristics of organisation such as…
• Industry
• Location
• Size
• Technology
• Profitability
• Management
 Based on user needs
• Based on purpose/use situation
 Performance requirements
• Application
• Importance of purchase  Assistance from suppliers

• Volume  Brand preferences

• Frequency of purchase  Desired features
• Distribution channel  Quality
• Choice criteria
Key reading
• Porter, M. (1985) ‘Competitive Advantage’, Free Press
• Porter, M. (1980) ‘Competitive Strategy: Techniques for Analysing
Industries and Competitors’, Free Press
• Markides, C. and Charitou, C. (2004) ‘Competing with dual business
models: a contingency approach’, Academy of Management
Executive, 18(3), p.22-36
• Faulkner, D. and Bowman, C. (1995) ‘The Essence of Competitive
Strategy’, Prentice Hall
• McGee, J. and Thomas, H. (1986) ‘Strategic Groups: theory, research
and taxonomy’, Strategic Management Journal, 7(2), p.153
 Next week…
We will be looking at…

• The macro-environmental factors that could affect the industry and

business
• Porter’s 5 Forces model in strategic analysis and critically explore its
value.
• The structures underpinning an industry’s competitive environment