These detailed notes on Strategic Business Management (SBM) encompass a wide range of essential topics, including Strategic Analysis, Corporate Governance, Ethics, Human Resource Management (HRM), and all necessary Excel formulae for the ICAEW Advanced Level Exam. Designed for students pursuing pro...
Chapter 02: Strategic Choice
Categories Competitive Strategies: Determine how an org. competes
Product Market Strategies: Determine Where an org. competes and the direction of growth
Institutional Strategies: Determine the method of growth.
Porters Generic Strategies Porter's Generic Strategies framework outlines three primary strategies that companies can adopt to gain a
competitive advantage in their industry. These strategies are based on the premise that firms can achieve superior
performance by either differentiating their products or services, achieving the lowest costs, or focusing on a
particular market segment
Strategy Definition Objective Key Characteristics Examples
Cost Aiming to become Attract a broad - Efficient production Walmart, Ryanair
Leadership the lowest-cost customer base with and economies of scale
producer. lower prices. - Tight cost control
- Standardized products
- Minimized overhead
costs
Differentiation Offering unique Achieve higher - Innovation and R&D Apple, Rolex
products or prices and margins. investment
services. - Strong branding
- Customer service
focus
- Unique product
attributes
Focus Targeting a specific Serve a particular - Deep understanding Tesla (electric
market segment or group of customers of the niche vehicles), Rolls-
niche. effectively. - Tailored offerings Royce (luxury
- Cost focus or brand)
differentiation focus
Limitations of Porter
, Generic Strategies Strategy Limitations
Cost Leadership - Risk of price wars, eroding margins.
- Potential perception of lower quality.
- Vulnerability to competitors reducing costs.
- Limited flexibility and responsiveness to market changes.
Differentiation - High costs associated with R&D and marketing.
- Risk of imitation by competitors.
- Limited market size due to niche focus.
- Vulnerability to changing consumer preferences.
Focus - Limited sales potential in narrow markets.
- Dependency on niche market stability.
- Emergence of competition within the niche.
- Resource constraints compared to larger competitors.
General Limitations - Over-simplification of competitive dynamics.
- Difficulty adapting to dynamic market conditions.
- Challenges in aligning organizational functions for strategy execution.
- Rigid adherence may hinder responsiveness to new opportunities.
Bowman’s Strategy Clock Bowman's Strategy Clock is a strategic management tool that expands on Porter’s Generic Strategies by
providing a more nuanced view of competitive positioning based on two key dimensions: price and perceived
value. The model presents eight strategic options that organizations can adopt, illustrated on a circular diagram,
typically divided into eight segments. Here’s a breakdown of the options on the clock:
Bowman’s Strategy Clock
Positio Strategy Description
n
1 Low Price/Low Offering basic products at a low price, typically competing with cost
Value leadership but with minimal features. This strategy can lead to a low market
share and is often unsustainable.
2 Low Price Competing on price with products that offer slightly better perceived value
than the lowest quality. This position aims for mass market appeal through
cost efficiency.
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