Business Strategy Chapter 5
Instructor’s Manual
CHAPTER 5
Illustration 5.1
The strategy clock It is important that students get a grasp of the basis of competitive strategy, and the strategy clock helps them to do this. However, they should not assume that these strategies are static. The questions here help them understand how the basis of competitive strategy may change over time. • Route 1 on the strategy clock may provide an opportunity for entry because large players may have vacated that space in the market as they try to add value rather than compete on price in what may have become commodity-type markets. In the specific instance of the car industry in the 1960s and 1970s, Western producers were operating with a relatively high cost base compared with Japanese entrants from what was then a low-cost producer nation. The result was that the Japanese did not face markedly higher quality competition, but they could readily compete on price. Trading up through routes 2 and 3, as the Japanese did, is an interesting phenomenon. Why did the market leaders not respond? Was this solely a function of the Japanese cost structure? Was it to do with the speed of innovation in Japanese firms? Or the inertia of existing market leaders? Entering through route 5 and moving elsewhere is discussed explicitly at the end of section 5.3.4. As is pointed out there, this entails a lowering of price, and therefore cost, while maintaining differentiating features. It also means moving from a focused approach to a less focused approach. Neither of these moves is easy, usually because the competences of the firm have become attuned to more focus and less emphasis on cost; but also because the market may well regard such a firm as segment specific and therefore be wary of such a move. Nissan was driven into position 8 from which it needed to re-position.. For example, if it tried to move to the hybrid position – differentiated but at lower prices (and, therefore, lower costs) – this requires the
CHAPTER 5
Illustration 5.1
The strategy clock It is important that students get a grasp of the basis of competitive strategy, and the strategy clock helps them to do this. However, they should not assume that these strategies are static. The questions here help them understand how the basis of competitive strategy may change over time. • Route 1 on the strategy clock may provide an opportunity for entry because large players may have vacated that space in the market as they try to add value rather than compete on price in what may have become commodity-type markets. In the specific instance of the car industry in the 1960s and 1970s, Western producers were operating with a relatively high cost base compared with Japanese entrants from what was then a low-cost producer nation. The result was that the Japanese did not face markedly higher quality competition, but they could readily compete on price. Trading up through routes 2 and 3, as the Japanese did, is an interesting phenomenon. Why did the market leaders not respond? Was this solely a function of the Japanese cost structure? Was it to do with the speed of innovation in Japanese firms? Or the inertia of existing market leaders? Entering through route 5 and moving elsewhere is discussed explicitly at the end of section 5.3.4. As is pointed out there, this entails a lowering of price, and therefore cost, while maintaining differentiating features. It also means moving from a focused approach to a less focused approach. Neither of these moves is easy, usually because the competences of the firm have become attuned to more focus and less emphasis on cost; but also because the market may well regard such a firm as segment specific and therefore be wary of such a move. Nissan was driven into position 8 from which it needed to re-position.. For example, if it tried to move to the hybrid position – differentiated but at lower prices (and, therefore, lower costs) – this requires the