Slide 5.1
Chapter 5: Strategy options in e-business markets
After this session you should be able to:
 Understand the fundamentals of competitive advantage in ebusiness.
 Explain the generic approaches to strategy formulation.
 Appreciate the meaning of an ‘outpacing’ strategy.
 Assess the risk for companies of being ‘stuck-in-the-middle’.
 Understand the levers that improve the fit between the chosen
strategy and the value chain activities.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.2
Exhibit 5.1 The strategic triangle addresses the main drivers of
competitive advantage
2
Customer
1
Price/
benefit
Price/
benefit
4
Company
Competitors
Cost
Cost
3
Source: Adapted from H. Hungenberg (2006), p. 185.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.3
The goal of the strategic triangle is to address the following
four questions regarding the drivers of competitive advantage
1
Is the price/benefit ratio (also called value for money) that we offer better than the
price/benefit ratio of our best competitor?
• 2 Is the value that we offer to our customers perceivable and important to them?
•
•
• 3 Are our costs for making the product (or service) lower than the costs that we incur?
4 Is this advantageous position sustainable into the future?
Source: See H. Hungenberg (2006).
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.4
Exhibit 5.2 Impact of threshold features and critical success
factors on consumer benefit
Consumer benefit
Critical success factors
Threshold features
Performance
Source: Adapted from H. Hungenberg (2006), p. 185.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.5
Exhibit 5.3 There are two generic approaches to achieve a
competitive advantage
Generic types of competitive advantage
Unique product
with price
premium
Performance
advantage
Goal of the company
Business strategy
Provide something
unique that is valuable
to buyers
'Differentiation‘
Provide a product
with lowest price
'Cost leadership‘
Become the cost
leader in the industry
(Cost/price leadership)
Competitive
advantage
Price
advantage
Similar product
with lower
price
Source: Adapted from H. Hungenberg (2006), p. 189.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.6
Several levers help a firm to achieve a cost leadership position
Economies of scale
Economies of scope
Factor costs
Learning effects
The basic concept of economies of scale is that as a firm increases its
product output, it decreases its unit production cost.
While economies of scale can be realised by increasing the production of
one product type, economies of scope result from expanding the variety
of products sold using the same assets.
Factor costs represent a crucial cost driver, especially for retailing
companies that act as intermediaries. The ability to bargain down input
prices, for instance, through bulk purchasing can be an effective lever
for lowering costs.
Learning effects can lower costs as a firm improves its efficiency over
time, thereby reducing slack and wasteful activities.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.7
Exhibit 5.4 Economies of scale lead to a decrease in per-unit costs as output
increases, whereas dis-economies of scale lead to an increase in per-unit
costs
Price per unit
As the cumulated production
quantity increases, costs per unit
decrease.
Eventually, costs go up
again when production
capacities reach their
constraints
Average costs
Economies of
scale
Dis-economies of
scale
Quantity
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.8
Exhibit 5.5 Tangible and intangible sources of differentiation
Quality
Customisation
Convenience
Tangible
sources
Speed of
delivery
Sources of
differentiation
Product
range
Brand
Intangible
sources
Reputation
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.9
Exhibit 5.6 Perceived performance and relative price position
determine a firm’s strategy
High
Differentiation
Perceived
performance
Outpacing
Low cost/
low price
Low
More expensive
Cheaper
Relative price
Source: Adapted from H. Hungenberg (2006), p. 194.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008
Slide 5.10
Exhibit 5.7 The strategic gameboard helps to formulate
consistent business strategies
2
Where do we want to
achieve the
competitive
advantage?
Market segment (niche)
Whole market
Performance
1
Cost/
price
New
game
3
How do we want to
achieve the
competitive
advantage?
Old
game
Which competitive
advantage do we
aim for?
Source: Adapted from H. Hungenberg (2006), p. 251.
Tawfik Jelassi and Albrecht Enders, Strategies for e-Business, 2nd edition, © Pearson Education Limited 2008