The Strategy Clock

There has never been such a massive addition to competitive advantage theory
since Porters in the 1980s. In the Strategy Clock, Cliff Bowman sought to posit other
avenues by which a firm can gain and sustain competitive advantage. We must
indicate here however that Bowman like most others didnt go along a different path
from Porters since the basis of most of his views tend to either support or provide
further explanation on Porters positions. Bowmans Strategy Clock offers eight
strategy routes that a firm can chart its operational course or courses in order to
achieve competitive advantage. Bowman suggests that the choice of a firms
strategy is dictated by customer choices. The strategy Clock therefore helps firms to
understand the changing requirements of their markets and the actins they are
required to take in order to position themselves appropriately and gain competitive
advantage. We have discussed the strategy routes below;
No Frills Strategy or Strategy Route 1. This is necessarily a matter of
conscious placing and consequent positioning which becomes a strategy. It is a
combination of deciding to sell at low price, fitting the product at a low perceived
benefit portion of the perceptual plane with a focus on a market segment that is
characteristically price sensitive. The strategy is a marketing facing one (not industry
facing or focused). So we take note of the characteristics; low price, low perceived
product or service benefits, price sensitive market. There may be the need to explain
a point here, to the effect that most often this strategy is confused with Porters Cost
Leadership strategy.
We have already explained what no frills strategy is. Now we will attempt to provide
explanation on the differences or distinctions between the two. Cost leadership
advantage is a matter of operational or production capacity in terms of volume and
also the technology that produces more efficiently than is the case with the
competition, resulting in the ability of the firm with such an advantage to produce at a
much lower cost. In the case of trading firms i.e. firm doing buying and selling, they
may have cost advantage if they procure their goods from a cheaper source with a
cheaper transportation and storage cost than other companies.

Although the two may appear to have a common point of convergence, it is important
for us to also look at the basis of the low price;

The low selling price in the case of firms pursuing cost leader strategy may be
because the firm want to achieve increased or high market share. Its
products/services may be of good quality as may be the case at the industry level
so that the low price becomes a matter of choice enabled by the low production
cost. Thu, the resulting low price of the products/services may not be because of
low quality nature of the product. In the case of no frills strategy however, whist
the low price may also be a matter of choice to operate in a price sensitive
market, a choice informed y smallness of the firm and other variables that make
operation at such a level and such a market crucial to survival and success.

A firm with low cost advantage can decide to pursue a no frills strategy but
another firm originally pursuing a no frills strategy cannot per se switch
strategies to become a cost leader if the source of its low price is not low
production cost.

Porters low cost advantage is related to the firms low cost of production, such a
low cost may not inform final pricing or the price at which consumers will buy the
product or service, since the firm is open to the choice of selling at the ruling rate
or industry price to maximise profit or sell below that price and maximise market
share. No frills strategy on other hand is related directly to final pricing.

Lastly, the two are simply different strategies may be applied or be operating in
different markets.

Firms may pursue no frills strategy upon prevalence of the following conditions;

Where there is high buyer power and cost of switching to other products/services
is low. Where buyer can dictate what happens on the market and also can easily
change their preferences without incurring any high costs, they could easily
switch. Under such a condition the firm is helpless may have to kowtow to the
dictates. The reverse is true where buyer power is low and the cost of switching
preferences is high.

Where the choice of the strategy will offer opportunity for a firm to avoid major
competitors. On the condition that larger or more powerful competitors are
pursuing other strategies, it may mean that a market opportunity that fits the
firms strategy may be left unattended. It is the right place for smaller firms or new
entrants who may not have the muscle to match the stronger firms boot for boot
in the intense competitive warfare, thus finding that strategy and market

opportunity a hiding place and a stepping stone.

Under conditions where customers are price sensitive. These customers either
cannot afford to buy more expensive or better quality products/services or they
simply prefer low quality products. Bigger competitors may find such markets
unattractive, but as indicated earlier, its a good starting point for new entrants

and a safe place for smaller firms.

Under conditions where customers do not particularly discern differences in
product/service quality of the different suppliers, so that price becomes the key
differentiating issue.

Low Price Strategy or Strategy Route 2. Firms that choose to pursue this
strategy mean to sell their products/services at a much lower price than competitors.
However regarding perceived product/service benefit, the firm tries to be at par with
the competition. Firms which achieve competitive advantage though low price
strategy do so by focusing on the market segments that are unattractive to bigger
and major competitors and thereby like those pursuing no frills strategy, seek
refuge in that haven. There are some implications with pursuing this strategy;

There will be reduced profit margin if competitors decide to follow suit with low
pricing. The price reductions will create price wars which will result in each firm
engaging in the competition having a portion of its profits slashed away so that

profit margin reduces.

Because of the low profits following the competition, there may not be enough
resources to improve products and/or invest in the development of new ones.

Here again we must look at the fact that the firm pursuing low price strategy must
have sustainable source, such a source as low cost of production. The low cost of
production should itself be able to enable the firm sell at a lower price than
competitors. Low production cost without low price ability will not make any
competitive sense. This means that the firm pursuing the strategy must be able to

achieve a sustainable source of low price i such a way that competitor cannot
compete such a source or attain an exact imitation of the source which can be low
cost of production or low cost source of wares( if the firm is into trading).

No frills and low price strategies are price based

routes.

Others eg. Cheap

source of goods etc

Final Pricing

Which source?

Low price
Noperceived
Frills
Low
benefit
Price sensitive
market

Market segment
focused/facing

Market share
Final costing( strategy
maximisation
sustainer)

Low price
Convergence
Low Cost

Low price
Same price

Not necessarily.

Profit
maximisation

Industry focused
/facing

Distinctions between no frills strategy and Porters low cost advantage.

Source: Author

No frills strategy is related to final pricing whereas low cost advantage is related to
final costing. But what is the sustaining source of the no frills strategy? It could be
due to having a low production cost base or procurement source base. With the low
final costing, the firm can choose to sell at a price below the ruling rate or at the

ruling rate. The two have low price in common on condition that a firm with low cost
advantage as in the case of as in the case Porters generic strategy decides to sell
below industry par.
Differentiation (Industry wide) or Strategy Route 4. The concept of
differentiation as discussed earlier under Porters generic strategies is a product
focused one. It is concerned with a firm offering products/services that are superior
to those of the competition, charging prices that are either slightly or significantly
higher than the going industry rate. For thi strategy to succeed, the firm must;

Identify and understand its strategic customers. The strategic customer is the one
who is the reason for the choice of strategy option. Organisation whose product
patronage is multifaceted i.e.(in this context) not sold to one particular person or
company but moves down the supply chain to other people, in such a way that it
is difficult to pinpoint who exactly the strategic customer is.
For instance, who exactly is Multi Choices strategic customer? Is it the TV
stations that get listed, those who list their shows on it or the final domestic
customer? Again, who is Nestle Ghanas strategic customer? Is it the
wholesalers, retailers or final consumer at home?
For NGOs is it the donors or the target group who constitute the strategic
customer? This question can be dealt with by asking the questions of what the
nature of the product is as well as who the ultimate beneficiaries are. So in the
case of Nestle Ghana for instance, the strategic customer is the final consumer at
home. This is however the case in the ultimate sense. Dynamically at some point,
a wholesaler be Nestles strategic customer if that customer buys in high volumes
and contributing hugely to the companys revenue and profit base.
The NGOs strategic customer may be the donor since they make things
happen( make operation of the NOO possible) at their target group level. So in th
enabling sense, ths funds provider is the strategic customer. But the NGO will
continue to get support only when they achieve results; in this ultimate sense, the
target group becomes the strategic customer. What the state or public
institutions? For instance, who is Volta River Authoritys (VRAs) strategic
customer? GRiDCO, ECG, Companies, PURC or the domestic user?

As indicated earlier, who the strategic customer is varies across the spectrum of
time and strategicity (what appeals to the firms interest in vogue i.e. the firms
interest at the time). In the final analysis, we will attempt to suggest a general
principle by which firms can identify their strategic customers. This is done by
asking the question, what do we want in this strategy option? And who
particularly gives us this? The answer to the second question could be more than
one.

Identify key competitors. The must know who its key competitors are. This is
critical in designing its game plan. It will help it to assess the ease with which its
products could be imitated. The competitor analysis will enable it know the extent
of sophistication in terms of the technological and innovative capability of the
competitor. The competitor identification will also help the firm to do vulnerability
assessment in case the market segment it is operating in is rice sensitive, it will
end up stultifying the effects of the superior features that the product possesses
i.e. although the product may be superior, customers on the basis sensitivity to
the price may prefer low price alternatives.

Differentiation (Focused) or Strategy Route 5. Firms pursuing this strategy

seek to provide products/services with high perceived benefit at a significantly high
price than what competitors are offering so that the premium (difference between the
product or service price and the competition price) is justified by the superiority or
high product/service benefit. As the description goes, firms pursuing this strategy
concentrate on market segments or niches. For example most universal banks in
Ghana have introduced Private Banking as part of their services. The service
( Private Banking)comes with different brand names. For instance UniBank Ghanas
brand of the service is Esteemed Banking. Private banking is selling specialised
banking products to a chosen market segment, high net worth individuals and
corporate concerns. These private banking services are priced significantly higher
than the generic products.
However, pursuing this strategy comes with a number of implications. First, new
entrants or businesses may choose a particular segment and meet its needs. With
time however, when growth sets in, the company cannot continue focusing just on a

small segment, it might begin to shift to industry wide service ( from route 5 to 4).
This may force it to cut price slightly and also product features in order to operate
sensibly. This features striping and price lowering if not managed well could affect
the company and its products. The second implication is the fact that market
dynamics could result in the situation where segment competitors also begin to
improve their products, products which were earlier considered normal or regular.
Where the level of competitor improvement creates negligible differences between
the firms products/services and that of the competitor, customers could easily begin
to switch to competitor products especially where the cost of switching is low.
Thirdly, competitors could further segment the market by creating products that are
of higher perceived value than those of the firms all other factors being constant.
Fourthly, pursuing this strategy could create stakeholder conflict. For instance, a firm
may be established to go in a particular direction, but pursuing the strategy could
force it to the other way, which could be compromising on the mission position.
Stakeholders may not welcome this. For instance, the Daily Graphic published by the
Graphic Communications Group is a hardcopy brand and is known for that, although
in recent times it has begun appealing to IT Savvy niches by making copies available
online. Known for what it is, if the company decides to go completely online, it may
end up cutting off its numerous less IT savvy huge hardcopy readers. This position
which is different from the purpose for which the state established (although there is
now some private interest) it as a newspaper to report on Ghana and for Ghanaians.
Lastly, there may be strategy conflict and and confusion. A firm originally pursuing
route 5, but finding itself shifting to route 4 following growth may end up not being
able to juggle the two since the expertise for managing the two may be different.

Hybrid or Strategy Route 3

Firms charting this path try to kill two birds with one stone; they attempt offer
products/services that are superior to those of competitors which at the same time
are priced lower than the competition. In other words with this strategy, firms try to
achieve differentiation and low price simultaneously, combining two strategies into
one, price-based and differentiation-based. This path is quite dicey. Didrentiation
comes at a cost, in fact it adds up to the cost of production, a cot which should be
compensated for with a premium price. Low price strategy on the other hand is
pursued by firms with one form of low cost base or the other. Differentiating
products/services involves dynamic sustainability of the differences . where does the
money required for this come from especially when the price is not even at par with
the competition but lower?
The hybrid strategy will succeed upon the following conditions;

That the firm can supply greater or higher product volumes or have a large
clientele base for its services, all other factors such as demand for the offerings
being constant. The higher volumes will compensate for the price inferiority to
bring about some profit margin enough to maintain investment into maintenance
of the diffrentiations and to meet other operational expectations. May be
somehow, the differentiated products/ services at such a lower price may mean
affordable value for the customers and that can provide the firm with market

share leadership.
That there is low production or procurement(in the case of trading firms) cost
which will sustain the differentiations. Refer to the explanations on the the
differences between no frills strategy and Porters cost leadership advantage on

strategy route 1 for clarity on this point.

That the strategy is being used as entry technique. This will make strategic sense
since it will enable the weaker new entrant to establish a foothold on the market
or new geographical area until it can climb p to higher better strategies.

Failure Strategies or Strategy Routes 6, 7 and 8.

Some strategies ab initio are destined to failure. These are strategies which neither
provide high perceived product benefit nor provide lower in prices. For instance
strategy route 6 suggests increasing price without compensating same with increase
in perceived product/service benefits. Route 7 is even worse, suggesting increasing
price and decreasing perceived product/service benefits. Strategy route 8 also
suggests decrease in perceived product/service benefit whilst maintaining price.

Sustaining
competitive
Price-based
advantage

strategies

Accept reduced margin

Win a price war

Reduce costs
Focus on specific

segments

Lock-in
Achieve size and
market dominance
First over
advantage
Reinforcement
Rigorous
enforcement

Differentiation

Create difficulties of
imitation
Achieve imperfect
mobility(of resources/
competences)
Reinvest margin

Sustaining competitive advantage

Source: Exploring Corporate Strategy, Johnson et al, 8 th Edition.

Sustaining Bowmans Competitive Advantages

The strength of a competitive advantage resides in its ability to be sustained and/or
protected. Competitive advantage without the ability to sustain it might be no
advantage at all since long term operations capability is key. We will take a separate
look at the two strategy categories (price-based and differentiation-based) and how
thry can be sustained.

Sustaining price-based strategies

This can be done by;

The firm having a uniquely low cost production or procurement structure.

Refer to Porters generic strategies or the explanation on the distinctions

between no frills strategy and Porters cost leadership strategy.

By the firm being prepared to make do with lower profit margins. Profitability
or profit margin feeds into pricing. But ability to maintain the lower profit
margin, a margin which may not be enough to support reinvestment and
other crucial operational areas may call for cross-subsidisation from other

strategic business units( cash cows may be) to support the ability of the firm in

question to sustain the lower profit margins.

The firm having capabilities that are unique to it. Such capabilities that are

either inimitable or difficult to imitate.

The firm focusing on market segments where lower price is highly valued
relative to any other thing.

Regardless of these conditions however, as indicated earlier under these strategic

directions, pursuing these low-price strategies come with its own repercussions
including the following;

Possibility of competitors to follow suit. This could lead to the erosion of maret

share and profits

Price-based strategies will incapacitate the firm against pursuit of

differentiation strategies
Low-price strategy( Route 2) and no frills strategy are different strategies. It is
possible that customers a market segment where route 2 is being applied may
begin to see the low price as being necessitated by low perceived
product/service benefits due to the thin line between the two strategy routes.
This may result in the situation where the firm is forcefully slipped to route 1
in the minds of consumers. The ensuing implications are obvious.

Sustaining Differentiation-based Strategies.

This can be achieved;

If the technology responsible for the firm differentiated products is either

difficult to imitate or is simply inimitable.

If the firms capabilities are imperfectly mobile i.e. they cannot be traded. This
however depends on whether the capabilities are intangible or tangible
assets. Tangible assets such as highly creative and intelligent workforce or
specilaised equipment cannot( in the long term sense) be said to be unique to
the firm since the intelligent people can be poached. For instance most of
Radio Golds then superor presenters, Kwame Sefa Kayi and Fiifi Banson
were poached by Peace Fm whilst in recent history, Starr Fm poached most

of Joy Fms staff. Also the specialised equipment can be acquired by rival
firms who can affors. In the case where the source of the basis of the
differentiation hinges on such intangible assets as brand image, brand loyalty
etc. However, the firm is likely to sustain the advantage, all other factors being

constant.
If the firm has a low cost postion that enables it to sell at the industry price to
maximise profit which it can reinvest into maintaining the differentiation

Read more under Porters generic strategies on Differentiation.

Attaining Lock-in Status- Another Approach to Sustaining

Competitive Advantage
This is another way by which firms can sustain their competitive advantages
(whether they are pursuing low-priced strategies or differentiation strategies.)
Lock-in s the situation whereby an organisation attains such a status that makes it
become the standard or the reference point in that industry. For instance Giorgio
Armani suits or clothes are considered a global standard of fashion excellence. In
Ghana we can also cite GBC which is seen a real standard when it comes to the
journalism profession.
For an organisation to achieve a lock-in status;

It must have large market share or dominance. This is required to justify the
claims. No matter how uniquely differentiated a firms products/services are,
its position will not be recognised by rival firms if it does not have market

dominance.
The firms dominance has a first-mover underpinning. Where the firm was the
first or was among the first to enter the industy, it is likely to be successful with
attaining a lock-in status than otherwise. We must here again cite GBC and
also the Daily Graphic having achieved lock-statuses because they were the

first to enter the media industry and their practices are considered the

standard, such that they have become authoritative sources.

The firm having attained the lock-in status is able to sustain it by ensuring that
rival firms recognise that standard. And conform to it. This ensurance must
however be done in such a way that it is not seen as sustaining a proprietary
position impropriety or through unorthodox means. We will attempt to say
here that the conformity ensurance should be done positionally i.e. the firm
must continue to maintain its standard and dominance without demanding
recognition, rather, its commanding disposition will move rivals to recognise it
as such. In ost cases however dominant firms insist forcefully so that rival
firms that do not comply or conform or are frustrated out of the industry. An
example of this is as cited by Johnson et al (Exploring Corporate Strategy, 8th
Edition), Microsoft was sued in some United States courts for being guilty of

this offence which was considered not to be in the interest of the industry.
The firm is able to win some rivals to its side who recognise its position. Other
firms may also follow suit.