Critique the alternative explanations of how scale and non-scale strategies can be combined effectively in particular cases. Do the alternative explanations have differing implications for how the enterprise should develop its future strategy?

Question

What will be an ideal response?

Answer 1

Chapter 8 suggested that scale-based strategies may be sustained over time via enhanced quality,
variety and flexibility of output and output processes. These mechanisms are generally associated
with attempts at modest differentiation, since they frequently incur additional costs. The latter may
be mitigated by enhanced efficiency or by eliminating individual operational processes.
Differentiation and focus strategies (non-scale) have the potential to exploit many avenues of
distinctiveness in the product/service and how it is conveyed (refer to chapter 6). To combine the
opposed priorities of scale and non-scale strategies must risk increasing costs or losing a single-
minded emphasis on the primary advantage-creating intent. However, modern methods of
distribution and delivery, often using automation and information systems to advantage, can offset
any adverse cost effects in the value adding chain. For example, some NHS hospitals use automated
(robotic) dispensaries to handle the large numbers of drug prescriptions needed to treat patients. The
equipment has been proved to combine cost reductions (less labour cost and less drug wastage) with
higher service quality, because of fewer prescription errors. All else equal, therefore, one should be
optimistic that some elements of non-scale operations can support and enhance low cost operations.
Equally, it would be wrong to ignore opportunities for cost containment in differentiation strategies.
The key strategy issue is that the overall intent of both strategies must remain clear and distinct. Yet
observation suggests that enterprises with non-scale strategies whose marginal costs of
distinctiveness do not sustain adequate price premiums are particularly vulnerable to predation by
scale-based providers whose higher specification offerings cost only marginal more, yet provide
credible alternatives for buyers. For example, mainstream quality car producers such as Audi, BMW
and Mercedes sustain serious competition for low volume, prestige sports car producers such as
Aston Martin, Ferrari and Porsche in many (but not all) markets segments and geographic areas, to
the point where sales of specialist makes are confined largely to ‘user chooser’ private as opposed to
corporate buyers.