Strategic Management Tools for Competitive Advantage: An Analysis of British Gas

This article discusses the strategic management tools used by British Gas to achieve competitive advantage in the market and increase its market share. The article covers Ansoff Matrix, BCG Growth Share Matrix, Porter's Generic Strategy, and Bowman's Strategy Clock. It also provides insights into the company's products and services, and how it uses these tools to analyze its environment and build appropriate strategies.

Strategic Management Tools

EXECUTIVE SUMMARY
The strategic management tool enables the company to analyse the environment in which
company is operating and opt appropriate strategy which will help the company to compete in
the market. Company needs to set their goals and objectives and build a plan and implement the
plan using appropriate strategies. This enables company to achieve its goals and increase market
share of the company. The effective and efficient strategy increases company's profit margin and
enables sustainable growth and development in the competitive market. The project highlights
the strategic management tools used by British Gas to analyse its environment and competitive
advantages that enables company to compete in market.

Table of Contents
.........................................................................................................................................................1
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAINBODY....................................................................................................................................4
Ansoff Matrix...............................................................................................................................4
BCG Growth Share Matrix..........................................................................................................6
Porter's Generic Strategy.............................................................................................................8
Bowman's Strategy Clock............................................................................................................9
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Strategic management is the process where company sets its goals and objectives and
make plans and implement those plans to achieve those set goals and objectives. It is a flexible
procedure as it changes with the growth of organization. Strategic management tools are tools
used by company to implement an appropriate strategy according to the products and services
and the market it is dealing with. These tools are used to analyse the business environment
within which the organization is operating and to make strategy which will help the organization
to achieve its goals and objectives. Strategies are made after analysing the strength and
weaknesses of the company and use of appropriate strategy will result in sustainable growth and
development of the company. British Gas is the company that is dealing in energy and home
appliance services. This is a subsidiary of Centrica and British gas is trading name of British Gas
Service Limited and British Gas New Heating Limited. It is UK based company having its
headquarter in London. The products of the company are gas, electricity, plumbing and drains,
boilers and central heating, renewable energy and home appliance services. The project will
highlight the different strategic management tools used by the company to achieve competitive
advantage in the market and increase its market share. The strategic tools to be discussed in the
project are Ansoff matrix, BCG matrix, Porter's Generic strategy and Bowman's strategy clock.
MAINBODY
Ansoff Matrix
Ansoff matrix is a fundamental tool used for developing growth strategy using two
parameters i.e. products and services sold and the market in which these products and services
are sold. Ansoff has divided these parameters into four parts to understand growth opportunities
in the company.
Market Penetration
This matrix is about the strategy used by company to increase its existing products sale in
the existing market. It uses market strategies to increase its market shares and its revenue.
Market shares can be increased by increasing sales of the products and attracting new customers.
The sales can be increased by using effective promotional and distribution activities so that
strong customer base can be build (Zanjani and et.al., 2020). This can be achieved by decreasing
price of the product by decreasing the cost of production. This is the least risky market strategy.

British gas uses this strategy to increase the sales of its product by using competitive strategies
like pricing, advertisement and promotions. The campaigns for promoting the products are set up
to eliminate competition and to attract new customers. Promotional and loyalty schemes are
introduced to increase the usage of existing customers and to ensure their retention.
Market Development
In this, company tries to expand its business by entering into new market with its existing
products. The new market can be new country or different customer segments. This strategy
involves minor changes in the existing products and services so that it can be adapted by new
market. To get stable in the new market the company needs to understand the new market and
the customers it is targeting to expand its business (Clarissia, 2019). This strategy can be
successful if the company has unique ideas to build market shares in new market and new market
should not be too different from the existing market. British gas can expand its business to new
market by establishing new distribution channels and new dimensions of products. New pricing
policies can be adapted in order to attract new customers in the new market and to build market
shares. The company can increase its production capacity using the latest technology to expand
its products to other countries.
Product Development
Companies try to deal in new products and services in the existing market to expand its
product line and to increase its market shares and revenue. The new products should be as per the
customers' needs and preferences so that customers can easily get attracted to the new products.
The success of this strategy can be by investing in research and development of new and unique
products. The advantage of developing new product in the existing market is that the customers
and market are familiar to the company and company is aware of all the threats in the market.
British gas is trying to develop new competencies along with the development of modified
products that can be introduced in the existing market (Morita and Machuca, 2018). The
company is trying to extract crude oil along with natural gas from wells in diverse countries.
Company has highly invested in two areas for improvement of its products which includes
human resource and technology. The investment has resulted into increase in efficiency of
production and to gain competitive advantages to the company.
Diversification

This strategy is usually used by start up companies in which they introduce new products
in the new market. The strategy offers the greatest potential to the company but it is the riskiest
strategy. This strategy is of two types i.e. related diversification and unrelated diversification.
Related diversification means the production of products which are related to the existing
product (Thompson, 2019). Unrelated diversification also known as conglomerate diversification
in which new products are completely different from the existing products the company is
already dealing with. The company faces many challenges in the process of diversification
because of lack of knowledge of market and the customers of the new market company is going
to deal with. The company needs to explore the ideas through which new products can build
market shares in the new market.
BCG Growth Share Matrix
BCG matrix is a planning tool used by the company to decide which products and
services are to be kept, sold or invest more in. Matrix uses two parameters which are market
share and rate of market growth. The four categories of BCG matrix are dog, star, cash cow and
question mark.
Dog
The company whose products have low market shares and low market growth then it falls
in this matrix. The company needs to sell or liquidate the product so that it may not affect the
growth of the company. The products which fall in this matrix does not generate much cash to
the company as it has lower market share and little or no growth. These products can hold funds
for long term which may adversely affect the growth of the company as this money could be
invested by the company in other more profitable products (Torquati and et.al., 2018). The
products may have low market share due to high cost, poor quality or lack of effective
marketing. The company needs to liquidate such products unless there is other strategic aim to
keep this product. British Gas can use this matrix to recognize the products that are profitable
and which needs more investment to be expanded and products that is not giving any profit needs
to be sold. Company needs to take appropriate decision regarding the liquidation or investment
in the products. The products which fall in this category needs to be liquidated by British Gas
unless it gives healthy margin to the company.
Cash Cow

The products with low growth but large market shares falls in this category. The products
give returns which are higher than the market growth rate so company decides to retain these
products. Company needs to invest in the product so that market growth can be increased. These
products generate cash which can be used for investment in other products or projects. These
products are base of the company and usually follow stability strategy (Lin and et.al., 2021).
British Gas needs to recognize those products with high market shares but low growth rate.
When these products reach the maturity stage the investment and resource allocation in these
products become low. The company should use the cash flow generated by these products and
reinvest into the faster growing segments which have large market shares and growth rate is also
high.
Star
The products in this category have large market share and faster growth in the industry.
These products generate large cash inflow but due to faster growth rate it needs huge investment
to remain market leaders (Chiu and Lin, 2019). These products have high competition in the
market and needs to use effective promotion schemes to maintain the strong customer base and
remain competitive. The products not only generate present cash flow in the company but also
have huge potential for future growth. British Gas needs to continuously invest in these products
so that it can increase market shares and profitability.
Question Mark
The products which are in high growth industry but have low market shares. These
products can increase the market shares by effective and appropriate advertisement to attract
customers. The products in this category grow fast but consume large amount of resources of the
company. The company needs to continuously analyse these products and if it thinks there is
scope of increasing market share then it must keep the product and adopt expansion strategy
otherwise it should liquidate these products (Liang and et.al., 2020). These products have the
potential to move to star category if it is frequently observed and huge investment is made.
British Gas needs to figure out the products have potential to represent star category or dog
category. The company needs to invest in technology and human resource so that if these
products are having potential of star category then it can be kept. The company after analysing
concludes that it is not feasible to invest in these products as they represent dog category then
company should divest such products and invest the resources in star products.

Porter's Generic Strategy
This strategy is used to analyse the competitive advantage of the company and use
appropriate strategy to increase the market shares in the industry. There are two basis of
competitive advantages i.e. low cost and differentiation. The company uses these strategies to
increase the market share and gain higher profit. There are two parameters to divide these
strategies i.e. competitive advantages and competitive scope.
Cost Leadership
The company aims to become lower cost producer in the market. The company needs to
find and exploit all sources for cost advantages so that the production cost can be low and
company can increase its profit by setting average price in the market. Company can increase
market shares by appealing to price sensitive or cost conscious customers. To succeed in
providing low price product along with gaining high profits and high returns on investment,
company needs to produce its product at low price than its competitors (Brett, 2018). This low
cost production will give company an advantage of setting average price for the products and to
gain profits. Company can achieve low cost production by increasing its production so that fixed
cost can be spread over large number of products resulting into lower cost. This can create entry
barriers for the potential competitors who may be unable to achieve the set scale of low cost and
price (Porter's Generic strategy, 2022). The company also needs to achieve low direct and
indirect operating cost. This can be achieved by having a strong relationship with suppliers who
supply raw materials at low cost and with good quality and engage labours with low wages. The
company needs to ensure that quality of products are maintained as if customers are supplied
with low quality products then they may switch to competitors.
Differentiation
In this strategy company focuses to provide products with unique features and with low
substitutes. This strategy is appropriate where the targeted customers are not price sensitive. The
needs of customers are specific and company has unique resources and are capable to serve those
products as per the customers' preference. To satisfy the customers company requires innovative
ideas, talented personnel, advanced technology and unique experts (Ze and et.al., 2018). The
company needs to ensure that the products that are produced have unique features and there are
low substitutes. Company can increase its profitability if it continuously engages in innovation
activities to provide customers with innovative products as per their needs. This will satisfy the

customers and helps to build a strong customer base. This strategy is also appropriate for the
companies where there is low competition. To achieve success in this strategy, company needs to
invest a huge amount in research and development, human resources and technology. This will
give company a complete knowledge about the market its targeted customers and their needs.
Focus
This strategy is used by company who targets niche market with narrow competition. The
targeted customers are distinct groups with specialized needs. The company needs to understand
the market and the targeted customers and choose appropriate segment. The profit and revenue
of the company depends upon the selection of appropriate market segment or customer group.
The focus strategy is divided into two parts one is cost focus and another is differentiation focus.
In cost focus company targets a niche market with price sensitive customers (Islami, Mustafa and
Topuzovska Latkovikj, 2020). The company needs to produce its products on low cost to achieve
competitive advantages and to increase its profits. Company that applies differentiation focus
strategy needs to ensure that it provides unique featured products as the customers' loyalty
depends upon the unique products produced by the company. The company needs to target those
customer groups which has differential and unique product needs and are not price sensitive.
British Gas has implemented differentiation strategy as company aimed to provide unique
products within the market. The company has diverse products like gas, electricity, telephone
services and wide range of home care products. The company is trying to expand its products
range by supplying water (Ali and Anwar, 2021). The company is engaged in business with less
competition so differentiation strategy can give company higher profitability. This strategy may
not ensure low price but it promotes customer loyalty and helps company to build strong
customer base and attract more customers. Strategy has helped to increase customer volume and
to set price which is affordable by all level of customers resulting into higher revenue and profit.
The customer base is also increased as company provides necessary products and services that
are required by customers. The differentiation strategy has proven to be successful as the
company has increased the price of its products but still remains leading supplier of electricity in
UK.
Bowman's Strategy Clock
Bowman's strategy clock is a tool which is used by company to position its products and
services in the market based on two dimensions. First dimension is price of the product or

service and another is value of product, services and brand to the customers. The company can
opt for any strategy using these dimensions which offers the company competitive advantages
resulting into growth and overall development of the company. The company needs to
understand all these strategies and implement appropriate strategy to achieve the set goals and
objectives of the company. This model helps the company to make necessary changes to improve
the competitive position of the company. The model is divided into eight strategies which are as
follows:
Low price and low added value
In this strategy the price of products and services are kept low to attract the customers
and is the only competitive method used to compete in the market. The products and services
offered in the market are not distinguished and add little value to the customers. Products offered
are of low quality but low price encourage the customers to try these products. The company
relies on the volume of sales to gain profit (Mulders, 2019). This strategy keeps price low to
remain competitive but the product lacks differentiation and customer perceives little value so it
is not so attractive strategy for the companies. The company can't invest in producing innovative
products as it has to maintain low cost of production and investment in research and
development may increase the production cost. This will not give company low price advantage
as the price of product will increase with respect to increase in production cost.
Low price
The companies using this strategy produces large volume of products to keep low cost of
production. Fixed cost can be divided into large amount of products which will decrease the per
unit cost of fixed cost. The customer value to the products are higher in comparison to previous
strategy. The company sells products at low price leading to low profit margin from each
product. Companies gain higher profit as it produces large volume of products. This strategy
gives competitive advantage to the company in throat cut competition in market and helps to
retain market shares. This strategy favours companies which focus on cost minimization through
low direct and indirect operation cost.
Hybrid
This strategy is the combination of low price and differentiation. The strategy is effective
if the company attributes the value of product to its customers and provide products at consistent
quality (Echchakoui, 2018). The companies that opt this strategy provides products at low or

reasonable price with some product differentiation which is diverse from other products that are
offered by competitors. Company needs to implement different promotional activities to attract
customers and convince them that company is offering low price products at consistent quality
which increases value to customers for its products.
Differentiation
The aim of this strategy is to give customers perceived value for the products and
services of the company. The company focuses on providing unique featured products and
services that will create unique form of value for customers. This value creating will help the
company to attract and retain customers and increase the volume of sales (Yu, 2021). The
success of the strategy depends on the brand value and quality of the products. High quality
product and brand value will lead to high price resulting into value addition to the customers.
This strategy is appropriate in the market where the customers are not price sensitive and are
willing to pay more for products as they are of higher quality and the company has a brand value
in the market.
Focused differentiation
In this strategy company focuses on those customers who are willing to pay high price for
the products as it has high perceived value. The price of the products offered are very high and
customers are willing to pay higher for the products which are offered by other competitors at
relatively low price. The company invest a huge amount for promotion, marketing and
distribution of the products. This higher price and effective promotion strategy helps the
company to gain higher profit margin and increase the market shares. The company needs to
ensure that products offered by the company are of higher quality and unique as the success of
this strategy depends on the loyalty of the customers. The companies with high brand value can
only have competitive advantage of higher price and withstand this strategy in long term.
Risky high margin
This is a short term strategy used to exploit disequilibrium in market supply. The
company sets higher prices without offering anything extra in regard to perceived value. The
success of the company depends upon the customers if they are willing to buy the products and
services at higher price. Customers will purchase the products until they find any substitute for
these products. The profit of the company depends upon the retention of its customers (Helmold,
2020). The strategy is appropriate in the market where there is low chance of substitute products.

The customers look for products with higher quality at same price or similar product at lower
price which can add value for money to the customers. Ultimately, customers will shift to those
products which offers more perceived value to customers at same or lower price in comparison
to price and quality of products offered by company. This strategy removes the entry barriers for
competitors in the market.
Monopoly pricing
Monopoly market is the market where only one business or organization is engaged in the
market for particular products or services. The company which is in monopoly market has a
competitive advantage so it is less concerned about the perceived value and price of the products
and services (Bowman's strategy clock, 2022). The customers are depended on these markets for
the products and services as there is no substitute available as a result company sets a price
which gives them higher profit margin. Customers have no choice, they have to buy at the price
which is set by monopoly company.
Loss of market
In this strategy, value for the products and services are low due to high price. Companies
that opt for this strategy set standard price for their products to remain competitive in the market.
The aim of strategy is to take inferior products and pricing it to match the perceived value for the
customers. This is short term market and over a period company will lose its customers and there
will be decrease in market shares. This will impact the growth of the company as well as its
profit margin and its overall development.
British Gas has opted for differentiation pricing strategy which offers unique featured
products at relatively higher price. The company is engaged in diverse products with low
competition in the market. Company is trying to enter into market with new product i.e. water
supply which will give competitive advantage to company as customers will be enabled to get
variety of products and services from one company. The products of the company has perceived
value for the customers and customers are willing to buy the products at higher price. The
differentiation has given a competitive advantage to the company to compete in the market and
gain higher profit margin. This unique featured products and services offered by the company
has increased the market share and helped in sustainable growth and development of the
company.

CONCLUSION
There are different types of strategic management tools which are used by organizations
to analyse the environment in which it is operating. After analysing the environment and
different factors that may affect the business, management makes appropriate plans and
implement these plans to achieve the organizational goals and objectives. These strategic tools
help the organization to achieve sustainable growth and development by increasing profit
margins. The tools discussed in the project are Ansoff matrix which helps to develop market
growth strategy of the company. Porter's Generic strategy was used by company to analyse the
competitive advantages of the company and opt appropriate strategy to increase market shares
and compete in the market. The two more strategic tools which were discussed in the project are
BCG matrix and Bowman's strategic clock which are used to analyse the market share and
growth of the product and setting price accordingly to add perceived value to the customers.

REFERENCES
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Online
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Porter's Generic strategy, 2022. [Online]. Available through: <https://getlucidity.com/strategy-
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