3.8.2 Strategic positioning - how to compete

What is a competitive advantage? 


An advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices

What did Porter say about strategic positioning? 


He suggested 2 overall business strategies that could be followed in order to gain competitive advantage

• Differentiation & low cost / cost leadership are effective strategies for firms to gain competitive advantage

What is strategic positioning with a low-cost strategy?

The objective with this strategy is to become the lowest-cost operator in a market or industry

• typically involves production or operations on a large scale which enables business to exploit economies of scale (reduces unit costs)

Why is cost leadership such an effective strategic positioning? 


Marketing advantage of being able to offer lowest prices :

• if selling prices are broadly similar, low cost operator will enjoy highest profits

• lowest-cost operator can also offer lowest prices (gain market share)

What are suitable markets for a low-cost strategy? 


Tend to be markets with :

• standard product

• little product differentiation

• where branding is relatively unimportant (though many successful low-cost operators build brands that emphasise & are associated with low-cost positioning)

What are the key features of businesses that successfully position themselves using low-cost strategy? 


• High levels of productivity & efficiency

• high capacity utilisation

• Large scale = economies of scale

• use bargaining power to negotiate (or demand) lowest prices from suppliers

• lean production methods & low-cost culture

• access to widest & most important distribution channels

What are some examples of businesses using a low-cost strategy? 


• Ryanair

• poundland

• Aldi

• walmart

• Xiaomi

What is strategic positioning through differentiation strategy? 


Businesses aim to offer a product that is distinctively different from competition, & where customer values (prepared to pay for) that differentiation

What are various ways in which a business can attempt to differentiate its product or service?

• Superior product quality (features, benefits, durability, reliability)

• Branding (strong customer recognition & desire, brand loyalty)

• Wide distribution across all major channels (product or brand is essential item to be stocked by retailers)

• Sustained promotion - often dominated by advertising, sponsorship etc

What are examples of businesses who position themselves through differentiation? 


• Apple

• costa coffee

• premier inn

• Dyson

• bang & olufsen

What are hybrid strategies?


Positioning (attempting to be) as both low-cost and differentiation

What is an example of a business adopting a hybrid positioning strategy?


IKEA