Influences on the Choice of Strategic Positioning

What are factors which might be needed considering a strategic position?

• Competitors:

  • Market share/ resources/ strategy

  • Competitive

• Core Competencies:

  • Unique selling points

  • Scope to be able to differentiate

  • Scale and efficiency to be able to compete at low cost

• External environment:

  • Changes all businesses in the market need to respond to

  • Opportunities and Threats

What are competitors doing?

• How strong are the competitors a business faces in its chosen strategic position? What advantages, if any, do those competitors face?

• A business considering positioning itself using a cost leadership strategy (Porter) will want to assess whether it is capable of achieving the same level of efficiency and productivity as key competitors who also adopt a cost leadership strategy. Can the business access the same economies of scale as competitors?

• Similarly, a differentiation strategy may be attractive, but are existing competitors already exploiting the market opportunities for a differentiated product or service? What are the market shares of the market segments a business might want to target?

What are core-competencies?

• It is essential to have an honest view of the business's ability to compete. Does the business have a unique selling point that might enable it to sustain a strategy of differentiation?

• If innovation is key to positioning, does the business have the appropriate resources, organisational culture and reward systems to create a suitable flow of innovation?

What is external evironment?

• Careful and regular scanning of changes in the external environment is key to effective strategic positioning. For example, changes in the political and/or regulatory environment can create opportunities as well as pose threats to the existing positions of businesses in a market.

• Similarly, changes in the economic environment can challenge existing positions. For example, a significant economic downturn might increase the attractiveness of businesses that are positioned as "low-cost" operators if demand for such products and services increases at the expense of higher-priced and higher-cost alternatives.

What are difficulties in maintaining a competitive advantage?

• Loss of product differentiation:

  • Spending on R&D to maintain innovative image - expensivel

  • Rivals launch their own 'capy-cat' products

• New competition:

  • Competitors exploit gaps in the market to gain market share

• Changes in Tastes/ Fashions:

  • Changing tastes can bring an end to competitive advantages

• New legislation:

  • Government intervention in the marketie. new laws and regulations

  • Example. Payday loan firms saw interest rate caps on their loans which made many of them financially unvlable e g the collapse of Wonga

What is the evaluation of influences of strategic positioning?

• Porter's generic strategies model is more readily accepted and used in the business world. Bowman's model by contrast is considered overly complicated and confusing.

• Porter's theory stresses the need for careful management of a firm's value chain and its key areas of differentiation but how realistic is this theory in a modern fast-changing economy?

• Is 'getting stuck in the middle' really as bad as Porter's model makes it out to be?

• The largest danger to a firm's competitive advantage is that of complacency. Firms might see no reason to change and risk becoming static in dynamic markets.