3.8.2 Strategic Positioning Flashcards
Definition of competitive advantage
An advantage over competition gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices
Definition of broad/ mass market
Market with a wide variety of backgrounds with no identifiable preferences and experiences
Definition of a narrow/niche market
A small, specialised market for a particular product or service
The challenge facing business strategy?
To find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market
What is Porters approach to strategic positioning
Porter argued that differentiation and low cost are effective strategies to gain competitive advantage
What is Porter’s generic strategies
What part of porters generic attacked are low cost
Cost leadership and cost focus
What part of porters generic strategies is differentiation
Differentiation leadership
Differentiation focus
What is cost leadership (porters)
Being the leader in terms of cost in a broad market
What is cost focus (porters)
Being the leader in terms of cost in a narrow market
What is differentiation leadership (porters)
Making your products/services different/ more attractive competitors in a broad market
What is differentiation focus
Making your products/ services different/ more attractive competitors in a narrow market
Examples of a business that focuses on cost leadership (porters
Poundland
Lidl
Asda
Example of a business that focuses on a cost focus (porter)
Tesco
Shop to
Example of a business that focuses on differentiation leadership (porters)
Waitrose - free coffee
Example of a business that operates on differentiation focus
Rolls Royce
What is a low cost strategy (porters)
Objective is to become the lowest-cost operator
Typically involves production on a large scale - enables business to exploit economies of scale
Why is cost leadership important
If selling prices are broadly similar, the lowest- cost operator will enjoy the highest profits
Suitable markets for low cost strategy?
-standard product
-little product differentiation
-branding relatively unimportant
Likely features of low cost operators
-High levels of productivity and effort
-high capacity utilisation
-large scale = economies of scale
-use bargaining power to negotiate lowest price from suppliers
-lean production methods and culture
-access to the wildest and most important distribution channels
Examples of low cost strategies in action
Ryanair - £5 flights
Strategy of focus & differentiation
With a differentiation strategy, aims to offer a product that is distinctively DIFFERENT from the competition with the CUSTOMER VALUING that differentiation
Ways for a business to achieve differentiation
- superior product quality
- branding
-wide distribution
-sustained promotion
Examples of successful differentiation strategies
Dyson - technology
Waitrose - giving free coffee for purchases
Examples of stuck in the middle
Morrisons
McDonald’s
WHSmiths
Sony
Hybrid strategies : differentiations and low cost
IKEA
-furniture is flat packed to reduce storage space
-large out of town retail units spread fixed costs
- products are made in china and Malaysia reducing unit costs
-low margins/ high volume allows economies of scale
Differentiation using:
Unique/ unusual design
Localisation of product range
Targeting (mainly) the young global middle class
Benefits of having a competitive advantage and difficulties
Financial
Reduced unnecessary marketing / costs
Helps with recruitment
Brand perception
Difficulties of maintaining a competitive advantage
Financial
Market is constantly moving
External factors
Well informed customers
What is stuck in the middle
Stuck in the Middle: Neither Inexpensive nor Differentiated
