8.2 Strategic Positioning

Question 1

strategic positioning

Answer 1

how a business perceives itself in relation to its competitors
eg.
premier inn more of a budget hotel than hilton

Question 2

Porter’s strategies:

Answer 2

Porter identified 2 possible approaches designed to help a business gain a sustainable competitive advantage:
- Cost-Leadership Strategy
- Differentiation Strategy

Question 3

what market did Poter say his strategies could be aimed at?

Answer 3

mass market (as a whole) or niche market (smaller part- focus strategy)

Question 4

how did porter explain: competitive scope of the business?

Answer 4

the amount of the market targeted

Question 5

broad scope:

Answer 5

targets the market as a whole (mass)

Question 6

narrow scope:

Answer 6

focuses on a niche

Question 7

cost- leadership strategy

Answer 7

this involves becoming the lowest-cost producer in the industry

Question 8

how could businesses lower their costs?

Answer 8

• economies of scale
• investing in better technology
• research and development
• owning supplies
• product - low-cost airline
• efficient distribution channels
• lean production levels

Question 9

why is cost leadership important?

Answer 9

• many market segments in the industry place emphasis on minimising costs
• if achieved selling price can equal/average the market then the lowest-cost producer will gain best profits
• this strategy is usually associated with large-scale businesses offering ‘standard’ products with little differentiation that are readily accessible to majority of customers
• Occasionally, a low cost leader will also discount it’s products to maximise sales, particularly if it has high cost advantage over competitors- can further increase market share

Question 10

what is a cost-focus strategy?

Answer 10

business seeks a lower-cost advantage in 1 or a small number of market segments

the product will be basic- perhaps similar product to higher-priced and featured market leader, but acceptable to sufficient customers

Question 11

cost-leadership with parity:

Answer 11

changing the same price as rivals but because costs are lower the profit margin is higher

Question 12

cost-leadership with proximity:

Answer 12

having a lower price than rivals but because costs are lower- it’s possible to still make the same or higher profit margins

Question 13

differentiation leadership strategy:

Answer 13

• targets larger markets
• business provides some degree of uniqueness from competitors
• allows them to charge higher prices
• this will reflect higher costs of production + extra value added from the consumers perspective

Question 14

how can businesses achieve differentiation leadership strategy:

Answer 14

1. superior quality (features, benefits, durability, reliability)
2. branding (strong customer recognition, brand loyalty)
3. industry-wide distribution across all major channels (widely stocked by retailers)
4. consistent promotion (adverts/ sponsorships)

Question 15

differentiation focus strategy aim:

Answer 15

Bs aims to differentiate within just one or a small number of target market segments

the special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers

Question 16

differentiation focus strategy:

Answer 16

• classic niche marketing strategy
• many small bs’ are able to establish themselves in a niche market segment using this strategy- achieving higher prices than un-differentiated products through specialist expertise/ other ways to add value for customers

eg. Tyrells crisps: focus on the smaller, hand-fried, premium section of the crisp industry

Question 17

Bowman’s strategic clock:

Answer 17

• plots the options open to a bs on a ‘clock’
• the model explores options for strategic positioning i.e. how products should be positioned to give it the most competitive position in the market