8.2 Strategic Positioning

Question 1

What are Porter’s two strategies for strategic positioning?

Answer 1

Cost-leadership strategy

Differentiation strategy

Question 2

What does Porter’s strategy diagram look like?

Answer 2

Top Left - Cost leadership 
Top Right - Cost Focus
Bottom Left - Differentiation Strategy 
Bottom Right - Differentiation Focus 
Top Left Column - Broad 
Top Right Column - Narrow

Question 3

What does cost leadership include?

Answer 3

Having the lowest costs in the industry- EOS

Question 4

Why is cost leadership so important?

Answer 4

Many market segments in the industry are supplied with the emphasis placed on minimising costs. If the achieved selling price can be equal to the average for the market, then the lowest-cost producer will get the best profits

Question 5

How can a cost leadership strategy be achieved?

Answer 5

Lower input costs
Economies of scale - Use of bargaining power to negotiate the lowest prices for production inputs
Experience
Product/process design - Lean production methods (e.g. JIT)
High levels of productivity - High capacity utilisation

Question 6

What are some methods of the differentiation strategy?

Answer 6

Superior product quality (features, benefits, durability, reliability)
Branding (strong customer recognition & desire; brand loyalty)
Industry-wide distribution across all major channels (i.e. the product or brand is an essential item to be stocked by retailers)
Consistent promotional support – often dominated by advertising, sponsorship etc

Question 7

What is Bowmans clock?

Answer 7

1 - Low price and low added value 
2- Low price 
3- Hybrid 
4- Differentiation 
5- Focused differentiation
6- Risky high margins 
7- Monopolistic pricing 
8- Loss of market share

Question 8

How does Bowman’s clock and Porter’s theory differ?

Answer 8

Focusses on the prices to customers rather than the costs to the organisation.
Highlights the full range of options open to a business, whereas Porter’s model provides relatively few distinct choices in terms of strategic positioning.

Question 9

What influences a positioning strategy?

Answer 9

Competitors position
External environment
The strengths and competences of the business

Question 10

How can a business protect its competitive advantage?

Answer 10

Legal protection
Control over resources - de Beers controls a significant proportion of the supply of diamonds in the world
Particular culture

Question 11

What are the three main sources of competitive advantage?

Answer 11

Innovation
Architecture - relationships with suppliers and customers
Reputation