8.2 strategic positioning: choosing how to compete

Question 1

what are porters strategies

Answer 1

cost leadership and differentiation

Question 2

what is cost leadership

Answer 2

becoming the lowest-cost organisation in the industry in which the business is competing

Question 3

how can cost leadership be achieved

Answer 3

• lower input costs- reducing the cost of its inputs, could be done by owning the suppliers as you can avoid the margins of the supplier
• economies of scale- may have a cost advantage by being bigger than rivals
• experience- managers and employees may be more experienced than rivals enabling them to be cheaper from sourcing materials and they may also make better decisions
• product/process design- the design of a product or process used to produce may be more cost efficient than competitors

Question 4

what is differentiation strategy

Answer 4

when a business provides a degree of uniqueness relative to its competitors that is sufficiently valued by customers (USP)

Question 5

difference between Porter’s strategies

Answer 5

• cost leadership- charging same price as rivals but lower costs so margins a higher
• lower price as costs are lower so likely to sell more leading to higher profit
• differentiation- charge higher price as it has a USP and so higher margins

Question 6

influences on positioning strategy

Answer 6

• where are the competitors positioned- big business may want to compete head on, smaller business or less risky business may want to avoid the rest of the market with deliberate conservative positioning
• the external environment- influence where businesses position themselves, increasing consciousness of environment as per customer demand
• strength and competence of the business- dependence on what the company is able to deliver, no point going for differentiation strategy if business’s products have no USP, or a low-cost leader if the business cant keep cost down

Question 7

what is sustainable competitive advantage

Answer 7

a sustainable competitive advantage is one that can be upheld for a prolonged period of time, a competitive advantage is having a benefit of your products over competitors such as a USP or lower prices, as you have a competitive advantage rivals will want to use your ideas losing the advantage

Question 8

examples of ways to protect a competitive advantage

Answer 8

• legal protection
• control of recourses
• a particular culture, values and attitudes of employees and how they think

Question 9

sources of sustainable advantage

Answer 9

• innovation
• architecture (relationship with suppliers and customers)
• reputation