Choosing Strategic Direction (3.8) Flashcards
(Marketing Strategy Challenge)
To find a way of achieving a…
To find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market.
Competitive Advantage : Is an advantage over competitiors gained by offering consumers…
An advantages over competitors gained by offering consumers greater value, either by means or lower prices or by providing greater benefits and services that justifies higher prices.
Porter’s Generic Strategy :
1) Cost leadership : _________ market.
2) Differentiation : ________ market.
3a) Cost Focus : __________ market.
3b) Differentiation focus : ____________ market.
Strategic advantage is on the top (e.g. low cost, high quality), Strategic target (scope) is along the side.
1) Cost leadership is low cost, broad (mass) target/market.
2) Differentiation is differentiation, broad (mass) market.
3a) Cost focus is low cost, narrow (niche) target/market.
3b) Differentiation focus is differentiation, narrow target/market.
Porter’s suggested four ‘generic’ business strategies that could be followed…
- The differentiation and cost leadership strategies seek…
- By contrast, the differentiation focus and cost focus strategies are…
Porter’s suggested four ‘generic’ business strategies that could be followed in order to gain competitive advantage.
- The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments.
- By contrast, the differentiation focus and cost focus strategies are best used in a narrow market or industry.
(Porter’s ‘Generic’ Strategies, Cost Leadership)
- The objective is to become the __________-cost producer in…
- Typically involves production on a _________ scale which enables to business to…
- Good for businesses with…
Objective is to become the lowest-cost producer in the industry.
- This typically involves production on a large scale which enables the business to exploit economies of scale.
- Good for businesses with little product differentiation.
(Porter’s ‘Generic’ Strategies, Cost Focus)
- Here a business seeks a _________-cost advantage in just one or a…
- The product will be _________…
- Here a business seeks a lower-cost advantage in just one or a small number of market segments.
- Product will be basic, perhaps similar to the higher-priced and featured market leader.
(Porter’s ‘Generic’ Strategies, Differentiation Focus)
- The classic _________ marketing strategy.
- A business aims to differentiate…
- Business must ensure…
- Approaches could be through…
- Classic niche marketing strategy.
- A business aims to differentiate within just one or a small number of target market segments.
- Must ensure : needs and wants are clearly identified, there’s a valid basis for differentiation.
- Could achieve through selling high quality, using specialist expertise and exclusiveness.
e.g. Ferrari and Bentley
Porter’s ‘Generic’ Strategies, Differentiation Leadership)
- Business targets much larger…
- Usually associated with charging…
- Requires a substantial and sustained…
- About ensuring customers have a reason to…
- Methods include…
- Business targets much larger markets and aims to achieve competitive advantage across the whole of an industry.
- Usually associated with charging a premium price, added value features.
- Requires a substantial and sustained marketing investment.
- About ensuring customers have a reason to prefer the product over other, less differentiated products.
- Methods include : superior product quality, branding, consistent promotional support.
e.g. Apple, Nike, Jack Wills.
(Bowman’s Strategic Clock)
A model that explores the options for…
- There’s two dimensions which determine the strategic options around the clock face…
- The 8 positions are :
Model that explores the options for strategic positioning - i.e. how a product should be positioned to give it to the most competitive position in the market.
- 2 Dimensions : Price and Perceived value.
- Low price and low value added, Low Price, Hybrid, Differentiation, Focus Differentiation, Risky High Margins, Monopoly Pricing, Loss of Market Share.
(Bowman’s Strategic Clock)
1) Low Price and low value added :
2) Low Price :
3) Hybrid :
1) Low Price and Low Value Added : not a very competitive position, product isn’t differentiated and the customer perceives very little value.
2) Low Price : Look to be the low-cost leaders in a market. Profit margins on each product are low, but high volume of output can still generate profit.
3) Hybrid : Involves some element of low price but also some product differentiation, aim is to persuade consumers that there is good added value for the price.
(Bowman’s Strategic Clock)
4) Differentiation :
5) Focused Differentiation :
6) Risky High Margins :
4) Risky High Margins : Aims to offer customers the highest level of perceived added value. Branding & quality plays a key role in this star.
5) Focused Differentiation : Aims to position a product at highest price levels, high perceived value, adopted by luxury brands.
6) Risky High Margins : A high risk strategy that is likely to fail, business offer high prices without anything extra in terms of perceived value.
(Bowman’s Strategic Clock)
7) Monopoly Pricing :
8) Loss of Market Share :
7) Monopoly Pricing : Only one business offering the product, no alternatives, tightly regulated.
8) Loss of Market Share : Setting a middle-range or standard price for a product with low perceived value, unlikely to win over consumers who will have much better options, i.e. higher value for the same price.
Porter’s Five Forces is a framework for analysing…
- …
- …
- …
- …
- …
The model is a framework for analysing the nature of competition within an industry.
- Power of customers.
- Power of suppliers.
- Intensity of rivalry.
- Threat from substitutes.
- Threat of market entry.
(Porter’s Five Forces)
- The threat of new entrants - …
- The threat of substitutes - …
- The bargaining power of customers - …
- The bargaining power of suppliers - …
- The intensity of rivalry - …
- If barriers to entry exist then this is less likely.
- The easier your product is to copy the more likely you are to face competition from rivals.
- Think about ; the ability of customers to switch products, the importance of individual buyers.
- Number of capable suppliers, the cost of switching suppliers, the brand power of suppliers.
- Which is determined by the balance of the other four forces. Plus the number of sellers in the market, the degree of differentiation between products and the market size and growth potential.
(Porter’s 5 Forces) Threat of new entrants :
- If new entrants move into an industry they will gain…
- The position of existing firms is stronger if…
- If barriers to entry are low then…
- Barriers can be :
- If new entrants move into an industry they will gain market share and rivalry will intensify.
- The position of existing firms is stronger if there are barriers to entering the market.
- If barriers to entry are low then the threat of new entrants will be high, and vice versa.
- Barriers can be : high investment costs, economies of scale available to existing firms, legal restrictions e.g. patents, lack of access to suppliers.
