Welcome to Strategic Positioning!
In the previous section, we used the Ansoff Matrix to decide where a business should grow (which products and which markets). Now, we are looking at Strategic Positioning. This is all about deciding how to compete once you are in that market.
Think of it like this: if Ansoff is choosing which race to run, Strategic Positioning is deciding whether you’re going to win by being the fastest, the most agile, or by having the best equipment. Don't worry if this seems a bit abstract at first—we’re going to break it down into simple, real-world choices!
1. What is Strategic Positioning?
Strategic Positioning is the way a business chooses to present itself to customers compared to its competitors. It’s about finding a "space" in the market that the business can own.
To do this, businesses usually look at two main things:
1. Price: Are we going to be the cheapest?
2. Benefits: Are we going to offer something unique or better than everyone else?
Quick Review: The Goal
The goal of positioning is to achieve a Competitive Advantage. This is simply something that identifies a business as being better than its rivals in the eyes of the customer.
2. Porter’s Generic Strategies
A famous professor named Michael Porter suggested that there are three main ways a business can position itself to win. He called these "Generic Strategies" because any business in any industry can use them.
A. Cost Leadership (The "Low-Price" King)
A business using this strategy aims to be the lowest-cost producer in the industry. This doesn't just mean having low prices; it means the business has found ways to keep its own costs (like factory rent or materials) lower than anyone else's.
Example: Ryanair or Primark. They keep their internal costs extremely low so they can offer prices that competitors find hard to beat.
B. Differentiation (The "Unique" Choice)
This strategy is about making a product different from and more attractive than those of competitors. Because the product is "better" or unique, the business can often charge a premium price (a higher price).
Example: Apple or Dyson. People pay more for an iPhone or a Dyson vacuum because they believe the design and features are unique and superior.
C. Focus Strategies (The "Specialist")
Instead of trying to sell to everyone, a "Focus" strategy targets a specific, narrow part of the market (a niche). There are two types:
• Cost Focus: Being the cheapest within a tiny niche.
• Differentiation Focus: Offering something unique to a tiny niche.
Example: Ferrari doesn't try to sell cars to every driver. They focus purely on the high-end luxury sports car niche (Differentiation Focus).
Memory Aid: The "CDF" Trick
To remember Porter’s strategies, just remember C-D-F:
C - Cost Leadership (Cheapest)
D - Differentiation (Different)
F - Focus (Filtered down to a niche)
3. The Danger of Being "Stuck in the Middle"
Porter warned that the worst place to be is "stuck in the middle." This happens when a business isn't the cheapest, but it isn't unique enough to charge a higher price either. These businesses often struggle because customers have no clear reason to choose them.
Analogy: Think of a high-street department store that is more expensive than Primark but doesn't feel as special or "cool" as a high-end designer shop. It's stuck in the middle!
Key Takeaway: To succeed, a business must pick a clear lane—either be the cheapest, the most unique, or the best specialist.
4. Influences on the Choice of Strategy
How does a manager choose which of Porter's strategies to use? It’s not just a random guess! They look at:
• Internal Strengths: If you have amazing inventors, go for Differentiation. If you have massive factories and great efficiency, go for Cost Leadership.
• Competitors: If the market is already full of low-cost brands, it might be easier to Differentiate to stand out.
• Market Conditions: In a recession, Cost Leadership is often very popular because customers are looking to save money.
• The External Environment (PESTLE): For example, new technology might make it easier for a business to lower its costs.
5. The Value of Strategic Positioning
Why bother with all this planning? A clear position provides Value by:
• Giving the business a clear Identity (customers know what to expect).
• Making Marketing easier (it’s easy to write an ad when you know exactly why you’re better).
• Helping to build Brand Loyalty.
6. Competitive Advantage: Getting it and Keeping it
Having a Competitive Advantage is great, but the hard part is keeping it!
Benefits of Competitive Advantage:
• Higher profit margins (especially for Differentiation).
• Higher sales volume (especially for Cost Leadership).
• Protection against competitors.
Difficulties of Maintaining it:
Don't worry if you think a business is "safe" once they are on top. It’s hard to stay there because:
• Imitation: Competitors will try to copy your unique features.
• Changes in Technology: A new invention could make your "low cost" method old-fashioned and expensive overnight.
• Changes in Consumer Tastes: What is "unique" and "cool" today might be boring tomorrow.
Common Mistake to Avoid
Students often think Differentiation is just about advertising. It’s not! True differentiation comes from the product itself, the quality of service, or the technology used. Advertising just tells people about the differentiation; it doesn't create it.
Summary Checklist
Before you move on, make sure you can answer these:
• Can you define Strategic Positioning?
• Can you explain the three parts of Porter’s Generic Strategies?
• Do you know what happens if a business is "stuck in the middle"?
• Can you list two reasons why it's hard to maintain a Competitive Advantage?
Key Takeaway: Choosing how to compete is about playing to your strengths. Whether you are the cheapest or the most unique, the secret is being consistent so customers know exactly why they should buy from you!