1. 8.2 Strategic positioning: choosing how to compete
8 Choosing strategic direction
Recap Year 1:
Distinguish between a mass market and a niche market.
Why might a business choose to target a niche market?
What is meant by market mapping?
Draw a market map for an industry of your choice comparing price to differentiation.
8.2 Strategic positioning: choosing how to compete

2. 8.2 Strategic positioning: choosing how to compete
In this topic you will learn about
How to compete in terms of benefits and price
Strategic positioning to include:
Porter’s low cost, differentiation and focus strategies
Bowman’s strategic clock
Influences on the choice of a positioning strategy
The value of different strategic positioning strategies
The benefits of having a competitive advantage
The difficulties of maintaining a competitive advantage

3. Strategic positioning
Strategic positioning is where a business wants to be in the market relative to other business
Based on consumers’ perception
The decision as to which markets to compete in and which products to offer have already been made so the decision now is one of where to compete in that market with those products
Strategic positioning can be analysed using two models:
Porter’s low cost, differentiation and focus strategies
Bowman’s strategic clock
Briefly explain one other model by Porter.

4. Michael Porter’s Strategic matrix
A matrix that categorises the marketing strategies a business can adopt to try and achieve a competitive advantage
Analyses low cost v. differentiation
Porter’s basic premise is to be one thing or the other and not stuck in the middle
He emphasises the danger of the middle ground, almost as if it is a “no mans’ land” where there is little protection
He believes that businesses must put their flag in one camp and remain clearly focused on this
Marketing messages must be clear and non contradictory
Tesco “ Good food that costs less”
M&S “ Its not just food its M&S food”

5. Porter’s Generic Strategy
Lowest
Cost
Highest
Differentiation
Cost
Leadership
Differentiation
Focused Cost
Focused
Mass
Market
Niche
Market

6. Porter’s Generic Strategy – Low cost
Porter states that a strategy of low cost can be successful in either a mass or niche market
He refers to this as cost leadership, in the mass market, and focused cost leadership, in a niche market
Cost leadership means being able to offer your good or service at the lowest cost possible
Price is a key element in the marketing mix
Both operational and financial objectives must focus on cost minimisation
A business that operates with the lowest cost can charge the lowest prices but does not necessarily have to
Explain why this gives power to the business.
How does Ryanair maintain a competitive advantage?

7. Porter’s Generic Strategy - differentiation
Porter states that a strategy of differentiation can be successful in either a mass or niche market
He refers to this as differentiation, in the mass market, and focused differentiation, in a niche market
Differentiation means being able to offer a good or service that stands out from the competition
Product – has to appear better than the competition e.g. USP or patents
Promotion – create desire, exclusivity, brand loyalty
Operational objectives will focus on R&D and innovation
For each strategic option you should be able to think about the impact on elements of the marketing mix as well as other functional objectives and strategies.
How has Lush achieved a competitive advantage?

8. Activity – Porter
Select an industry in which there are several competitors e.g. clothing, supermarkets, cars, gyms
List all the businesses that compete in this industry and try to place them in Porter’s matrix
Low cost
Differentiated
Mass
Niche

9. Bowman’s strategic clock
It is important to note the dimension of price is the price to the consumer not the cost to the business as in Porter’s strategy.
A model that outlines 8 competitive positions or different strategies based on two dimensions:
Price – low to high
Perceived added value – low to high
The model highlights that there are a range of potentially competitive strategies where the combination of price and perceived added value is seen to be fair
However there are other combinations which are highly likely to fail as they are seen as unfair by the consumer
A business’ position will affect its competiveness

10. Bowman’s strategic clock
The fair value line – above the line is seen as a fair combination of price and perceived added value.
How does the consumer perceive the degree of added value they receive from the product?
Non-competitive strategies, predominantly 6,7 and 8 but can fall anywhere below the fair value line. The shaded area is just an indication not a precise area.
What price does the consumer have to pay to buy the product?

11. Bowman’s strategic clock
Strategy
Characteristics
Competitiveness
Example
1 Low price, low added value
“No frills” or “bargain basement”.
Added value/quality is low but matched with low prices.
Low costs must be maintained.
Requires volume sales and an ability to attract new customers on an ongoing basis.
Can be competitive but may not be sustainable in the long run.
Poundland
Supermarket value range
£1 megabus
2 Low price
Low cost but moderate perceived added value.
Option only to low cost businesses.
Operate in a mass market as profit margins are low.
May compete on price wars.
Competitive only if a low or lowest cost operator in a mass market.
Flybe
Travelodge

12. Bowman’s strategic clock
Strategy
Characteristics
Competitiveness
Example
3 Hybrid
Low price but with high perceived added value.
Reputation for fair prices and good quality products meeting customer needs.
Competitive strategy as it builds customer loyalty and therefore repeat business.
Aldi, Lidl and Netto
Ikea
Superdrug
4 Differentiation
Offers a product with a USP but at a moderate to high price.
Builds brand loyalty.
Targets a wide market.
Competitive due to USP and fair price.
Superdry
British Airways
Hilton Hotels

13. Bowman’s strategic clock
Strategy
Characteristics
Competitiveness
Example
5 Focused differentiation
High price matched with high perceived added value.
Targeted at a niche market.
The perception of quality allows the business to charge premium prices.
Price inelastic products.
Competitive strategy as it builds on perceived value and desire.
Armani
Mulberry
Rolls Royce
6 Risky, high margins
High price but only a standard product with moderate perceived added value.
May attract new entrants into the market lowering price in the long run.
Consumers will become dissatisfied.
Risky in a competitive market.
May allow for high profit margins in the short run but in the long run market share will fall.
Bannatyne’s Gyms
Blackberry

14. Bowman’s strategic clock
Strategy
Characteristics
Competitiveness
Example
7 Monopoly pricing
High price but low perceived added value which is achievable as a result of monopoly power.
Will only be maintained as a strategy in the long run if high barriers to entry exist.
High profit margins but not sustainable in a market economy in the long run.
Virgin trains
Broadband providers
Royal Mail
8 Loss of market share
Standard price but with low perceived added value.
Will lose market share.
Can only compete on price.
Not a competitive strategy as the only way to sell a low added value product in a competitive market is to compete on price therefore there will be a definite loss of market share.
Tesco and Sainsbury’s

15. For each business explain the value of the strategy chosen.
Challenge – add one example of each strategy for an industry of your choice.
For each business explain the value of the strategy chosen.

16. Influences on the choice of a positioning strategy
Strategic direction – which market and which products
The competitive nature of the business and relative position of competitors e.g. is there a gap?
Corporate objective
Core competences of the business
Market conditions i.e. PESTEL environment
SWOT analysis
What are the factors influencing Sainsbury’s strategic position?
Analyse the decision to enter a joint venture with Netto using Porter’s generic strategy and Bowman’s strategic clock.

17. Competitive advantage
What is meant by the term competitive advantage?
Benefits of a competitive advantage
Customer loyalty
Potential to charge a premium price
Market share
Reputation as low cost or highly differentiated therefore seen as higher added value
Create barriers to entry
Difficulties of maintaining a competitive advantage
Competitors’ actions e.g. copying or responding to strategy
Inability to maintain barriers to entry
Changing external environment
How have each of these businesses achieved a competitive advantage?
What actions can a business take to try and achieve a sustainable competitive advantage ?

18. Activity 10 high street stores of 1976 that have disappeared.
With reference to the article, Porter’s generic strategy and Bowman’s strategic clock analyse:
Strategic position
Value of different strategic positioning strategies
Difficulties of maintaining a competitive advantage
Why must strategy be reviewed over time?

19. 8.2 Strategic positioning: choosing how to compete
In this topic you have learnt about
How to compete in terms of benefits and price
Strategic positioning to include:
Porter’s low cost, differentiation and focus strategies
Bowman’s strategic clock
Influences on the choice of a positioning strategy
The value of different strategic positioning strategies
The benefits of having a competitive advantage
The difficulties of maintaining a competitive advantage