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Strategic Positioning

Strategic Positioning

Every business has to choose an appropriate strategy in order to succeed. It needs to place itself in the right position in the marketplace so that it can compete with other companies. This is known as strategic positioning. Let's examine this concept in more detail.

Strategic positioning definition

Strategic positioning is a position of a business within a marketplace. It refers to how a company sets itself apart from the competition and delivers a product to the customers.

Chanel is considered to be one of the most expensive and luxurious shops in the world, whereas H&M is a relatively cheap multiple store. This way, Chanel’s value is very high and H&M’s value is low.

No matter what an enterprise’s position is, it can still compete and provide a competitive advantage. However, in order to do it, not only do they have to be different, but also differentiated.

Strategic Positioning : Types, advantages and examples

According to Porter’s generic strategy matrix (see Figure 1 below), all the markets operate in the same way. They can be segmented in two ways: narrow and broad scope, cost and differentiation source of competitive advantage. It is essential to use the generic strategy matrix as it has a huge influence on choosing and analysing a strategy. There are three types of strategies depending on scope and source of competitive advantage.

Strategic positioning, Porter's generic strategy matrix, StudySmarterPorter's generic strategy matrix

Cost leadership strategy

Firms choosing the cost leadership strategy aim to become the low cost producer in the industry. They try to reduce costs wherever possible and offer customers products at the cheapest price. They typically take advantage of economies of scale and catch up on quantity, not quality.

A company using the cost leadership strategy is Asda. It offers numerous products at a relatively low price.

Differentiation strategy

Here companies try to make their product differ from the competition. They aim to offer customers something which is unique and innovative. In order to gain a competitive advantage, they need to do the research to make sure they produce something which will draw customers’ attention. They focus on quality instead of quantity.

A business using the differentiation strategy is Sainsbury’s. It offers a variety of products at regular prices.

Focus strategy

As the name suggests, businesses using the focus strategy focus on a specific segment of the market and consequently, their scope is relatively narrow.

The focus strategy has two variants:

- Cost focus

- Differentiation focus

The cost focus is when a company aims to provide the cheapest products within the industry whereas the differentiation focus is when it provides well-specified products.

Firms using the focus strategy are Aldi and Waitrose. Aldi offers essential groceries at the cheapest price whereas Waitrose offers groceries that are more sophisticated.

Strategic positioning analysis

Let us see a bride analysis with the factors influencing the positioning strategy. There are numerous factors that may influence an organisation's positioning strategy.

Competitors position in the market

Oftentimes there are already existing companies that would be impossible to beat by a startup. For example, Ryanair being a low fare airline has so many customers that probably no one would be brave enough to establish an airline of the same type competing with it.

Skills within the business

Some people might have some special operational skills which might be of an advantage when establishing a company. These skills may either result in producing something which is revolutionary (differentiation strategy) or cheap to manufacture (cost leadership strategy).

Desire to be the best

Entrepreneurs might enter a market where they think they will have a high market share and consequently, high profits. They may give up sectors where the chances to succeed are low and move into the ones with better prospects.

Strategic Positioning - Key takeaways

  • Strategic positioning is a position of a business within a marketplace.
  • Not only do companies have to be different, but also differentiated.
  • According to Porter’s generic strategy matrix, companies can be segmented in two ways: narrow and broad scope, cost and differentiation source of competitive advantage.
  • There are three types of strategic positioning strategies: cost leadership strategy, differentiation strategy and focus strategy.
  • The main influences on a positioning strategy are competitors position in the market, skills within the business and desire to be the best.

Frequently Asked Questions about Strategic Positioning

Strategic positioning is a position of a business within a marketplace. It refers to how a company sets itself apart from the competition and delivers a product to the customers.

Strategic positioning is important because it helps a business to place itself in the right position in the marketplace. 

Cost, quality, speed of response, flexibility, innovation, and service positioning are the 5 common positioning strategies. 

Cost leadership, differentiation, and focus strategy. 

Strategic positioning is a position of a business within a marketplace. 

Final Strategic Positioning Quiz

Question

What is strategic positioning?

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Answer

Strategic positioning is a position of a business within a marketplace.

Show question

Question

Can all the companies compete and provide a competitive advantage?

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Answer

Yes, no matter what an enterprise’s position is, it can still compete and provide a competitive advantage.

Show question

Question

According to Porter’s generic strategy matrix, what are the two ways in which companies can be segmented?


Show answer

Answer

They can be segmented in two ways: narrow and broad scope, cost and differentiation source of competitive advantage.

Show question

Question

What are the three types of strategic positioning strategies?


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Answer

Cost leadership strategy, differentiation strategy and focus strategy.

Show question

Question

What is the cost leadership strategy?


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Answer

The cost leadership strategy is when firms aim to become the low cost producer in the industry. They try to reduce costs wherever possible and offer customers products at the cheapest price.

Show question

Question

Give an example of a company using the cost leadership strategy.


Show answer

Answer

Asda

Show question

Question

What is the differentiation strategy?


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Answer

The differentiation strategy is when companies try to make their product differ from the competition. They aim to offer customers something which is unique and innovative.

Show question

Question

Which of these companies uses the differentiation strategy?


Show answer

Answer

Sainsbury's

Show question

Question

What is the focus strategy?


Show answer

Answer

The focus strategy is when businesses focus on a specific segment of the market and consequently, their scope is relatively narrow.

Show question

Question

What are the two variants of the focus strategy?


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Answer

Cost focus and differentiation focus

Show question

Question

Give an example of an enterprise using the focus strategy.


Show answer

Answer

Waitrose or Aldi

Show question

Question

What influences a positioning strategy?


Show answer

Answer

Competitors position in the market, skills within the business and desire to be the best.

Show question

Question

What influences a positioning strategy?


Show answer

Answer

Competitors position in the market, skills within the business and desire to be the best.

Show question

Question

What influences a positioning strategy?


Show answer

Answer

Competitors position in the market, skills within the business and desire to be the best.

Show question

Question

What influences a positioning strategy?


Show answer

Answer

Competitors position in the market, skills within the business and desire to be the best.

Show question

Question

How can competitors position in the market influence positioning strategy?

Show answer

Answer

Oftentimes there are already existing companies that would be impossible to beat by a startup.

Show question

Question

How can skills within the business influence a positioning strategy?


Show answer

Answer

Some people might have some special operational skills which might be of an advantage when establishing a company. These skills may either result in producing something which is revolutionary (differentiation strategy) or cheap to manufacture (cost leadership strategy).

Show question

Question

Why might companies give up sectors where the chances of success are low?


Show answer

Answer

To move into markets with better prospects where they have better chances to succeed.

Show question

Question

Firms choosing this strategy aim to become the low cost producer in the industry. What strategy is it?

Show answer

Answer

cost leadership

Show question

Question

According to Porter’s generic strategy matrix, there are two sources of competitive advantage. What are they?

Show answer

Answer

Cost and Diffrentiation

Show question

Question

Companies using this strategy aim to offer customers something which is unique and innovative. What strategy is it?

Show answer

Answer

Differentiation strategy 

Show question

Question

Which strategy is used by Aldi?

Show answer

Answer

Cost focus

Show question

Question

Waitrose uses a differentiation focus strategy.

Show answer

Answer

True

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Question

Firms using cost leadership strategy catch up on ___, not quality. 

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Answer

quantity

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Question

Which of these companies is more likely to use cost focus strategy?

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Answer

H&M 

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Question

___ is a position of a business within a marketplace. It refers to how a company sets itself apart from the competition and delivers a product to the customers.

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Answer

Strategic positioning

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Question

Companies using a differentiation strategy focus on ___ instead of quantity.

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Answer

quality 

Show question

Question

Businesses using this strategy take advantage of economies of scale. What strategy is it?

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Answer

cost leadership

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