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Strategic Positioning

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Business Studies

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, StudySmarterFigure 1. Porter's Generic Strategy Matrix, StudySmarter

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.

Strategic Positioning

Companies have to be differentiated in order to compete and provide a competitive advantage within the marketplace.

Cost leadership strategy, differentiation strategy and focus strategy.

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.

The strategic positioning of a company is dependent on how it positions itself within a marketplace. Companies can either choose to set themselves apart by becoming low-cost producers in the industry (cost leadership), make their products stand out from competitors (differentiation strategy), or focus on a specific segment of the market (focus strategy).

There are three main positioning strategies including cost leadership, differentiation, and focus strategies. Within focus strategies, there are two further strategic variants which are cost focus and differentiation focus. Cost focus is when a company aims to provide the cheapest products for the target segment, whereas differentiation focus is when it provides specific products for the target segment.

Final Strategic Positioning Quiz

Question

What is Bowman’s Strategy Clock?

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Answer

It is a strategic tool which designs a marketing strategy to analyze a company’s competitive position.

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What does the Bowman’s Strategic Block help by?


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It helps to determine how a product should be positioned to give it the most competitive position in the market.

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How to use the Bowman’s Strategy Clock?


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You should think about the two dimensions: value and price of a product or service. They will help you to arrive at an appropriate position on the clock.

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What are the eight strategies of the Bowman’s Strategy Clock?


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Low price and value added, low price, hybrid, differentiation, focused differentiation, risky high margins, monopoly pricing, loss of market share.

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Give an example of a business using a hybrid strategy.


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Answer

Ikea, Wilko.

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Which of these companies use a differentiation strategy?


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Adidas

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List the advantages of the Bowman’s Strategic Clock.


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It is simple and comprehensive and offers a variety of starting points to examine strategy.

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List the disadvantages of the Bowman’s Strategic Clock.


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Its strategies can be blurred and focus on competitive marketplaces.

Show question

Question

What is strategic positioning?

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Answer

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

Show question

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Can all the companies compete and provide a competitive advantage?

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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?


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Answer

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

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What are the three types of strategic positioning strategies?


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Answer

Cost leadership strategy, differentiation strategy and focus strategy.

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What is the cost leadership strategy?


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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.


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Answer

Asda

Show question

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What is the differentiation strategy?


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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

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Which of these companies uses the differentiation strategy?


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Answer

Sainsbury's

Show question

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What is the focus strategy?


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

Show question

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What are the two variants of the focus strategy?


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Cost focus and differentiation focus

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Question

Give an example of an enterprise using the focus strategy.


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Answer

Waitrose or Aldi

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Question

What influences a positioning strategy?


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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

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How can competitors position in the market influence positioning strategy?

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Answer

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

Show question

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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?


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Answer

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

Show question

Question

What is the least competitive strategy on the Bowman's Strategic Clock?

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Answer

Low Price and Low Value Added 

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What are the two aspects combined in the hybrid strategy?

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This strategy combines low price and product differentiation.

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What is the difference between the 'Low Price and Low Value Added' and 'Low Price' startegy?

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In the Low Price and Low Value Added the price and value of a product or service is very low wheras in the Low Price the price is low but the value is not.

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What are the two aspects combined in the Focused Differentiation strategy?

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This strategy combines high value and high price. 

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What are the two aspects combined in the Risky High Margins strategy?

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This strategy combines high price and low value. 

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Do businesses using the Monopoly Pricing strategy face any competition?

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Answer

No

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What companies use the Loss of Market Share strategy?

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This is a strategy for companies exiting a market or being in decline. 

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How many strategies does Bowman's strategic clock include?

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8

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Companies following ___ strategy try to make their product or service different from the products offered by their competition. Typically they offer the same product or service, but with some unique features.


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Answer

differentiation

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This strategy combines high price and low value. Here companies offer a low valued product or service but sell it at the highest price possible. What strategy is it?


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Answer

Risky High Margins

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Which strategy is on Bowman's Strategy Clock is the least competitive?

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Answer

Low Price and Low Value Added 

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Question

Bowman's Strategic Clock aims to help with determining how a product should be positioned to give it the most ___ position in the market.

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Answer

competitive 

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What are the two dimensions in Bowman's Strategic Clock?

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Answer

value and price

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Question

What strategy is used by IKEA?

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Hybrid

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The hybrid strategy combines low price and high value.

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Answer

False

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Question

Bowman’s Strategic Clock is a strategic tool that designs a ___ strategy to analyse a company’s competitive position. 


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Answer

marketing 

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Question

Imagine a company loses its customers, becomes less profitable and therefore is forced to lower the prices of its products. What strategy does it use?


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Answer

Loss of Market Share

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Question

Businesses using the low price strategy aim to minimise their production costs in order to sell as many units as possible at the lowest price.

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Answer

True

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In this market, there is only one business which controls a product or service and its price. What strategy is it?


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Answer

Monopoly Pricing

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

Show answer

Answer

cost leadership

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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

Show question

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