8 C HOOSING
S T R AT E G I C
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 S TRATEGIC POSITIONING : CHOOSING HOW
TO COMPETE
8.2 S TRATEGIC

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
S TRATEGIC
Briefly explain
one other model
by Porter.
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
M ICHAEL P ORTER ’ S S TRATEGIC
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”
P ORTER ’ S G ENERIC S TRATEGY
Lowest
Cost
Highest
Differentiation
Mass
Market
Cost
Leadership
Differentiation
Niche
Market
Focused Cost
Leadership
Focused
Differentiation
P ORTER ’ S G ENERIC S TRATEGY – L OW
How does Ryanair
maintain a
competitive
advantage?
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.
P ORTER ’ S G ENERIC S TRATEGY DIFFERENTIATION
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?

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
A CTIVITY – P ORTER

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
Mass
Niche
Differentiated
B OWMAN ’ S
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.

STRATEGIC CLOCK
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
B OWMAN ’ 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?
B OWMAN ’ S
Strategy
Characteristics
STRATEGIC CLOCK
Competitiveness
Example
1 Low price, low “No frills” or “bargain
added value
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
Competitive only
if a low or lowest
cost operator in a
mass market.
Flybe
Travelodge
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.
B OWMAN ’ 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
Competitive due
to USP and fair
price.
Superdry
British Airways
Hilton Hotels
4 Differentiation Offers a product with a USP but
at a moderate to high price.
Builds brand loyalty.
Targets a wide market.
B OWMAN ’ 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
B OWMAN ’ 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 Standard price but with low
share
perceived added value.
Will lose market share.
Can only compete on price.
Not a competitive
Tesco and
strategy as the only Sainsbury’s
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.
C HALLENGE – ADD ONE EXAMPLE OF EACH
STRATEGY FOR AN INDUSTRY OF YOUR
CHOICE .
For each business
explain the value of
the strategy chosen.
I NFLUENCES
ON THE CHOICE OF A
POSITIONING STRATEGY
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.

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
C OMPETITIVE
What is meant by the
term competitive
advantage?
How have each of
these businesses
achieved a
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

ADVANTAGE
Difficulties of maintaining a
competitive advantage

Competitors’ actions e.g.
copying or responding to
strategy

Inability to maintain
barriers to entry

Changing external
environment
What actions can a business
take to try and achieve a
sustainable competitive
advantage ?
A CTIVITY

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?
8.2 S TRATEGIC
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