So – competitive positioning. This is all about what firms do with their products and services in the marketplace, and why customers buy them. As you’ll all know (with everyone being so focused on the business these days) the core thinking comes from Michael Porter at Harvard and his concept of generic strategies – that businesses can only compete in two or three ways:
· Through differentiation (or niche focus) – adding something unique to the product and/or service meaning that not everyone will want to buy it but that enough people will, and when they do they will be prepared to pay a premium price to get this unique feature that they value. This means the firm gains more margin, becomes more profitable, grows faster and can eventually become a monopoly and life will be rosy.
· By cost leadership – producing the same goods or services as everyone else but doing so more cheaply so that everytime they make a sale they make more margin and so they get the same benefits as above.
This business strategy is probably still the most popular in use today (though it probably shouldn’t be) and has been repromoted recently in Kim and Mauborgne book, Blue Ocean Strategy. This basically promotes the same idea as Porter’s Competitive Positioning, brought up to date and in less academic language etc. Basically it says don’t compete in the choppy, turbulent red ocean where everyone else is competing but go and find some nice, calm blue ocean where you don’t have competition – i.e differentiation.
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