Strategic positioning: Choosing how to compete (A Level) flashcards

Topic 12: Strategic positioning: Choosing how to compete

Strategic positioning

The long-term choice of how a business will compete against rivals in its chosen market: the mix of benefits offered and the price charged compared with rivals.

Market mapping: purpose and method

A diagram placing competing brands on two axes that matter to customers (for example price and perceived quality). Score each rival, ideally from customer research, plot them, then look for close rivals and gaps.

Market mapping: limitations

Only two variables; a gap may have no demand or no profit; perceptions differ by segment and change; maps based on managers’ opinion may be biased.

Low cost strategy vs differentiation strategy

Low cost: produce a similar product at lower cost than rivals, then undercut their price or match it for a wider margin. Differentiation: make the product distinct in ways customers value, so it can command a higher price or stronger loyalty.

Low cost vs low price

Low cost is about the cost base; low price is a choice the low cost firm may or may not make. Two car washes charge £12: one costs £7.50 per wash (£4.50 margin), a rival costs £6.00 (£6.00 margin).

Differentiation: advantages and disadvantages

Advantages: higher unit margin, loyal and less price-sensitive buyers, a brand that is hard to copy. Disadvantages: costly to build and keep, customers may not value the extras, features get copied, vulnerable in a recession.

Competitive advantage: meaning and benefits

An edge over rivals, from lower costs or greater benefits, that lets the business earn above-average profit or win more customers. Benefits: higher margins, loyalty, bargaining power, profit to reinvest, a base for growth.

Why is a competitive advantage hard to maintain?

Rivals imitate or patents expire, tastes change, technology makes a feature standard, new entrants and substitutes arrive, input costs rise, and complacency or loss of key staff.

A premium valet costs £15 when the market average is £12. Find the price premium.

(15 − 12) ÷ 12 × 100 = 25%. A price above rivals needs benefits customers can see and believe.

Which benefits-and-price position is least likely to survive in a competitive market?

Same or fewer benefits at a higher price (overpriced): customers can get as much or more elsewhere for less, so they switch unless they have no choice.