Week 6: Strategy Capable Organizations Copy
Strategic positioning isthe aim of any business is to find a market position that is both profitable and defendable in its markets of choice, and such a position can only be achieved through differentiated products or lower relative costs, that is, by either serving different needs from competitors, or serving the same needs in different way.
A market position that is both profitable and defendable can only be achieved through differentiated value and a distinctive value chain. When your business occupies a market position that is both profitable and that you can protect, we say that it has been strategically positioned within that market, and as we saw in our strategy principles, there are only two ways to create such a position: through differentiated products, or through lower relative unit costs.
Differentiation means that your products and services are both unique and valuable to your target consumers, while lower relative costs on the other hand mean that those products and services are produced at a lower cost per unit than competing solutions. Strategic positioning therefore reflects the choices that you make with respect to two things:
- The kind of value that your products and services will offer to target consumers (the products’ “Value Proposition”), and
- How that value will be created differently from other companies (which is characterized through your business’s “Value Chain”).
Unless you offer products and services that are both unique and valuable to target buyers or to some extent difficult to copy, your profitability will be vulnerable to the attack of competitors with similar capabilities, and also well-funded copycats. Conversely, a company which positions itself through a differentiated value proposition, or through a “distinctive”, difficult to copy Value Chain, will be better equipped to retain its position over a longer period of time.
A good value proposition is at the core of effective strategic positioning where each of your businesses should translate into superior earnings since they will be able to either command higher prices, drive superior levels of demand or produce higher margins than other companies within the same industry.