Lesson 1, Topic 1
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6.1 Explaining Strategic positioning

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The first order of business for any established company is to protect the profits produced by its core business or businesses. Before thinking about new products, growth initiatives or the latest management trend, you must have a solid but realistic plan to protect that core source of value and fight, bite and scratch to defend it if necessary.

 A company that doesn’t have its core business under control, or that prioritizes other areas, growth for example, is at risk of failing at both. The only way to effectively protect your business, that is, to ensure that it has a market position that is both profitable and defendable, is through the strategic positioning of its products and services.

How to differentiate your products and services

Strategic positioning makes choices about how a business will “deliberately” protect core profits from industry forces and retain a profitable position in the market.  Based on our discussions about business strategy, there are only three ways to do that:

  1. By offering differentiated value, that is, through products and services that are both unique and valuable to target consumers
  2. By lowering prices well below competing alternatives or by
  3. Striking an effective combination of both differentiation and low prices.

While costs are the result of choices that a company makes in its Value Chain, price on the other hand is a “decision” that comes out of a positioning strategy and is usually established based on the relative price of a set of competing solutions. The challenge for executives when it comes to a business’s strategic positioning is in continually finding a “profitable” but “defensible” position in a marketplace, either through a differentiated offer, lower prices or a combination of both, where the company can maximize returns to shareholders for every dollar they invested in that business.

As a result of the dynamics and complexity of markets and competition, this market position becomes a bit of a moving target (a fast-moving one in some industries), making strategic positioning more like a “process” to continually adjust the perception of your business’s products and services in the minds of your target customers.

Self-Check Activity

How to differentiate your products and services in strategic positioning.