Strategic Positioning

Types of positioning strategies

Strategic positioning strategies refer to tactics a company uses to differentiate itself from competitors and establish the desired position in the market. Some of the common strategic positioning strategies include:

• cost leadership strategy
• differentiation strategy
• niche or segment focus strategy
• innovation strategy
• branding strategy

We will now explain positioning strategies based on Porter's generic strategy mix

Strategic positioning for competitive advantage: Porter's generic strategies

According to Porter’s generic strategy matrix (see Figure 1 below), all the markets operate in the same way, and a competitive advantage can be achieved using one of the three strategies. It is essential to use the generic strategy matrix as it has a huge influence on choosing and analysing a strategy. There are three types of strategies depending on the scope and source of competitive advantage:

• cost leadership strategy (broad scope),
• differentiation strategy (broad scope),
• focus strategy

Porter's generic strategy matrix

Cost leadership strategy

Firms choosing the cost leadership strategy aim to become a low-cost producer in the industry. They try to reduce costs wherever possible and offer customers products at the cheapest price. They typically take advantage of economies of scale and catch up on quantity, not quality.

Differentiation strategy

Here companies try to make their product differ from the competition. They aim to offer customers something which is unique and innovative. In order to gain a competitive advantage, they need to do the research to make sure they produce something which will draw customers’ attention. They focus on quality instead of quantity.

Focus strategy

As the name suggests, businesses using the focus strategy focus on a specific segment of the market and consequently, their scope is relatively narrow.

The focus strategy has two variants:

- Cost focus

- Differentiation focus

The cost focus is when a company aims to provide the cheapest products within the industry whereas the differentiation focus is when it provides well-specified products.

Strategic positioning analysis

Let us see a bride analysis with the factors influencing the positioning strategy. Factors influencing strategic positioning:

• competitor analysis
• skills and expertise
• market analysis
• resource availability
• financial stability
• marketing and sales

Let's take a look at some of them in more detail!

Competitor analysis

Oftentimes there are already existing companies that would be impossible to beat by a startup. For example, Ryanair being a low-fare airline, has so many customers that probably no one would be brave enough to establish an airline of the same type competing with it.

Skills and expertise

Some companies have special operational skills, which might be of an advantage over competitors. These skills may either result in producing something which is revolutionary (differentiation strategy) or cheap to manufacture (cost leadership strategy).

Market analysis

Market analysis is a crucial part of the strategic positioning process, as it helps a company understand the market landscape and identify opportunities for growth. It usually involves steps like assessing market size and growth, analysing customer preferences and competitive environment, as well as identifying market trends.

Strategic positioning examples

Let's take a look at three strategic positioning examples based on real-world companies:

1. Apple - differentiation strategy. Apple's strong brand and reputation for innovation have helped it establish a loyal customer base and differentiate itself from competitors in the electronics market.

2. Walmart - cost leadership strategy. The company's primary goal is to offer its products at the lowest possible price, and it achieves this through a combination of economies of scale and efficient supply chain management.

3. Tesla - differentiation and innovation strategies. Tesla's focus on sustainability and innovation has helped it differentiate itself from competitors in the automotive market.