Chapter 4 Notes

Chapter 4 - Positioning, Tactics, and Timing Positioning Positioning: a way to gain distinction in an industry by occupying a unique market niche that other companies cannot easily imitate. To determine the position of a firm it is critical to understand how it can utilize its strengths to secure profitable customer relationships + understanding the threats and opportunities in the external environment enables the firm to select a defensible position and where it should set it sights. Low-Cost Positions: Intends to win the game by driving down costs across the value chain, building high volumes and selling at thing margins. Typically, the firm will sell no frill items, but meets the consumers needs and basic quality standards. Superior advantage in a low-cost position comes from creating a significant and sustainable cost gap relative to competitors. Low-cost aspirants will make moves to reduce the cost of inputs and devise more efficient supply chains with less input variation. Works with suppliers to identify and eliminate unnecessary input costs. Must limit the firm's product lineup and streamline operations. Limiting product lineups, the low-cost provider seeks to accelerate learning to become more efficient, to boost scale to capture economies., an to right-size production to maximize utilization and existing capacity. At the distribution end of the value chain, low-cost leaders continue to trim costs. Packaging can be designed to reduce bulk for economical shipping, firm can opt for lower-cost transport options, such as sea and rail containers, or the format of the product the consumer receives. The Unique Advantage of Low-Cost Leadership: Firms that are able to attain low-cost leadership have two options:
1. Can either make their product at or near industry pricing averages and reap superior profit margins, or 2. They can reduce prices to levels that cannot be matched by rivals over the long term. Differentiation Positions: To gain a differentiated position in the rightmost quadrants, a company must examine the value chain to determine where and how it can emphasize uniqueness and add value. Differentiation comes at a cost; therefore, a company must offer differentiated benefits only where a substantial amount of customers are willing to pay a significant premium for a unique product. A company can examine the entire value chain to find tangible and intangible benefits that appeal to both emotion and practicability: o Tangible benefits can be created by melding superior engineering, top quality materials, and for exacting manufacturing into a high-performance equipment. o Intangible benefits that customers crave can be created via exclusivity, brand mystique, and "high-sheen, high-service" selling environments. The tangible aspects include all observable product characteristics, such as size, color, and materials under to make product, packaging, and complementary services. The intangible aspects include unobservable and subjective qualities - image, status, exclusivity, and identity. The total value is created by the entire relationship a firm has with the customer. Segmenting the Market:
The ability to find new opportunities for differentiation comes from observing product attributes that are not well covered in the market. Buyers can be segmented in many ways. Even geographic areas can be segmented. Low Cost + Differentiation Compatible? Best Value: Best value competitors will draw customers from lower- and higher-end rivals by casting a wide net and offering a selection of products and services that appeal to bargain seekers and that luxury buyers also find special enough to meet their needs. Best-value companies take advantage of behind the scenes low cost processes while providing high quality interactions that end-customers appreciate. The Impact of Position on Margin: Adopting a clear position with appeal to a company's target market yields per-unit profit margin advantages. The low-cost leader has greater margins than the average industry competitor. The differentiator has greater per-unit margins than the low-cost leader as it commands higher prices for the additional value it delivers. Best-value players have better margins when the benefits that their products and services justify higher prices, and their disciplined operations reduce costs. Repositioning
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