Competitive Positions

Finns competing in a given target market will, at any moment, differ in their objectives and resources. Some firms will be large, others small. Some will have

great resources, others will he strapped for funds. Some will be old and estab lished, others new and fresh. Some will strive for rapid market share growth, others for longterm profits. And the firms will occupy different competitive pos j itions in the target market.

Michael Porter suggests four basic competitive positioning strategies that companies can follow — three winning strategies and one losing one. 10 The three

winning strategies are:

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1, Overall cost leadership. Here the company works hard to achieve the lowest costs of production and distribution, so that it can price lower than its competitors and win a large market share. Texas Instruments and Amstrad are leading practitioners of this strategy. In the steel industry, big is not beautiful any more; small minimills, including Nucor and Chaparral Steel, which use electric furnaces to convert scrap metal, arc undercutting the large integrated suppliers.

2, Differentiation. Here the company concentrates on creating a highly differentiated product line and marketing programme, so that it comes aeross as the class leader in the industry. Most customers would prefer to own this brand if its price is not too high. Bose and Glaxo follow this strategy in ultrasmall speakers and ethical drugs, respectively.

3, Focus. Here the company focuses its effort on serving a few market segments well rather than going after the whole market. Many firms in northern Italy excel at this. Among them are Luxottiea, the world's leading maker of spectacle frames, pasta makers Barilla and many dynamic small firms in the Prato textile industry. In 1993 Nbvo No relist was Denmark's

twelfth largest company by turnover, but made more profits than any other by focusing on Insulin and industrial enzymes. It is a researchled company

that 'continues to take market share away from Its competitors on the back of sophisticated delivery systems'."

Companies that pursue a clear strategy one of the above are likely to perform well. The firm that carries out that strategy best will make the most profits. Firms

that do not pursue a clear strategy middleoftheroaders — do the worst. Olivetti, Philips and International Harvester all came upon difficult times because they did not stand out as the lowest in cost, highest in perceived value or best in serving some market segment. Middleoftheroaders try to be good on all strategic counts, but end up being not very good at anything (see Marketing Highlight 12.3).

More recently, two marketing consultants, Michael Treacy and Fred

Wiersema, offered a new classification of competitive marketing strategies. 12 They

suggest that companies gain leadership positions by delivering superior value to their customers. Companies can pursue any of three strategies — called value disciplines for delivering superior customer value. These are:

1. Operational excellence. The company provides superior value by leading its industry in price and convenience. It works to reduce costs and to create a lean and efficient value delivery system. It serves customers who want reliable, good quality products or services, but who want them cheaply and

easily. Examples include Virgin Direct and Dell Computer.

2. Customer intimacy. The company provides superior value by precisely segmenting its markets and then tailoring its products or services to match exactly the needs of targeted customers. It specializes in satisfying unique eustomer needs through a close relationship with and intimate knowledge of the customer. It builds detailed customer databases for segmenting and targeting, and empowers its marketing people to respond quickly to customer needs. It serves customers who are willing to pay a premium to get precisely what they want, and it will do almost anything to build longterm customer loyalty and to capture customer lifetime value. Examples include Harrods, BA and Kraft General Foods.

,1 Product leadership. The company provides superior value by offering a continuous stream of leadingedge products or services that make their own

518 • Chapter 12 Creating Competitive Advantages

Competitive Positions