8.2 Strategic Positioning (AQA A Level Business): Flashcards
Exam code: 7132
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Define strategic positioning.
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Define strategic positioning.
Strategic positioning is how a business sets itself apart from competitors by choosing its unique mix of price, quality, service and features.
Name two influences on the choice of positioning strategy.
Customer needs/preferences and competitor actions (also costs/resources, brand identity and technological capabilities).
What two factors does Porter's generic matrix consider?
The source of competitive advantage (cost or differentiation) and the scope of the market (mass or niche).
Name the four strategies in Porter's generic matrix.
Cost leadership, differentiation leadership, cost focus and differentiation focus.
What does Porter mean by being 'stuck in the middle'?
Failing to commit to one strategy, so the business cannot compete successfully with rivals.
Define a low cost (cost leadership) strategy.
A cost leadership strategy means being the most cost-competitive business in a large (mass) market.
What is the difference between cost leadership with parity and with proximity?
Parity = lower costs but the same price as rivals; proximity = lower costs and a lower price.
Give one advantage of a low cost strategy.
Economies of scale, competitive pricing, or barriers to entry for new rivals.
Give one disadvantage of a low cost strategy.
Risk of a price war, or quality concerns linked to low costs.
Define a differentiation strategy.
A differentiation strategy makes products distinct from rivals (on quality, service, innovation or brand) so the business can charge a premium price.
Give an example of a mass-market differentiation strategy.
Coca-Cola (branding), Samsung (technical features) or Volvo (safety and build quality).
Give one advantage of a differentiation strategy.
Premium pricing, strong brand loyalty, or fewer competitive pressures (hard to imitate).
Define a cost focus strategy.
A cost focus strategy means being the lowest-cost competitor within a market niche.
Define a differentiation focus strategy.
A differentiation focus strategy means offering specialised products within a niche market.
Give an example of a differentiation focus business.
Hotel Chocolat (premium fair-trade confectionery) or Brompton Bicycle (folding bikes for commuters).
Give one weakness of a focus strategy.
It limits sales potential; the business is exposed if the niche shrinks, and larger competitors may enter the niche.
Porter warned that failing to commit to one strategy leaves a business in the middle.
Porter warned that failing to commit to one strategy leaves a business stuck in the middle.
True or False?
A business can successfully pursue cost leadership and differentiation together in the long term.
False.
Pursuing a mixture is not feasible long-term — it risks leaving the business 'stuck in the middle'.
True or False?
A differentiation strategy allows a business to charge a premium price.
True.
Distinctive products or brands mean customers are often willing to pay more.
Define competitive advantage.
Competitive advantage is when a business has something special — lower costs, unique products, better service or stronger brands — that lets it outperform competitors.
Give two benefits of having a competitive advantage.
Higher profits and greater market share (also customer trust/repeat purchases, a barrier to entry and attracting investors).
How does competitive advantage create a barrier to entry?
Resources like patented technology make it expensive or difficult for newcomers to compete.
How does competitive advantage attract investors?
Steady profits and market leadership attract investors and lenders, giving the business funds to grow.
Give an example of a business's competitive advantage.
Tesco's Clubcard data, Rolls-Royce's engineering/service contracts, AstraZeneca's R&D patents, or Burberry's heritage brand.
Name two difficulties of maintaining a competitive advantage.
Fast-moving technology and rivals copying ideas (also changing customer tastes, regulations/shocks and complacency).
How can regulations or economic shocks remove a competitive advantage?
New laws or events remove protective barriers — e.g. Uber ending London black-cabs' protected status.
A competitive advantage lets a business charge premium prices or maintain healthy even if it cuts prices.
A competitive advantage lets a business charge premium prices or maintain healthy profits even if it cuts prices.
True or False?
A competitive advantage, once gained, is permanent.
False.
It can be lost through new technology, imitation, changing tastes, regulation or complacency.
True or False?
A competitive advantage that is easy to imitate is hard to maintain.
True.
If rivals can copy it easily and cheaply, they will, quickly eroding the advantage.
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