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A LevelBusinessAQARevision Notes8. Choosing Strategic Direction (A Level)8.2 Strategic PositioningStrategic Positioning Strategies

Strategic Positioning Strategies (AQA A Level Business): Revision Note

Exam code: 7132

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Updated on

Influences on the choice of positioning strategy

  • Strategic positioning is how a business sets itself apart from competitors in the market by choosing the unique mix of price, quality, service and features it offers

Influences on the choice of strategic position

Influence

Explanation

Example

Customer needs and preferences

  • A company studies what its target customers value most—such as low price, high quality or fast service—to choose its position

  • A budget supermarket focuses on low prices and simple stores because shoppers want to save money on groceries

Competitor actions

  • A business looks at rivals to find gaps in the market or avoid direct clashes, and then chooses a different position

  • While most airlines compete on price, one airline offers extra legroom and lounge access to stand out

Costs and resources

  • A firm’s own costs, equipment, and staff skills determine whether it can afford to compete on low price or premium features

  • A discount airline uses a single type of plane to keep costs down and offer the cheapest tickets

Brand identity and reputation

  • A company’s existing image and values influence what position it can hold, since trusted brands can often charge more

  • A luxury car maker sells vehicles at high prices because people associate its name with quality and status

Technological capabilities

  • Access to new technologies—like e-commerce platforms or automation—allows firms to offer unique services or features.

  • An online retailer uses fast warehouse robots to offer next-day delivery, setting it apart from others

An introduction to Porter's Generic Strategies

  • Porter’s Generic Matrix identifies a range of strategies a business can utilise to increase their success in the competitive landscape

  • The matrix considers two factors 

    • Its source of competitive advantage (cost or differentiation)

    • The scope of the market in which it operates (mass or niche)

  • Porter's generic strategies provide a clear framework for businesses to determine the most appropriate strategy to succeed in the mass market or within a smaller niche market

  • It emphasises the importance of developing distinctive capabilities and avoiding being 'stuck in the middle'

Porter's Generic Matrix

Matrix illustrating competitive strategies: cost leadership and differentiation for mass market; cost focus and differentiation focus for niche market.
Porter's generic matrix identifies suitable strategies for mass and niche markets

  • The model encourages businesses to make strategic choices that are difficult for competitors to copy

  • Pursuing one strategy forces the business to make explicit choices about its direction and concentrate on it

  • However, the model does not offer guidance to businesses on specific tactics or implementation

  • It also overlooks external factors such as technological change, economic conditions and changes in laws which could  impact competitive position

Stuck in the middle

  • Porter argued that failing to adopt one of the strategies risks a business being' stuck in the middle'

    • This means it is unable to compete successfully with rivals in the market because each strategy is different

    • A business should select its strategy and concentrate its resources on pursuing it rather than simply responding to its competitors' actions

  • Pursuing a mixture of strategies is also not feasible in the long term

    • For example, cost leadership and differentiation are unlikely to be financially compatible

      • Low prices combined with high quality can negatively affect consumer perceptions of the product

Low cost strategies

  • Most suitable for businesses that have a significant cost advantage over rivals 

    • It means being the most cost-competitive business in a large market

      • Cost leadership with parity is where a business has lower costs than rivals but charges the same price

        • Examples include hotel chains such as Premier Inn and Ibis Styles

      • Cost leadership with proximity is where a business has lower costs and charges a lower price than rivals

        • Examples include budget airlines such as Southwestern and Ryanair

Evaluating low cost strategies

Advantages

Disadvantages

  • Economies of scale

    • Low cost strategies involve large-scale production to achieve a lower unit cost

  • Competitive pricing

    • Cost leaders can offer lower prices than their competitors, which attracts more customers 

  • Barriers to entry

    • New rivals struggle to fund required capital investment

  • Risky

    • May result in a  price war if more than one business in a market pursues this strategy

  • Quality concerns

    • Low costs/prices are often linked to poor quality

 

Differentiation strategies

  • Businesses that cannot be the most competitive on cost should make its products distinct from those of rivals

    • For example, a business may stand out on quality, customer service, innovation or brand identity

  • Successful differentiation allows a business to charge a premium price and achieve a high profit margin

  • Examples of businesses that adopt a mass market differentiation strategy include Coca Cola, Samsung and Volvo

    • Coca Cola's trusted and well-known branding includes its logo, brand colours and characters such as the Coca Cola truck

    • Samsung's cutting-edge mobile phones have the most advanced package of technical features in the mass market

    • Volvo's focus on safety and build quality allows it to charge premium prices in the mass market

Ways to achieve differentiation

Diagram showing methods of differentiation, including marketing, packaging, functions, customisation, and customer service branching from a central box.
Businesses can achieve differentiation through branding, customer service, design features and quality

Evaluating differentiation strategies

Advantages

Disadvantages

  • Premium pricing

    • Customers are often willing to pay more for unique features, quality or brand image

  • Brand loyalty

    • A strong brand image can lead to less price-sensitive, loyal customers

  • Fewer competitive pressures

    • A differentiated product is difficult for rivals to imitate

  • High costs

    • Researching, developing and maintaining unique features requires significant budgets

  • Customer preferences

    • Fashions, trends and customer preferences change over time, so research must be ongoing

Focus strategies

  • Businesses that operate in niche markets should adopt one of two focus strategies that closely meet the needs of its specific group of customers

Cost focus strategy 

  • A cost focus involves being the lowest cost competitor within the market niche

    • Examples of businesses that adopt a cost focus strategy include Carnival Cruise Line and Glasses Direct

      • Carnival Cruises sells cruises to locations including the Caribbean and Europe and is well-known for it's eye-catching low fares that can be offered due to its fleet of smaller vessels that operate at full capacity

      • Glasses Direct is an online retailer of spectacles that sells popular styles of lesser-known brands at very low prices as a result of its low overhead costs

Differentiation focus strategy

  • A differentiation focus involves offering specialised products within the niche market

    • Examples of businesses that adopt a differentiation focus strategy include

      • Hotel Chocolat, which sells a range of premium, fair-trade celebration confectionary in its chain of beautifully-designed retail outlets

      • Brompton Bicycle Retail, which sells innovative products such as the folding bicycle that closely meet the needs of its wealthy commuter target market

Evaluating focus strategies

Strengths

Weaknesses

  • Focusing on a specific niche allows a business to tailor its products or services to a particular audience

  • Can be highly profitable as low competition allows high prices to be charged

  • Serving a niche market well can lead to strong customer loyalty

  • Focusing on a small segment limits sales potential

  • If the niche market shrinks or changes, the business may struggle to break even

  • Larger competitors might enter the niche market and outcompete the focused business.

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    Author
    Reviewer
    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Reviewer: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.