Okay, what are the strategic orientations that exist for product, service or idea towards
the market?
Well the most famous grouping of strategic orientations is Porter’s Generic Strategies.
And it generally broke down the strategic approaches in to four categories, really three
categories with one category being again subdivided.
But first is cost leadership that the product, service or idea has something about it, something
about the operational elements or something about some level of protection it has that
allows it to be the low cost provider.
Now don’t think of the low cost provider is being the low cost to the customer, think
about it as it cost less for your business to deliver that value proposition to the customer,
something about your operations is cheaper, okay, so you can create that or – excuse
me create and then transmit that same value or greater value at a lower cost to you.
It allows for a higher profit margin and optimally allows for the strategic option of being the
low cost provider to the customer as well.
Okay, you can think of the example as Walmart.
Walmart are first, or generally the lowest prices towards a customer but they're able
to do so because they have a low cost advantage, they have the lowest cost supply chain out
there.
So, that gives them strategic advantage and that is their approach and then they were
able to capture a large market share by delivering low cost to the customer by passing that on.
Not all businesses that have that low cost structure will pass it on.
They would simply capitalize on that higher profit margin, especially businesses that
in someway have some market power such as drug companies or things like that that or
companies like that have some level of intellectual property protection that gives them a stated
period of time to recoup value when they have very few competitors they can have a low production
cost and still take advantage of that high profit margin by setting a higher price.
Another strategy or the second major strategy grouping is differentiation.
And differentiation is any orientation that sets your product or service apart from others
based on any number of factors.
How it's used, it's attractiveness, it's brand image, it's convenience, it's easy storage,
it's ease of use.
It's anything, any factor that you can think that would make a product better than others
or some attribute that you would attribute that product say, a warranty, free services,
things like that that come with the product or service that give it some advantage over
a similar product or service.
And thereby that is differentiated in thereby gives it some level of advantage over the
others.
Now, differentiation maybe copyable or maybe subject to imitation by the competitors or
substitute products or not, the purest forms of strategic advantage are going to be types
of advantages that are very difficult too or in some cases cannot legally be copied.
Okay, so you evaluate this and say what is it about my business that I can do differently
than someone else than another competitor or substitute product that provides again
that value proposition to the customer in a different way that is going to make that
customer purchase my product versus another.
Be careful with mixing strategies trying to be say, the lowest price to consumers and
the highest quality.
Generally if market forces are in place this is very, very difficult to do and it can cause
a lack of focus for a given brand or product so in that way understanding what it is about
your product that you can differentiate in order to make it competitive in a field that
while you may not currently have competitors, could or will have competitors in the future.
And then the last strategic grouping is a focus group or niche markets that is you're
orienting your product or service towards a customer segment or – or target group
that has not generally been addressed by the existing market players, the existing competitors
in the market have largely overlooked this grouping for any number of reasons or just
has not been beneficial for them to address that market.
And then your product or service or business can address these customers that you can deliver
a value proposition to them that otherwise – that otherwise is not being delivered
by the current competitors in the field.
And within that niche market you can further say we're going to be the cost leader or have
some level of cost advantage in there or we're going to in someway differentiate our product
from the existing products that are targeting this market.
And in that way you find a segment or niche for your product or service business that
allows it to be competitive in the market.
So, just as a recap these are your overarching strategic orientations cost differentiation
or focus that is in niche or target markets.
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