Challenge of Business Strategy
- To find a way of achieving a sustainable competitive advantage over the other competing products and firms in a market
A competitive advantage
- An advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices
Low price
- Low profit margins
- Companies such as Aldi
- Very intense (price wars)
Low price and low value
- Not very competitive
- Very little value
Hybrid
- Some element of low price
- Some product differentiation
- Some added value and a reasonable price
Differentiation
- Offers the highest level of perceived added value
- Branding plays a key role
- Quality is very important
Focused Differentiation
- Highest price levels
- Customers buy the product because of the high perceived value
- Luxury brand
Risky High Margins
- Very high risk
- No extra in terms of perceived value
- Customers will usually find a better option eventually
- Very short term strategy
Monopoly Pricing
- Only one business offering the product
- Customers have no alternative, so pricing is easy to change for the business
- Regulated very tightly as the market position is extremely dominant
Loss of market share
- Recipe for disaster
- Middle-range or standard price for a product with a low perceived value