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


  • Some element of low price
  • Some product differentiation
  • Some added value and a reasonable price


  • 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