Please enable JavaScript.
Coggle requires JavaScript to display documents.
MAF651 Strategic positioning (Porters's 5 Forces (Bargaining power of…
MAF651 Strategic positioning
Porters's 5 Forces
Bargaining power of suppliers
When comes to bargaining power of supplies, we need to purchase semi product from supplier in order to create our own product and there is always various choices of suppliers to deal with. As a buyer, we preferred to purchase a product which offer a cheaper price with the quality that we want.
Substitute of products
The threat of substitution in an industry affects the competitive environment for the firms in that industry and influences those firms’ ability to achieve profitability. The availability of a substitution threat effects the profitability of an industry because consumers can choose to purchase the substitute instead of the industry’s product. The availability of close substitute products can make an industry more competitive and decrease profit potential for the firms in the industry.
Bargaining power of buyers
The last forces to focus is bargaining power of buyer. This concern on our customer as a buyer in the market. If we offer certain price that do not meet the criteria of customer and has less power to the buyers, then the buyer can choose to purchase the same product from other competitors. However, if our product is really special and exclusive than the buyer has lower power at that point. If all the forces are developed strongly between our business and competitors, then the market we are in is less attractive.
Industry rivalry
Focusing on rivalry among existing competitors, all the competitors including ourselves focuses on this middle section of the model. The rivalry of this competitors are being influenced by the four forces around them, each of this competitors has to deal with certain power which give the rivalry a higher attention.
Threats to new entrants
Every business has an entry threat who wants to enter the market with the same market we are in. As an example, other competitor from China enter the same market to sell their product. The product may be similar to the product that we are sell so the threat existed here.
Objectives of strategic positionig
The first strategic positioning objective
is changing environment and systematic realization of positioning. When there is changes in the environment in the industry, the organisation have to react to the changes and identify whether their current strategy still relevant to be used to face the changes or not. A necessary change on the outdated strategy and implementation of new planning should be considered in an organisation for them to be remain in the same level with competitors in the industry.
Next is competitive pressure.
Competitive pressure can be defined in term of its effect on an organization’s incentives to undertake product and process innovations. An organization usually face two types of competitive pressure: pressure for cost reduction or pressure to be locally responsive. Pressure for cost reduction require the firm to minimize its cost per unit while pressure to be locally responsive arise from differences in customer preferences and taste and differences in traditional practices and infrastructure.
Lastly is to
create competitive advantage.
Competitive advantage is an advantage over competitors gained by offering greater value, either by offering lower price or by providing greater benefits or services that justify the higher price. This condition allows company to generate more sales or corporate margin compare to its competitors. Competitive advantage can be achieve when organisation implement a strategy that are unable to imitate or duplicate by competitor
Strategy
cost leadership strategy
Overview of cost leadership strategy
Cost leadership is a strategy that focuses on creating lowest cost by manipulating production cost of the products or services and target on the broad market with large demand. Company will apply this strategy in 2 ways; by charging lower prices to increase market share or by reducing cost to increase their profit margin. Usually the company will only set the price after considering all costs related such as the production cost and overhead cost to ensure the profitable sustenance of the business. After doing so, the company will be targeting on a broad market to fulfil the customer’s needs and demands on their services or product by offering the lowest possible price compared to their competitors. Cost leadership strategy will benefits businesses is many ways.
Benefits
is it will help businesses in increasing their efficiency by reducing the cost related in production of goods or services supplied. This can be done by updating and improving the technology used in producing the goods. Even though this will involve upfront cost to change the technology used in production of goods, this new technology will help the businesses to stay ahead of their competition. Therefore, by simplifying the production process using high technology and state processes can lead to lower cost and higher profitability in long term planning.
Barriers
Not only that, this strategy may also create barriers to new entry in the market. This is because the existence of a cost leader in the market tends to discourage firms from joining the 5 industry, as new firm would find it difficult to attract buyers by undercutting cost leader’s prices. In spite of the benefits mentioned above, there is also few disadvantages of cost leadership strategy. First, the customer’s might have bad perception on the quality of the products provided when the firm is selling at low prices. This is because the firm might use cheap and low quality raw materials in producing the goods in order to cut the production cost. Customer might also be uninterested to buy the goods provided even though it is offered at such low prices because of their loyalty on their favourite brands. This shows that the price offered is not the main concerns of some customers as they appear to be willing to pay a little extra to enjoy the brand of their choice.
Differentiation strategy
Benefits
First, this strategy help to reduce competitive rivalry between the similar products offered. Customer’s loyalty on their favourite brand will act as a safeguard against competitors and they are also relatively price insensitive. This can be seen when big brands release their new products and it can be out of stock in a few hours only. Customer are also willing to pay extra as long as they get their favourite brands’ product. Along with that, the bargaining power of supplies will also increase because there are only few firms dominate the industry and no competition from substitute products.
Barriers
Even so, there is disadvantage that the firm might need to overcome when applying this strategy in the business such as the potential of their unique products being imitate by the competitor at a lower price. When variety of imitation products are being offered in the market 6 to fulfil the high demands from customer, firm can lose their market share. This is because customers might perceive that the products being offered are in same quality compared to the authentic products offered and might not interested to purchase directly with the firm that provide the products. Next, over differentiation can also reduce the profit margin for the firm because the operation costs can be costly. Even though the costs can be covered by the premium prices paid by the customer, there is also a possibility that customers might forego the additional features because they refuse to pay more on products that have no added value for them.
a strategy that focus in providing product or services with unique characteristic in comparison with the competitor’s products to reach a broad market with high demand. Firm will also focuses on obtaining the market research data to understand the customer’s needs and identify the competitors’ position to fulfill what the market is expecting. Differentiation strategy is normally have a high-cost strategy since providing a distinct quality might cause the company to incur in high research and development costs and also the new elements included in the product or service might increase the final cost of production.
Focus strategy
Benefits
Company can benefits in many ways when they applying this strategy in their businesses such as it helps to improve the pricing structure for the business. This is because the firm can produce products at lower cost by focus on targeting products and offers best price to their customer. In addition, company can use this strategy to provide a high quality products because customers have desire to have the best products available when having their needs met. They will be willing to pay more on products that interest them the most thus increase the profit margin of the company.
Barriers
There is risk of applying focused strategy based on either low-cost or differentiation where there is a potential for the preference and needs in the niche market to be shift over time towards the products or services provided. It can also limit the future growth of the business because the future expansion may be difficult for the company. The company are required to repeat the processes of focus strategy to develop new opportunities since what has been developed is already specific to the demographic.
Focus strategy is a kind of marketing strategy where a company concentrates all its resources specifically on expanding or entering a specific sector or market segment. Focus strategy concerns itself with the identification of a niche-market and already has products or services that can fulfil the specified specifications in a competitive market. Company can apply this strategy in 2 ways, by focus on low cost strategy within market or focus in pursuing strategy differentiation within focus market. This strategy will help company to focus on the areas that the company wants to excel. This strategy is targeted to those who have demands on unique products at low cost and allows the company to compete against the cost leader in the niche market that have cost advantage.
Definition
Strategic position concerns with the way in which an organisation as a whole distinguishes itself in a valuable way from its competitors and delivers value to specific customer segments. In other words, strategic positioning is when a company choose which area they want to excel and specialize to compete in the market.
Strategic positioning concerns with the impacts from three aspects; external environment, internal resources and competences and stakeholder’s influences and expectations.
A consideration of the environment, strategic capability, the expectation and the objectives within the cultural and political framework of the organisation provides a basis for understanding the strategic position of an organisation.