Lesson 7 of 7 · 15 min
Competitive strategy and positioning
A company's strategy is judged by whether it defends against the five forces, fits the external influences and can be executed with the company's resources; most successful strategies are variants of cost leadership, differentiation or focus.
In short
- Every company has a strategy, intentional (planned, measured, refined) or unintentional (teams following habit or norms); unintentional strategies are rarely best.
- A strategy's effectiveness shows up only in hindsight (economic profit). Looking forward, ask three questions: does it defend against the five forces, does it fit the PESTLE influences, and does the company have the resources and capabilities to execute it?
- Cost leadership: scale, cheap inputs, cost discipline, aggressive pricing for volume, low-cost distribution, economies of scope. Suits capital-intensive industries with price-conscious customers who do not notice product differences.
- Differentiation: brand, service, quality, unique features, IP protection, premium pricing. Suits customers who value distinctiveness more than price and innovative industries.
- Focus: serve a particular group (customer, product or geography) closely, using cost and/or differentiation elements; works where others find that group hard to serve.
- Being stuck in the middle (none of the three) is a poor position.
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