Monday, December 16, 2013

3.2 THE STRATEGIST IN YOU: Bowman’s Strategy Clock


(SHORT NOTES FROM STRATEGY TOOLS:
Strategic Options at http://www.mindtools.com)
 

Making Sense of Eight Competitive Positions
In many open markets, most goods and services can be purchased from any number of companies, and customers have a tremendous amount of choice.  Michael Porter (1980) reduced competition down to three classic strategies:
·        Cost leadership
·        Product differentiation
·        Market segmentation
In 1996, Cliff Bowman and David Faulkner developed Bowman's Strategy Clock.  This model of corporate strategy extends Porter's three strategic positions to eight.  Bowman's Strategy Clock is a very useful model to help you understand how companies compete in the marketplace.

Bowman’s Strategy Clock
Position 1: Low Price/Low Value
·        the "bargain basement" bin
·        forced to compete in because their product lacks differentiated value
·        through cost effectively selling volume, and by continually attracting new customers
·        won't be winning any customer loyalty
·        able to sustain
·        Products are inferior
·        prices are attractive enough to convince consumers to try them once
Position 2: Low Price
·        low cost leaders
·        drive prices down to bare minimums
·        balance very low margins with very high volume
·        e.g. Walmart
Position 3: Hybrid (moderate price/moderate differentiation)
·        offer products at a low cost
·        offer products with a higher perceived value than those of other low cost competitors
·        build a reputation of offering fair prices for reasonable goods
·        quality and value is good
·        consumer is assured of reasonable prices
·        the combination builds customer loyalty
·        e.g. discount department stores
Position 4: Differentiation
·        offer their customers high perceived-value
·        sustain by:
o   increase their price and sustain themselves through higher margins
o   keep their prices low and seek greater market share
·        Branding is important
·        e.g. Nike, Reebok
Position 5: Focused Differentiation
·        designer products
·        High perceived value and high prices
·        Consumers buy based on perceived value alone
·        product does not necessarily have to have any more real value
·        perception of value is enough to charge very large premiums
·        Highly targeted markets and high margins
·        e.g. Gucci, Armani, Rolls Royce
Position 6: Increased Price/Standard Product
·        gamble and simply increase their prices without any increase to the value
·        enjoy higher profitability
·        may work in the short term
Position 7: High Price/Low Value
·        classic monopoly pricing
·        don't have to be concerned about adding value
·        customers will pay the price set
·        monopolies do not last very long
Position 8: Low Value/Standard Price
·        will lose market share
·        low value product, sell it is on price or mark it down a few cents
 
POINTS TO CONSIDER WHEN COMPETING
PRICE
VALUE
·        price leader
·        sustain a cost leader position
·        able to control your costs and sustain a good margin
·        able to exploit all the cost advantages available
·        able to balance low price against the perception of too low value
·        market segments capable of sustaining your business
·        have a well-identified target market
·        understand the values of target market
·        aware of the perceived value of competitor's products
·        areas of differentiation that can be capitalized on that others cannot easily copy
·        have alternate methods of differentiation


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