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