Focusing on Cost, Adding Benefits

The cost of providing the extras must be less than the price premium they are prepared to pay.

Cost-leadership strategy positions an organization as the lowest-cost producer in a particular industry. Everything about the firm is designed to be low cost--labor, premises, materials, capital, and so on.

The firms products or services are comparable in quality and price to the rest of the market: profit comes from the difference between the low costs and the market price. A subdivision of the cost-leadership strategy is the “no-frills” strategy, where low-cost production is still sought but the products or services are acknowledged to be of more basic quality.

Differentiation strategy is a near opposite approach to cost leadership. A firm employing this strategy adds additional features to its products or services to make them above average in the market.

For example, where a no-frills airline may offer little airport support (or make passengers pay extra for it), a differentiating airline may include a limo to the airport and a private lounge in the price of its tickets. Key factors for success with a differentiation strategy are that customers must desire the extra features and be willing to pay a price premium for them. The cost of providing the extras must be less than the price premium they are prepared to pay.

ACTION POINT: Identify the features and benefits that customers are willing to pay extra for.

Three Generic Strategies

Each requires a particular philosophical approach to be applied throughout the whole organization.

A business strategy is unique to the organization and environment in which it operates. However, research conducted by Professor Michael Porter recognizes three generic organizational strategies that businesses and use to gain and maintain competitive advantage within a market: cost leadership, differentiation, and focus. Each requires a particular philosophical approach to be applied throughout the whole organization.

You an choose to pursue one of the three strategies in its pure form or to devise a hybrid. If you do the latter, monitor the strategy regularly to ensure its clarity and integrity -- a hybrid can easily drift into compromise.

ACTION POINT: Know your strategy and regularly monitor it for clarity to prevent drift.

Assessing Positions

position brands on a scale from low to high quality and price

A basic way to look at strategic positioning within a market is to position brands on a scale from low to high quality and price. The example below maps out how a number of car brands might position themselves in a typical national market. Each has chosen to focus on particular market segments, and so reduce the number of competitors they have. Brand C, for example sells budget-range cars at the lower end of the price scale and so avoids competition with brands that are targeting customers with more money to spend.

STRATEGIC POSITION OF CAR BRANDS WITHIN A MARKET

• Brand A - $ Budget to $$Mid Range
• Brand B - $$Mid Range to $$$Executive
• Brand C - $ Budget
• Brand D - $Budget to $$Mid Range
• Brand E - $$$Executive to $$$$Luxury
• Brand F - $Budget to $$Mid Range
• Brand G - $$Mid Range to Executive
• Brand H - $$$$Luxury

ACTION POINT: Identify your target segment and know that of your competitors.

Positioning Yourself

you can reduce the destructive forces of competition.

The two coffee shops could avoid competition by targeting different kinds of customers rather than fighting over the same ones. One could choose to supply lower-quality take-out coffee that would appeal to those on a budget, while the other could provide more up market coffees and pastries in a stylish cafe to appeal to those with more income.

In this way, by actively targeting different customers to your competitors and choosing to serve only one market segment, you can reduce the destructive forces of competition. If you are successful and develop a dominant position in your chosen market segment, competitors may be intimidated and look for their own segment to move into.

ACTION POINT: Position your self to develop dominance in your market.

Gift of Wisdom: Centering Prayer

O taste and see that the Lord is good... Psalm 34:8

Is it really possible to taste God? The answer is yes, but we cannot bright it about by our own efforts. We can only prepare ourselves for it by reducing the obvious obstacles we can perceive and by allowing the action of divine love to purify our unconscious motivation. The Gift of Wisdom has a very important place in Centering Prayer because it is this gift that causes the prayer at times to be full of insights, delightful, and profoundly silent -- a silence that can almost be tasted or heard. The Gift of Wisdom communicates the mystery of God's presence as a personal experience. It brings to an end any doubts about God's love for us that we might have brought with us from early childhood, such as feelings of rejections or lack of self-worth. There is not greater affirmation of our goodness than to be affirmed by the Divine Presence.

You have taught me the way of life, you will fill me with joy in your presence. Acts 2:28