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Bowman’s Strategic Clock - Amazon S3 · What you need to know • How to compete in terms of...
Transcript of Bowman’s Strategic Clock - Amazon S3 · What you need to know • How to compete in terms of...
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Bowman’sStrategicClock
3.8ChoosingStrategicDirection
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What you need to know
• Howtocompeteintermsofbenefitsandprice
• Strategicpositioningtoinclude:• Bowman’sStrategicClock
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Conceptlinks
BowmanStrategyClock
Marketpositioning
PerceivedValue
Price Competitiveadvantage
Differentiation
Addingvalue
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TheChallengeofBusinessStrategy
Tofindawayofachievingasustainablecompetitiveadvantageovertheothercompetingproductsand
firmsinamarket
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WhatisaCompetitiveAdvantage?
Anadvantageovercompetitorsgainedbyofferingconsumers
greatervalue,eitherbymeansoflowerpricesorbyproviding
greaterbenefitsandservicethatjustifieshigherprices
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WhatisBowman’sStrategicClock?
Bowman’sStrategicClockisamodelthatexplorestheoptionsfor strategicpositioning – i.e.howaproductshouldbepositioned to
giveitthemostcompetitivepositioninthemarket.
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TwoDimensionsDetermineTheStrategicOptionsAroundtheClockFace
PRICE PERCEIVEDVALUE
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PositionsAroundtheClock
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LowPriceandLowValueAdded(Position1)
Notaverycompetitivepositionforabusiness.Theproductisnotdifferentiatedandthecustomerperceivesverylittlevalue,despite
alowprice.Thisisabargainbasementstrategy.Theonlywaytoremaincompetitiveistobeas“cheapaschips”andhopethatno-oneelseisabletoundercutyou.
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LowPrice(Position2)
Businessespositioningthemselvesherelooktobethelow-costleaders
inamarket.Astrategyofcostminimisationisrequiredforthistobesuccessful.Profitmarginson
eachproductarelow,butthehighvolumeofoutputcanstillgeneratehighoverallprofits.Competitionisusuallyintense– ofteninvolving
pricewars.
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Hybrid(Position3)
Involvessomeelementoflowprice(relativetothecompetition),butalsosomeproductdifferentiation.Theaimistopersuadeconsumersthatthereis
goodaddedvaluethroughthecombinationofareasonablepriceandacceptableproductdifferentiation.
Thiscanbeaveryeffectivepositioningstrategy,particularlyiftheaddedvalue
involvedisofferedconsistently.
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Differentiation(Position4)
Adifferentiationstrategyaimstooffercustomersthehighestlevelof
perceivedaddedvalue.Brandingplaysakeyroleinthisstrategy,asdoes
productquality.Ahighqualityproductwithstrongbrandawarenessandloyaltyisperhapsbest-placedtoachievetherelativelypricesandadded-valuethatadifferentiation
strategyrequires.
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FocusedDifferentiation(Position5)
Thisstrategyaimstopositionaproductatthehighestpricelevels,wherecustomers
buytheproductbecauseofthehighperceivedvalue.Thisthepositioning
strategyadoptedbyluxurybrands,whoaimtoachievepremiumpricesbyhighlytargetedsegmentation,promotionand
distribution.Donesuccessfully,thisstrategycanleadtoveryhighprofitmargins,but
onlytheverybestproductsandbrandscansustainthestrategyinthelong-term.
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RiskyHighMargins(Position6)
Ahighriskstrategythatlikelytofail–eventually.Businesssetshighpriceswithoutofferinganythingextrain
termsofperceivedvalue.Ifcustomerscontinuetobuyatthesehighprices,the
profitscanbehigh.But,eventuallycustomerswillfindabetter-positionedproductthatoffersmoreperceived
valueforthesameorlowerprice.Otherthanintheshort-term,thisisan
uncompetitivestrategy.
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MonopolyPricing(Position7)
Wherethereisamonopolyinamarket,thereisonlyonebusinessofferingtheproduct.Themonopolistdoesn’tneedtobetooconcernedaboutwhatvaluethecustomerperceivesintheproduct– theonlychoicetheyhaveistobuyornot.Therearenoalternatives.Intheorythemonopolistcansetwhateverpricetheywish.Fortunatelymonopoliesareusuallytightlyregulatedtopreventthemfrom
settingpricesastheywish.
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LossofMarketShare(Position8)
Thispositionisarecipefordisasterinanycompetitivemarket.Settinga
middle-rangeorstandardpriceforaproductwithlowperceivedvalueisunlikelytowinovermanyconsumerswhowillhavemuchbetteroptions(e.g.highervalueforthesameprice
fromothercompetitors).
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EvaluatingStrategicPositionUsingtheBowman’sClock
Threeofthepositions(6,7and8)areuncompetitive.Thesearetheoneswherepriceisgreaterthanperceivedvalue.Providedthatthemarketisoperatingcompetitively,therewillalwaysbecompetitorsthatofferahigherperceivedvalueforthesameprice,orthesameperceivedvalueforalowerprice.
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