Bowman’sStrategicClock

3.8ChoosingStrategicDirection

What you need to know

• Howtocompeteintermsofbenefitsandprice

• Strategicpositioningtoinclude:• Bowman’sStrategicClock

Conceptlinks

BowmanStrategyClock

Marketpositioning

PerceivedValue

Price Competitiveadvantage

Differentiation

Addingvalue

TheChallengeofBusinessStrategy

Tofindawayofachievingasustainablecompetitiveadvantageovertheothercompetingproductsand

firmsinamarket

WhatisaCompetitiveAdvantage?

Anadvantageovercompetitorsgainedbyofferingconsumers

greatervalue,eitherbymeansoflowerpricesorbyproviding

greaterbenefitsandservicethatjustifieshigherprices

WhatisBowman’sStrategicClock?

Bowman’sStrategicClockisamodelthatexplorestheoptionsfor strategicpositioning – i.e.howaproductshouldbepositioned to

giveitthemostcompetitivepositioninthemarket.

TwoDimensionsDetermineTheStrategicOptionsAroundtheClockFace

PRICE PERCEIVEDVALUE

PositionsAroundtheClock

LowPriceandLowValueAdded(Position1)

Notaverycompetitivepositionforabusiness.Theproductisnotdifferentiatedandthecustomerperceivesverylittlevalue,despite

alowprice.Thisisabargainbasementstrategy.Theonlywaytoremaincompetitiveistobeas“cheapaschips”andhopethatno-oneelseisabletoundercutyou.

LowPrice(Position2)

Businessespositioningthemselvesherelooktobethelow-costleaders

inamarket.Astrategyofcostminimisationisrequiredforthistobesuccessful.Profitmarginson

eachproductarelow,butthehighvolumeofoutputcanstillgeneratehighoverallprofits.Competitionisusuallyintense– ofteninvolving

pricewars.

Hybrid(Position3)

Involvessomeelementoflowprice(relativetothecompetition),butalsosomeproductdifferentiation.Theaimistopersuadeconsumersthatthereis

goodaddedvaluethroughthecombinationofareasonablepriceandacceptableproductdifferentiation.

Thiscanbeaveryeffectivepositioningstrategy,particularlyiftheaddedvalue

involvedisofferedconsistently.

Differentiation(Position4)

Adifferentiationstrategyaimstooffercustomersthehighestlevelof

perceivedaddedvalue.Brandingplaysakeyroleinthisstrategy,asdoes

productquality.Ahighqualityproductwithstrongbrandawarenessandloyaltyisperhapsbest-placedtoachievetherelativelypricesandadded-valuethatadifferentiation

strategyrequires.

FocusedDifferentiation(Position5)

Thisstrategyaimstopositionaproductatthehighestpricelevels,wherecustomers

buytheproductbecauseofthehighperceivedvalue.Thisthepositioning

strategyadoptedbyluxurybrands,whoaimtoachievepremiumpricesbyhighlytargetedsegmentation,promotionand

distribution.Donesuccessfully,thisstrategycanleadtoveryhighprofitmargins,but

onlytheverybestproductsandbrandscansustainthestrategyinthelong-term.

RiskyHighMargins(Position6)

Ahighriskstrategythatlikelytofail–eventually.Businesssetshighpriceswithoutofferinganythingextrain

termsofperceivedvalue.Ifcustomerscontinuetobuyatthesehighprices,the

profitscanbehigh.But,eventuallycustomerswillfindabetter-positionedproductthatoffersmoreperceived

valueforthesameorlowerprice.Otherthanintheshort-term,thisisan

uncompetitivestrategy.

MonopolyPricing(Position7)

Wherethereisamonopolyinamarket,thereisonlyonebusinessofferingtheproduct.Themonopolistdoesn’tneedtobetooconcernedaboutwhatvaluethecustomerperceivesintheproduct– theonlychoicetheyhaveistobuyornot.Therearenoalternatives.Intheorythemonopolistcansetwhateverpricetheywish.Fortunatelymonopoliesareusuallytightlyregulatedtopreventthemfrom

settingpricesastheywish.

LossofMarketShare(Position8)

Thispositionisarecipefordisasterinanycompetitivemarket.Settinga

middle-rangeorstandardpriceforaproductwithlowperceivedvalueisunlikelytowinovermanyconsumerswhowillhavemuchbetteroptions(e.g.highervalueforthesameprice

fromothercompetitors).

EvaluatingStrategicPositionUsingtheBowman’sClock

Threeofthepositions(6,7and8)areuncompetitive.Thesearetheoneswherepriceisgreaterthanperceivedvalue.Providedthatthemarketisoperatingcompetitively,therewillalwaysbecompetitorsthatofferahigherperceivedvalueforthesameprice,orthesameperceivedvalueforalowerprice.