Knowledge - based Positioning


Himanshu Vyas
Batch: 2009-11
Aravali Institute of Management

In order to gain competitive advantage over other firm's organizations position themselves differently in the market over other operating firms in the same market. Michel Porter (1985) evolved a theory of generic competitive advantage options available namely:

  • Cost Leadership
  • Differentiation
  • Focused cost leadership
  • Focused differentiation

Cost leadership is related with the internal aspects of the competition. To gain competitive advantage over its competitors, companies provide their products and offerings at the lower cost. It is not only related to the offering of a product or a service, it is also related to lower  input costs, lower production cost, lower delivery cost.

Focused cost leadership exploits the same position as cost leadership but it is proposed only for the niche segment of the market. Porter also proposed that cost leadership and focused cost leadership represents the 'low scale advantage' because company advantage is eroded by the lower cost and the new competitor who has entered into the market and providing the same products and servicing at lower price.

Differentiation is for the superior performance of the company Porter argues this as a higher scale advantage because of the two reasons first is that producer can charge a premium price for his product and second is that for competitors who are less in threat, they will require to produce a higher performance specification product.

Focused differentiation is for the specialist firms who are based on the platform of higher performance.

An alternative perspective to this low versus high scale advantage is level of knowledge demanded to a selected market position. Generally low cost provider strategies do not require knowledge to exploit them wherein in high scale advantage where the specialist knowledge is required to create differentiation. It requires knowledge so that it can create uniqueness and differentiate your product from the other competitors.

Gravin (1987) has given seven different dimensions namely:

  • Knowledge requires to offer different features
  • Better actual performance
  • Great conformance to customers
  • Better durability
  • Higher reliability
  • Better design
  • Superior style

In addition to physical product, organizations also exploit their knowledge about the utilization of the product by developing superior knowledge management capabilities that provide offering the outstanding services like delivery, order processing, installation, repairing, maintenance, customer training and post purchase upgrades.

In porter's model there is also a risk that user not knowingly can choose any of the above mentioned four options and there is also uncertainty.  To overcome this many western countries adopted customized approach of leadership and differentiation in addition to the porter's generic competitive model this then increased the competitive model options from four to twelve and thus lots of benefits were available. We can see some of the examples in cars, laptops (e.g. Dell) etc. they provide customized approach to their customers and the benefit is that customer can use his own choice according to his own needs and demands. Thus we can say that this approach helps marketer to position product and services at their best.

                                                 Figure: Strategic Options Matrix

Himanshu Vyas
Batch: 2009-11
Aravali Institute of Management

Source: E-mail November 5, 2010




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