Market positioning and competitive advantage

In Porter’s generic strategies, which one of the following would help a business to achieve a differentiation strategy?

‘The need to continue investment is the most significant difficulty facing a business which is trying to maintain a competitive advantage.’

To what extent do you agree?

Justify your view.

OR

Read the information below and then answer the questions that follow.

Dodo

Dodo is a small, growing, low-cost airline offering flights between the UK and Europe. The airline is seeing high demand for its flights due to its competitive pricing. It is able to keep its prices low due to its low-cost business model. The business model includes:

• making effective use of its non-current assets by using quick turnaround times which allow its planes to fly more hours a day than traditional airlines

• flying to cheaper airports rather than larger, more expensive airports such as London Heathrow

• using its own website for customers to book directly, avoiding the need to pay commission to other businesses

• making food, baggage and choice of seat optional extras rather than including them in the basic product offering.

Dodo currently has around 5000 permanent staff and sees its staff as key to the quality of service that it offers. Airline staffing needs are complex with a variety of different roles required. Some roles such as pilots and aircraft engineers require significant training that can take many months to complete. In addition, many staff spend most of their working day away from the company offices. Dodo sets and regularly reviews HR objectives in relation to:

• number of employees

• employee engagement.

Measures of quality that Dodo focuses on are:

• punctuality, measured using percentage of flights on time

• customer complaints, measured by number of complaints per 1000 customers.

Analyse why Dodo sets HR objectives in relation to the number of employees and employee engagement.

Analyse how Dodo would benefit from being the best in its market for its chosen quality measures.

Using non-current assets as fully as possible is the best way to gain low-cost advantage.

To what extent is this true for all low-cost businesses?

Read the information below and then answer the questions that follow.

Soundcheck plc

Soundcheck plc offers a streaming service enabling users in more than 160 countries to play a variety of content, such as music and podcasts, on electronic devices. The company initially offered its services free to consumers and earned revenue from advertisers. An additional, paid service was introduced in 2022. Paying subscribers benefit from better quality audio, no adverts, and playlists made by celebrities. Exclusive podcast content also provides paying subscribers with an enhanced experience which justifies a paid subscription model.

Since its launch in 2006, Soundcheck plc has grown to become the market leader. It now employs nearly 4000 staff globally. A stock market flotation has funded huge investment in building a high-quality technology platform, strong brand and a skilled workforce. However, Soundcheck plc has not regularly made an operating profit. Its costs have been rising significantly in recent years and in 2023 it lost £26 million as a global economic slowdown began.

In 2023, Soundcheck plc reached an agreement with trade unions about pay rates and ways of working. The agreement guaranteed starting salaries of at least £36 000 to many staff. This is significantly higher than the industry average. However, there is a global shortage of skilled software engineers and marketing staff so labour turnover rates remain high. In addition to competition for staff, new competitors are attracted to the growing market, including large rivals who are well established in other streaming markets. Other new entrants have also targeted the ‘free’ sector of the market. Some of these rivals have a competitive advantage because they own the rights to music or other content and so have lower costs than Soundcheck plc.

When introducing its paid service, Soundcheck plc changed its positioning strategy from position 1 to position 4 on Bowman’s strategic clock.

Analyse why Soundcheck plc decided to change its positioning strategy.

Soundcheck plc has set a corporate objective to achieve an annual profit in 2024.

Analyse the difficulties Soundcheck plc may experience when attempting to turn its 2023 loss into a profit in 2024.

Soundcheck plc’s management has had good relationships with trade unions and its staff have been supportive of strategic change.

To what extent does consultation with trade unions enable all businesses to overcome resistance to strategic change?

A key feature of Sanjay’s business is differentiation provided by his innovative, speedy waffle maker.

To what extent is successful innovation essential for all businesses choosing a strategy of differentiation?

Figure 2 shows Bowman’s strategic clock.

Which positions did Bowman consider to be undesirable strategies?

Analyse why a large business might choose to introduce a product into a niche market.

A business is changing from a strategic position of low cost to one of differentiation.

Will this lead to the business spending more on marketing and less on the operations function? Justify your view.