This question contains two parts; be sure to answer both. First, explain the three key principles that underlie strategic positioning. Next, explain whether strategic management works as well for small companies as it does for large organizations, providing an example of how a small company can offer personal connections as a source of competitive advantage.

Question

What will be an ideal response?

Answer 1

Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. Three key principles underlie strategic positioning:

1. Strategy is the creation of a unique and valuable position. This position emerges from three possible sources: (a) few needs, many customers; (b) broad needs, few customers; or (c) broad needs, many customers.

2. Strategy requires trade-offs in competing. Some strategies are incompatible. Thus, a company has to choose not only what strategy to follow but also what strategy not to follow.

3. Strategy involves creating a "fit" among activities." "Fit" has to do with the ways a company's activities interact and reinforce one another. The most effective companies have good or excellent fit among their activities.

One analysis found that companies with fewer than 100 employees could benefit from strategic planning, if only slightly. Even so, the researchers concluded, "it may be that the small improvement in performance is not worth the effort involved in strategic planning unless a firm is in a very competitive industry where small differences in performance may affect the firm's survival potential." Example: Whereas the strategy of big e-commerce companies is to build a device, sell it to consumers, sell content to play on it, and sell advertising space, the strategy of small retailers—like Hello Hello Books in Maine—is to discourage price comparisons (as in creating "buy it where you try it" campaigns or refusing to carry popular items carried by big retailers), offer freebies, and attempt to establish a personal or emotional connection with customers. They also try to exploit the sympathies of shoppers to "support the little guy."