Strategic positioning of the company

Introduction

The strategic position tries to identify the external environment, resources, competencies and capabilities of an organization, as well as the expectations and influences of interested parties, in other words, the development of the SWOT matrix.

Strategic positioning has been established as one of the main alternatives for the performance of organizations, since in addition to allowing companies to differentiate themselves from their competitors and give added value to the product and / or service they offer, they respond to the needs of the buyers, leading not only to the satisfaction of the same, but also achieving the favorable perception of the clients, for the company, including loyalty for the product or service, which today is a great challenge, due to strong competition.

Essentially, strategic positioning seeks that in any organization, the competitive advantage is to highlight what differentiates one company from another and that makes it more attractive to the buyer. This is to innovate the product and / or service and impress the buyer, or show that standard product and / or service, but in a more attractive way. Aspects such as the design, production, sale and distribution of the good or service that the company offers must be taken into account.

To have a resounding success in strategic positioning, it is necessary to include the points mentioned above.

The development of the strategic position in the organization

The essence of strategic thinking is positioning, that is, taking a position against the market and competition. It means defining how I want to be and how I want customers, competitors and the community to perceive me.

So what is competitive strategy? “The competitive strategy consists of being different. It means deliberately choosing a different set of activities, to provide a unique mix of value ”(Porter, 1999)

For the most part, the strategic positioning of a company arises from the correct interpretation of what exactly is the need that as a company I want to fill and what the client hopes to obtain as a buyer. In the purchase there are many elements that generate value, such as: the characteristics of the product, the place where it is bought, the price, advertising, after-sales services, etc., in addition, it must be borne in mind that, although the client wants to be in charge of a superior value, the company that produces the good or service, also hopes that its product will generate value for its growth and development.

In business life there are many positioning alternatives, that is, ways of taking a position in front of customers and the market, let's mention some of them:

1. Market segmentation:

It is about defining what population is my target market, what are its characteristics and what is its quantification (size and location). There is often talk of broad or focused segmentations, depending on whether they are participating in many or a few markets.

In the case of L'oreal, and despite the diversity of brands that comprise it, we can say that they follow an analytical strategy, whose characteristics are to maintain their activity, but at the same time launch new products and position themselves in new markets. This company follows a prospective strategy, since it carries out an attractive search for new opportunities, positioning itself as a pioneer in the launch of innovative products, such as nutritional products for cosmetic purposes under the Innéow brand. (Sánchez et al, 2006)

The L'oreal Group attaches great importance to the defense of market share, since it is located in already mature markets, where it has competitive advantages based on technology and experience, but also puts its effort into opening new markets. (Sánchez et al, 2006)

2. Product differentiation:

The products for each market can have unique or exclusive characteristics (differentiated products) or, on the contrary, be generic (standard product). The choice of what type of products to manufacture will depend on the inclination of the company and the acceptance of the client, and this will also affect the characteristics of the production system.

When it comes to exclusive products, it has a connotation of greater perception of value, by fulfilling more the customer's aspirations and therefore, a higher price strategy is assumed. Generic products, on the other hand, seek to gain market share based on their efficiency and low costs, with well-made basic products, since they are presumed to go to markets that do not accept high prices.

Positioning a brand in the mind of the consumer is important. One way to do this is by selecting a brand that has a direct connotation to the benefits of the product. For example: “Nice 'n Easy” by Clairol, which carries with it a direct connotation with the benefits of simplicity and convenience. (O'Shaughnessy, 1991)

3. The depth or diversity in the relationship:

There are different value mixes, when the offer aims to satisfy different needs based on the supply of several products to the same customer or, on the contrary, they focus on a few needs with a few products. In the first case, it is a question of looking for elements of depth in the relationship and in the second, it is preferred to have more customers than more products sold, seeking diversity in the number of customers.

With a larger number of clients we can develop specific marketing programs to profitably satisfy the particular needs of a small part of our clients. Thus, we obtain a higher degree of loyalty from our customers and a higher volume of sales. (Alet, 2011)

4. The territory strategy:

It is different, in terms of perception of value and business execution, trying to position itself in a few territories, to doing so in many places, which may have different characteristics and laws.

5. After-sales and complementary services:

Similarly, there may be large differences in after-sales services (errors, guarantees, information, advice, new partners, requests, claims, etc.) and complementary services (assembly, financing, maintenance, insurance, etc.), for example, the form of selling for cash or on credit may include a different perception of value, even for the same good or service.

The after-sales service can be used as a source to obtain data such as:

Information from customers on comments and impressions of the service and suggestions to offer a better service Identify opportunities for improvement Prepare and ensure subsequent sales, as well as consolidate those made. (Badía et al, 2013)

6. The sales force and distribution channels:

Each producer must choose between marketing channels and direct sales forces or the contracting of external distribution services, or outsourcing, which will produce competitive advantages, public perceptions and differences with direct distribution or through third parties.

Regardless of what is going to be sold, the sales force will have different characteristics, it must be trained, it will have to have an incentive system according to commercial objectives, in short, there will be a whole sales force management dynamic to have consider. (Rodríguez, 2009)

7. Innovation:

There are companies that are leaders in innovation and others are followers, the advantage of the leader is undeniable, but this implies significant research and development costs. Of course, being a follower is not a bad thing, as long as a solution as good or better than the innovator is launched on the market.

Among examples of products that have been innovated we can find:

The cubes of concentrates: initially created to facilitate the preparation of soups, today they participate actively and effectively in the market of "condiments". Nylon: passed stage after stage, from its initial market (war industries: parachutes, rope high resistance, etc.) to the market of female stockings and then to the textile market in general, to end up participating in the tire industry, aeronautics, etc. Swabs: were designed for cleaning the ears of children and currently they are applied to other uses such as cosmetics, painting, equipment cleaning, etc. (MAPCAL SA, 1998)

8. The propensity or aversion to risk:

What position of aversion or propensity to take risks does each company have? There are companies whose mood is prone to risk and others have behaviors of strong aversion to risk, these are different positions that the market perceives.

9. The commercial image:

There are aggressive companies and other conservative ones. What is the image you want to convey? and there are also great differences in the perception of value for customers.

10. Technology:

Technological modernization is not only an element related to costs, efficiency and productivity, it can also be related to diversity and the establishment of hardly repeatable product characteristics.

The Granite Rock Company of Watsonville, California sold gravel and sand to local builders. Renting trucks for bulk transportation of building materials can cost $ 1 or more per minute, so time is an important factor for the company. To speed up the process, the company developed an automated charging system, much like an ATM. He accepted an ID card, downloaded the materials, and printed a receipt. It was called the GraniteXpress system and it reduced loading time from 24 minutes to 7.

When it comes to buying gravel or sand this method makes a difference. (Trout et al, 2002)

11. PEEA matrix

In addition to the alternatives mentioned, there is a matrix called PEEA, for the development of strategic positioning and evaluation of the action, the purpose of which is that, through a four-quadrant framework, it shows whether aggressive, conservative, defensive or defensive strategies are needed in the organization. competitive. The axes of the PEEA matrix are: Financial strength (FF), competitive advantage (VC), environmental stability (EA), and industry strength (FI). The two internal dimensions, FF and VC, as well as the two external, FI and EA, can be considered as the determinants of the global strategic position of an organization. To better understand it, the following figure is shown:

Strategic positioning of the company

Fig. 4. 1. 1. PEEA matrix. (Source: David, 2003)

There are numerous variables that could encompass each of the dimensions represented in the axes of the PEEA matrix, according to the organization to which it refers. The PEEA matrix should be tailored to the particular organization you are studying and preferably based on real information. (See Table 1)

Table 4.1. 1. Examples of factors that make up the axes of the PEEA matrix.

(Source: David, 2003)

Strategic positioning of the company

The directional vector associated with each profile suggests the type of strategy to follow. When the directional vector of a firm is located in the aggressive quadrant of the matrix, it means that it is in an excellent position to use internal strengths in order to: take advantage of external opportunities; overcome internal weaknesses and circumvent external threats. Hence market penetration, market development, product development, forward integration, backward integration, horizontal integration, conglomerate diversification, concentric diversification, horizontal diversification, or a combination of these it may be feasible, taking into account the specific circumstances the business faces.

The directional vector can point to the conservative quadrant or upper left quadrant of the matrix, which implies staying within the basic skills of the firm, without taking excessive risks. Conservative strategies often include market penetration, product development, and concentric diversification.

Third, the directional vector may be located in the lower left quadrant of the PEEA matrix, which suggests that defensive strategies are the most appropriate. The firm should try to improve internal weaknesses and avoid external threats. Defensive-type strategies include divestment, liquidation, and concentric diversification.

Finally, the directional vector can point to the lower right quadrant of the PEEA matrix, indicating competitive type strategies that include horizontal, forward and backward integration, market penetration, market development, product development and partnership.

Examples of strategy profiles

Fig. 4.1. 2. Examples of strategy profiles. (Source: David, 2003)

There are many alternatives to provide a unique blend of value. All of them are part of the strategic business positioning; based on the fact that "the essence of the strategy consists in choosing what should and what should not be done". (Porter, 1999)

Mission and business organization

1. Organization of the mission

The mission of the company is the starting point of its activity, whose definition has a lot to do with the business (productive and commercial activity) of the same.

The mission of the company expresses the reason for being and its primary objective. It constitutes the true declaration of corporate principles and it is advisable that it be written explicitly. Here is a list of some of the questions that every entrepreneur should ask:

Why and why is our company in the market In what type of business are we exactly Where we are today and where we could be in the medium and long term Which markets should we target for convenience What are the main products or services that we offer to our clients What other products our clients demand that we do not provide them Who are our clients, consumers, users, etc. What are the most important characteristics that define them What consumer needs do we satisfy (when, how, where) With what qualities, resources or capabilities do we achieve it? could incorporate our company that it is not doing now. What are the main concerns of the employer (Publicaciones Vértice, 2007)

Thus, the mission provides a consistent guide in making important decisions by management. The mission inspires and motivates anyone who has a deep interest in the future of the institution or company. The strategy indicates the direction in which the institution or company should move, its driving force and other factors that will help determine what future products and services should be had and which markets show the greatest potential.

Strategic planning and analysis is a process for building the future of the company and people, thinking about sustaining their competitive capacity. Therefore, strategic planning and analysis is an act of repositioning, innovation and permanent and continuous improvement. (See Fig. 4.2.1)

Strategic plan development process

4.2.1. Process of elaboration of the strategic plan (Source: Sáinz de Vicuña, 2003)

Some companies differentiate between Mission and Vision:

A Mission Statement: it is more of a statement of corporate purpose and often defines the area of activity in which it is competing A Vision Statement: it articulates what the company wants to become or where it is going, is clear, convincing, serves to unify efforts and act as a catalyst for team spirit Objectives: they are a commitment by the organization to produce specific results in a given time They are hierarchical (they constitute a pyramid with a wide time horizon) They are quantified (objective figures are formulated) They are assigned a time limit for its completion (when)

Short-term objectives: describe the immediate improvements and desired results.

Long-term goals: consider what can be done in the present to increase strength over time and improve results.

Two types of results are established:

Financial objectives: strengthen survival or credibility Strategic objectives: depend on the results obtained, preserve and improve the organization's long-term market position Values: are fundamental and are part of the essence of the company in the sense of who he is, what he represents, what he wants to achieve and how to do it. These values condition and transcend the requirement of profitability.

Values such as: providing opportunities for the personal development and fulfillment of employees, pursuing a quality product, creating a safe work environment, working to improve the environment…

Company values help build relationships with other companies, can increase employee engagement and loyalty, and can provide a foundation for differentiation.

In an unstable environment where decisions are made flexibly, values take on greater importance; it is the business idea that controls and not the authority of some managers.

2. Organization of business:

One of the most important decisions when organizing a new business is choosing the legal structure. Factors to consider when deciding on the legal structure of your business include:

Legal Restrictions Obligations Type of business operation Distribution of profits Types of Business Organizations Necessary capital Number of employees Tax advantages and disadvantages Duration of business operation

A company can take one of three forms of organization. The organization of businesses, we can define them as:

Sole proprietorship: This type of business has only one owner, who is usually the manager. This is the easiest and cheapest way to start a business. You can start your own business by finding a location and opening the doors to do business. From an accounting point of view, each sole proprietorship is distinguished from its owner: the business's accounting records do not include the owner's financial records. (Horngre, TC, 2004) Society of various types: a society is the union of two or more individuals as co-owners. (Horngre, TC, 2004)

There are different types of business partnerships: The two most common are general partnership and limited partnership. A general partnership can be formed simply by oral agreement between two or more persons, but it is highly recommended to write the agreement with an attorney. The legal expenses of a business partnership arrangement are higher than those of the own business, but lower than those of a corporation. A legalized partnership agreement can be very helpful in case of disagreement between partners. However, each partner is responsible for her actions and the actions of the other partners.

A partnership agreement must include the following:

Type of business Equity or capital invested by each partner Division of profits or losses Compensation to partners Distribution of assets upon dissolution The duration of the partnership Provision of changes or dissolution of the partnership Dispute clause Agreement Authority restrictions and disbursements Agreement in the event of death or disability

Many retail establishments and some professional organizations for lawyers, physicians, and accountants are partnerships. Although in some cases they are small or medium, in others they are gigantic, with more than 200 partners. (Horngre, TC, 2004)

Corporations: A business can be incorporated without the help of an attorney, but legal advice is highly recommended. The organization of the corporate structure is usually more complex and expensive than the other two forms of business. Control depends on owning shares. The people with the most shares are the ones who control the corporation, not everyone who owns shares. With control or possession of 51% or more of the corporate stock, one person or group of people can make decisions in the corporation. Control is exercised through regular meetings of the board of directors and annual meetings of shareholders. A record is kept to document all decisions made by the board of directors.

Small corporations with few shareholders can operate more informally, but the records cannot be bypassed. The officers of the corporation are accountable to the shareholders for their actions.

conclusion

Understanding the strategic position in the organization ranges from observing the external environment, resources, internal competencies and expectations. Every company that competes in the market must have a competitive strategy, which originates from planning, by the administrative heads of the different departments. This strategy must be implemented through proper coordination and flow of accurate and timely information.

The management of the company must be constantly monitoring the social, economic and political environment, since a timely detection will allow it to take the appropriate precautions.

It is crucial to have an adequate strategic positioning and maintain it according to the identity of the company. Organizational leaders need to understand that positioning must be strategic, reflecting the long-term effort to gain market versus rivals.

Business strategies will determine the actions to be taken to achieve the common objective. Provides the route for the execution of activities. When you do not have a defined strategy in the organization, the behavior in a company will become incoherent and disorderly, since they will not have established where they want to go.

References

Bibliography

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