Strategic Positioning and Service
Strategy
Chapter 2
2. Strategic Positioning 1
1. A Strategic Hierarchy and
Strategic Consistency
Strategic Positioning
⚫ Strategic Positioning
•Sets “target market”
◦ Sets out a corporate-level •Five-forces or core competence
set of objectives, goals, •Decisions: Mission, high-level goals, high-level objectives
missions, etc.
◦ Determines way of
competition, market
positioning
⚫ Service Strategy
◦ Refines corporate level Service Strategy
strategy into a set of •Sets “service concept,” “operating system” and “service delivery
specific operational system”
objectives, goals and •Competitive priorities, order winners, and qualifiers
missions •Decisions: Location, facility size, type and number, capacity,
inventory, etc.
◦ Devises clear operational
plan
⚫ Tactical Execution
◦ Executes service strategy
◦ Specific decisions are made Tactical Execution
Note: All these •Represents managing day-to-day service operations
•Decisions: Supplier Selection, order size and timing, staffing levels,
hierarchies should be etc.
consistent and support
one another The Strategic Planning process for Services
2. Strategic Positioning 2
a. Strategic Positioning
⚫The objective is to define “the target market” the
company will serve, as well as to define the
organization’s strategy, including its mission and
objectives
⚫Two ways of thinking
◦ Industry and Competitor Analysis Approach to
Strategy
● Michael Porter’s work on Generic Strategies
● Starts with external conditions (OT) in order to set internal
operations (SW)
◦ Core Competency Approach to Strategy
● C. K. Prahalad and Gary Hamel’s work
● Starts with internal competencies (SW) in order to set
external operations (OT)
2. Strategic Positioning 3
Industry and Competitor Analysis
Approach to Strategy
⚫Five forces
⚫ Three generic strategy
◦ Cost leadership
◦ Differentiation
◦ Focus
2. Strategic Positioning 4
Industry/Competitor Analysis
Approach to Strategic Consistency
External Internal
Step 1: Five forces Step 2: Design the
Strategy analysis operating system
Step 3a: Manage Step 3b: Manage
interaction with external internal operations to
Execution entities like customers meet objectives of
and suppliers operating system
design
2. Strategic Positioning 5
Core Competency Approach to
Strategy
⚫Process
◦ Explore the internal resources of a company
◦ Find markets and opportunities to exploit it
⚫A core competency must meet three tests
◦ Provide access to a wide array of potential
markets
◦ Contribute to the customers’ perceptions of the
benefits
◦ Be difficult for other competitors to imitate
2. Strategic Positioning 6
Core Competency Approach to
Strategy
External Internal
Step 3: Determine Step 2: Determine core
Strategy markets to be served by competence of the
the core competence corporation
Step 4a: Manage Step 1: Scan operating
interaction with external system for potential
Execution entities like suppliers competencies
Step 4b: Manage
internal operations to
meet objectives of
operating system design
2. Strategic Positioning 7
b. Service Strategy
⚫It involves setting
◦ Service concept
◦ Operating strategy
◦ Service delivery system
⚫Process
◦ Find competitive priorities, order winners and
order qualifiers
◦ Set service concept and operating strategy
◦ Set service delivery system
2. Strategic Positioning 8
Service Concept
⚫ Describes the reason that the customer would choose one
service over a competitor’s
⚫ Set of competitive priorities that the target market values
⚫ Focus on the results that must be produced for customer
2. Strategic Positioning 9
Competitive Priorities, Order
Winners, and Order Qualifiers
⚫ The set of operationally oriented dimensions that companies can
compete on are called competitive priorities
◦ Five class: cost, quality, time, service, and flexibility
◦ Sixth is natural environment
⚫ Order qualifiers: To be taken seriously a certain level must be
attained on the competitive dimension, as defined by other market
players.
● Examples are cleanliness for a fast food restaurant or safe aircraft for an airline.
⚫ Order Winners: The competitive dimension used to make the final
choice among competitors.
● Example is price.
⚫ Order Loser: Failure to deliver at or above the expected level for a
competitive dimension.
◦ Examples are failure to repair auto (dependability), rude treatment
(personalization) or late delivery of package (speed).
2. Strategic Positioning 10
Service Purchase Decision
⚫ Service Qualifier: Just to be
considered.
⚫ Service Winner: Used to make the
final choice.
⚫ Service Loser: Failure to deliver.
Operating Strategy
⚫details how the different business
functions(marketing, finance, operations) will
support the service concept
⚫defines the measures and systems that will be
used to control the cost and quality of the service
◦ How should the firm be structured to produce the
service concept?
◦ How should resources be allocated?
Avoid Mismatch
◦ Mismatch is emphasizing a competitive priority in the
operating system that is not valued by the customers as
part of the service concept.
2. Strategic Positioning 12
Service Delivery System
◦ Designing physical and procedural assets that are
needed to execute the service concept
◦ Concept
● Job responsibilities
● Technology requirements
● Equipment requirements
● Facility layout
● Management policies and procedures
● Service process designs
● Operating capacity
● Quality management systems
2. Strategic Positioning 13
c. Tactical Execution
⚫ Managing day-to-day activities to satisfy target market
⚫ It includes task like
◦ Managing staffing levels
◦ Managing quality systems for continually improve efficiency and
effectiveness of delivery system
◦ Determining what items to stock in inventory and at what levels, etc.
⚫ Impact of tactical execution should not be taken for granted
⚫ Develop appropriate feedback loops that make sure that a
company is not very efficient at delivering a service no one
wants
2. Strategic Positioning 14
2. Strategically Planning for Service
Growth
● Multi-site service life cycle
● Industry roll ups
● Franchising
2. Strategic Positioning 15
Multi-site Service Life Cycle
Multi-site Service Firm Life Cycle
Revenue
Entrepreneurial Multi-site Growth Maturity Decline/
Rationalizatio Regeneration
n Positioning
Chapter 2 - Strategic
2. Strategic Positioning 16
Managing Growth – Skill Sets
Entrepreneuria Multi-site Growth Maturity Decline/
l rationalization Regeneration
•Charismatic •Selection of •Operations •Maintaining •Revising
leader dominant and design are market service
•Local paradigm for already set position and concept and
marketing and marketing, awareness implementing
PR operations and •Sell concept and keeping revisions over
HR to consumer concept “fresh” a large
•Innovation and network
and managerial •Maintaining
development •Standardizati audiences standards and
of service on of operating •Requires
strategy procedures control charismatic
•Wider scale leader
•Employees advertising •Keeping
typically employees
underpaid with motivated
little stability
2. Strategic Positioning 17
Industry Roll-ups
⚫Relatively recent strategy
⚫Idea
⚫ Increase market coverage by buying up competitors in a
fragmented industry
⚫Scope
⚫ Small, privately owned “mom and pop” firm trades its
ownership of a single unit for shares of stock in a firm
encompassing many units in same industry
⚫Advantage
⚫ Once competing firms share facilities, supplies, marketing
expenses and operational expertise
⚫ Retaining local connections while achieving economy of
scale
2. Strategic Positioning 18
Characteristics of Industries to
Target for Roll-ups
⚫Favorable market conditions, not just
fragmented
⚫Enough competitors that roll-up partners can
be selectively chosen
⚫Conviction that a real business can be built
2. Strategic Positioning 19
Franchising
⚫A strategy that can be used to facilitate multi-site
growth
⚫Unlike roll-ups franchising increases market
coverage by selling the right to operate to
someone else
◦ Franchisees pay an up-front fee and a
percentage of gross revenue
◦ Franchiser help set up, provide equipment and
production method, and train the new owner
⚫Franchising provides a way for a service company
to grow more rapidly than it could if it had to fund
the expansion out of its its own cash flow
2. Strategic Positioning 20
Challenges of Franchising
⚫Providing a continuing reason why a franchisee should
give certain percentage of revenue
⚫Channel conflict
⚫For example, retail outlets may oppose the
introduction of on-line channels
⚫Operational control issues
⚫Franchisees may oppose changes initiated at the
firm level
⚫Franchisers cannot dictate retail prices or require
that franchisees purchase supplies from the
franchiser
⚫Franchisers providing on-going value
2. Strategic Positioning 21
Advantages Disadvantages
⚫ Self financing ⚫ Limits income of successful
⚫ Can finance rapid growth concept
⚫ Less risky to franchiser ⚫ Shifts profits to franchisee
⚫ Entrepreneurial spirit of ⚫ Control more diffficult
franchisees ⚫ Operational changes more
⚫ Career path for stores difficult
owners not needed ⚫ Ability to influence
⚫ Revenue maximizing behavior curtailed
incentives naturally aligned ⚫ Profit maximizing
⚫ Ability to use national incentives not aligned
marketing media ⚫ Can limit marketing
channels
⚫ Special events more
difficult
2. Strategic Positioning 22
