Strategic clock is a strategic management tool by which it allows us to identify and situate our company in a certain strategic position as well as to indicate different strategies that allow us to reach competitive positions superior to the companies that compete within the sector.
The strategic clock was presented by Cliff Bowman and David Faulkner in his book "The essence of competitive strategy", which showed 5 competitive strategies against the 2 basic competitive strategies presented by Michael Porter. These 5 competitive strategies are based on Bowman's matrix-client model. The model assumes that customers base their purchase choices on 2 criteria:
Price that customers are willing to pay
Added value that is perceived by the customers of a certain product / service
The strategic clock is based on the principle by which companies achieve competitive advantages by providing more efficiently and / or better what their customers need or want, so the strategic clock is positioned from the point of view of the client taking into account 2 variables:
Price (horizontal axis)
Perceived value of the product / service (vertical axis)
From the graphical representation, each quarter of a portion is divided into 2, resulting in a total of 8 possible positions that encompass the 5 basic competitive strategies enunciated by this model:
Strategy based on price.
Focused differentiation strategy.
Strategy destined to failure.
The strategies based on price include positions 1 and 2 within the strategic clock, in both positions the price of the product / service is the axis and key of the competitive strategy.
In position 1 the company offers cheap products with zero value perceived by the customer. In this strategic position, the company offers its products to an audience that is highly sensitive to the variation in prices because there are no differences between the products of the competitors or because customers have very tight budgets as well as poor brand loyalty.
Position 2 seeks to reduce to the maximum the price of the product of the rest of the competitors of the market, perceiving by the clients certain added value. The key to this strategic position is to develop methods and processes that reduce the overall cost of the product / service to the maximum, making them leaders in costs compared to their competitors, allowing them to lower the price.
Low cost airlines such as Ryanair or Easyjet, the clothing sales company Primark, H&M or the Dacia automotive brand are examples among others of companies whose competitive strategies are based on price.
The hybrid strategy refers to position 3 of the strategic clock. In this strategic position, customers acquire products / services with a high perceived value at a relatively low price.
Under the hybrid strategy, companies work on cost reduction programs to achieve cost leadership as well as programs that offer high perceived value products to their customers. This type of strategy is also used by companies that want to enter a certain sector offering low prices to high quality products.
The multinational IKEA is a clear example of companies based on hybrid strategy, due that they offer economic products with a high value in design and functionality perceived by customers.
The differentiation strategy refers to position 4 of the strategic clock. In this strategic position companies offer better products / services and with a price similar compare with the competitors.
The client must perceive an added value attending to what customers appreciate and differentiating themselves from the rest of the products / services offered by their competitors.
An example of companies based on differentiation strategies are the automobile brands such as Toyota or Kia that offer cheaper cars and at the same time with higher standards of reliability and quality than other companies in the automotive sector.
The strategy of focused differentiation refers to position 5 of the strategic clock. In this strategic position, companies offer products / services with a high added value perceived by customers in exchange for high acquisition prices.
The companies that offer Premium products / services as well as companies dedicated to the luxury sector have the strategy of differentiation focused as the axis of the operation of the company.
Companies like Ferrari, Rolex, Hermes, Cartier, Mont Blanc, Mercedes are examples among others.
Finally, positions 6, 7 and 8 of the strategy clock include strategies with high prices and with few or no value perceptions from their clients.
This type of strategy usually occurs in the case of monopolies, oligopolies and in situations in which the customer only has an option to choose from, such as the price-quality ratio of a coffee or soft drink in a plane in mid-flight, the price of a low quality meal in a road service area away from the following towns ...
These types of strategies are destined to fail because if they are not able to maintain the monopoly and high entry barriers, other companies will offer the same product at a lower price, taking the dissatisfied and prisoners customers of the first companies.
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