Business strategy is fundamentally about achieving a sustainable advantage over competitors in the marketplace. This requires deliberate choices that differentiate a company’s offerings and activities from rivals. Firms that merely imitate successful practices or focus only on efficiency often face low profits. True differentiation comes from establishing a unique strategic position, which provides the basis for superior long-term performance. Building this distinctive market position requires performing activities differently from competitors.
Defining Strategic Position and Competitive Advantage
A strategic position describes how a company chooses to compete, distinguishing itself from rivals by delivering a unique mix of value to its customers. This contrasts with operational effectiveness, which means performing the same activities better or faster than competitors. Improving operational effectiveness, such as manufacturing more efficiently, is easily imitated and rarely leads to a lasting advantage. A durable advantage results from performing different activities altogether or performing common activities in idiosyncratic ways that create a unique market proposition.
Strategic positioning requires defining a distinct value chain—the sequence of activities required to create, produce, sell, and deliver goods or services. This system must be tailored to the company’s specific market position, making the overall approach difficult to replicate. Because a strategic position stems from a unique configuration of activities, it provides a robust barrier against imitation.
Variety-Based Positioning
Variety-based positioning focuses on producing a specific subset of an industry’s products or services. This approach involves focusing on a narrow product range that serves a wide spectrum of customers, rather than trying to meet all the needs of a particular segment. The strategy is built around the intrinsic value of the offering itself. By concentrating production and delivery on a select variety, a company achieves specialized efficiencies and deeper expertise.
Jiffy Lube exemplifies this by concentrating exclusively on automotive fluid changes and basic maintenance services needed by nearly all car owners. They have developed a highly optimized process for these services. Similarly, Vanguard built its original position on offering a narrow selection of index funds that appeal to a broad base of investors. This focus allows the firm to tailor its entire operating model to the specialized requirements of producing that limited variety with maximum efficiency.
Needs-Based Positioning
Needs-based positioning focuses on serving all, or nearly all, the needs of a particular group of customers. This strategy starts with the customer segment and then tailors the entire suite of products and services to fulfill that segment’s specific requirements. The position is based on the inherent differences in the needs of various customer groups. A firm following this strategy is defined by the depth of service it provides to its chosen clientele.
The wealth management industry illustrates this with firms like Bessemer Trust, which targets individuals and families with investable assets exceeding five million dollars. This segment requires a comprehensive suite of personalized services, including estate planning and specialized investment services. Similarly, IKEA initially positioned itself to serve the needs of younger customers requiring stylish, functional, and low-cost furniture. IKEA’s entire system—from flat-pack design to in-store cafeterias—is configured to meet the comprehensive needs of this specific, budget-conscious customer segment.
Access-Based Positioning
Access-based positioning segments customers based on how they can be reached, rather than by their needs or the product variety they consume. This strategy is relevant when customer needs are largely the same, but the configuration of activities required to reach them differs significantly. Access can be defined by factors such as geography, customer scale, or specific distribution channels. This approach requires optimizing the company’s activities for a particular access route.
Carmike Cinemas used an access-based strategy by locating theaters in smaller towns and rural areas underserved by larger chains. Although rural customers had the same need for entertainment as urban moviegoers, reaching them required a distinct, lower-cost operating model. Digital money transfer services like Xoom also use access as a differentiator, targeting customers who need to send remittances but rely on third-party pickup locations. By leveraging existing third-party brands for distribution, Xoom created a specific, cost-effective access point for its global customers.
The Necessity of Strategic Trade-Offs and Fit
Selecting one of these three sources of positioning requires making deliberate strategic trade-offs. A trade-off occurs when a company sacrifices one form of value to achieve another, meaning it actively chooses what not to do. For example, a firm pursuing a low-cost, variety-based position cannot also provide the high-touch, personalized service required for a needs-based position. These choices create barriers because competitors must match the firm’s entire system or risk becoming stuck in the middle.
The strategic position must also lead to a strong “fit” among the company’s activities. Fit means that the discrete activities within the value chain are interconnected and reinforce one another, creating a system greater than the sum of its parts. For a needs-based firm, the personalized sales process must align with specialized employee training and the customized technology platform. This system-wide alignment makes the entire position difficult for a rival to imitate, as they must replicate the entire web of interdependent activities.
Sustaining Strategic Position Over Time
Maintaining a unique strategic position demands vigilance against market pressures and imitation. Companies must continually improve their operational effectiveness within their chosen activity system without abandoning the underlying strategic choices. This involves finding efficiencies in specialized service delivery while resisting the temptation to add product varieties or serve customer segments that compromise the core strategy. When a firm attempts to straddle multiple positions, it sacrifices the coherence of its activity system and loses its advantage. Longevity rests on reinforcing trade-offs and deepening the fit among activities.