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Unlock This CourseMarket position refers to how customers and competitors see a business compared to its rivals. It's like a business's reputation or standing in the marketplace. Understanding your market position helps you make better decisions about products, pricing and promotion.
Key Definitions:
A strong market position means customers choose your products over competitors. This leads to higher sales, better profits and more loyal customers. Understanding your position helps you spot gaps in the market and areas where you can improve.
To find your market position, you need to know what customers think about your products, how you compare to competitors and what makes your business special. This requires research, analysis and honest evaluation.
Businesses use several tools to understand and improve their market position. Let's explore the most important ones:
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It helps businesses understand their internal capabilities and external market factors.
Internal positives: What you do well, your unique selling points, resources and advantages over competitors.
Example: Strong brand recognition, loyal customer base, unique product features.
Internal negatives: Areas where you need to improve, resources you lack, or things competitors do better.
Example: Limited budget, outdated technology, poor location, weak online presence.
Opportunities: External factors you could use to your advantage.
Threats: External factors that could harm your business.
Examples: New markets, changing trends, competitor actions, economic changes.
The Boston Matrix helps businesses analyse their product portfolio based on market growth and market share. It divides products into four categories:
High market share, high market growth
These products are doing well in growing markets. They generate good cash flow but need investment to maintain their position. The goal is to keep these products as market leaders.
Example: The latest iPhone model in the smartphone market.
High market share, low market growth
These products dominate stable markets and generate lots of cash with little investment needed. The money they make can fund other areas of the business.
Example: Coca-Cola's classic drink in the soft drinks market.
Low market share, high market growth
These products have potential but haven't captured much of the market yet. They need investment to improve their position, but success isn't guaranteed.
Example: A new fitness app in the growing health tech market.
Low market share, low market growth
These products perform poorly in stagnant markets. They may break even or make small profits but don't contribute much to the business. Companies often consider dropping these products.
Example: A basic MP3 player in today's streaming-dominated music market.
Market share tells you what percentage of the total market your business controls. It's calculated by dividing your sales by the total market sales and multiplying by 100.
Market Share = (Your Sales ÷ Total Market Sales) × 100%
For example, if the total smartphone market is worth £10 million and your company sells £2 million worth of smartphones, your market share is 20%.
Changes in market share over time can tell you if your position is improving or declining:
A competitive advantage is what makes customers choose your products over competitors. It's the foundation of a strong market position.
Being able to produce or sell products at a lower cost than competitors. This allows you to either make more profit per sale or offer lower prices to attract customers.
Example: Aldi and Lidl use simple store layouts and limited product ranges to keep costs low.
Offering something unique that customers value. This could be better quality, innovative features, superior service, or a strong brand image.
Example: Apple products are known for design, ease of use and integration with other Apple devices.
Market mapping is a visual tool that shows how products are positioned based on two key features, such as price and quality. It helps businesses see gaps in the market and understand where they stand compared to competitors.
To create a market map:
Tesco is the UK's largest supermarket chain with around 27% market share. Let's analyse its market position:
SWOT Analysis:
Competitive Advantage: Tesco combines a wide product range with convenience (many store locations and formats) and customer loyalty through its Clubcard scheme.
Market Positioning: Tesco positions itself as offering good value with its own-brand ranges while also providing premium options through "Tesco Finest". This middle-market position helps it appeal to a broad customer base.
To evaluate your market position effectively, consider these questions:
Remember that market position isn't fixed it can change based on your actions, competitor moves and market trends. Regular analysis helps you spot changes early and adapt your strategy.