What’s Your Strategy?

When I was studying my MBA I was introduced to the ideas of Michael Porter who wrote a book called Competitive Strategy. In this article I’ll look at one of the main concepts from that book – the three types of Competitive Strategy.

Firstly, I’ll give a quick overview of the book. Porter places a lot of emphasis on doing your research on your competitors and the environment your business exists in. By looking externally and knowing about the competitive factors that are present in your markets, you can make better decisions about your strategies.

Porter suggests there are three types of competitive strategies your business can adopt:

  1. Overall cost leadership
  2. Differentiation, and
  3. Focus

Overall Cost Leadership

This is a pretty simple strategy – create a product with low costs so you can make more profit. You can choose to sell it with a low price, or at the same price as everyone else, but make more profit on the sales.

You see this a lot in retail markets, particularly where the product being sold is a common, generic product. Think about television sets. Go into any retailer and look at their range of large screen TVs.  You’ll seen TVs with the same size screen at a range of different price points. Some manufacturers will take a low-cost position in this market, creating the product for a lower cost then their competitors and usually selling it at a lower price.

The dangers of trying a low-cost strategy is the risk of someone else coming in and undercutting your prices or cost structure.

This type of strategy can work effectively, but in my opinion the other two strategies are more suited to bloggers looking to build an online business.

Differentiation

I like the Differentiation strategy. It’s all about creating something unique that sets you apart from your competitors. I believe blogging gives you an amazing opportunity to do this.

Differentiation helps you on two levels – by being unique you’re creating a group of loyal fans – your tribe. This brand loyalty makes them less likely to switch to someone else. Also, by providing unique products or services you can command a higher profit margin – if you’ve got a product that can only be bought from you, you can set the price!

If you sell a generic product that has a lot of competition and alternate products, you’re more likely to compete on price. If you can differentiate and create something that’s different from everything else that’s out there you become less price-driven.

Focus

In a focus strategy, you concentrate on a particular sector. You narrow your market by zeroing in on a particular group.

The focus can be geographic (in a particular town or region), it can be based on certain industries or it can be based on demographics i.e. people interested in knitting.

You can adapt the Focus strategy to either differentiate within your niche, or take a low-cost position within the niche.

I see this in the financial planning world where planners focus on a particular target market i.e. retirees. By specialising in this area the planner is seen as an expert in that niche. Because of this they can command higher prices and can do the work more efficiently.

Competitive Strategy for Bloggers

So how do you apply this to your blogging?

As part of the business planning process I help bloggers analyse the markets they’re in, and look at what their competitors are doing. When you define who your target market is, what their issues or concerns are, and how your product meets their needs, you’re in a good position to look at the appropriate strategy.

I believe that blogging makes it easy to make your services or products unique – every blogger has a different (and unique) opinion or experience. Because of this, I’m not a fan of taking a low cost approach over the long term.

For many bloggers, having a Focus strategy can be a powerful approach to growing your business. Assuming you have a product that can be sold worldwide, there’s probably enough people in your target-market in the world who could purchase your product.

A great example is guitar lessons. Targeting the broad ‘guitar lessons’ niche may be a bit hard – there’s already plenty of people in that area. But maybe you can focus on a particular area – maybe ‘Blues Guitar Lessons’.  There’s a lot less competition in this market and it’s easier to become seen as an authority in this area.

Also, by specialising in this niche you don’t need to become an expert in other guitar styles and you can instead focus all your efforts in learning (and teaching) this one style.

A Differentiation strategy is also suitable for bloggers. If your niche is still broad, think about how you can set yourself apart from your competitors. We take for granted our individual skills and talents and don’t spend enough time thinking about ways to use them to differentiate ourselves.

Applying The Strategies To Your Blog

Take some time to think about the concepts I’ve introduced here and look at how you can apply them to your blog.

Do you know enough about your niche to be able to decide on a strategy, or do you need to do more competitive analysis?

Have you been competing on price rather than differentiating yourself?

Let me know what you think by leaving a comment below. Also, I recommend the Competitive Strategy book by Michael Porter – if this article has been valuable you’ll probably love the book.

Photo Credit - hikingartist/

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About

Allan lives in Adelaide, South Australia with his wife and two boys. He is the founder of Blogger Business Plan and loves helping bloggers learn how to transform their blogs from hobbies into sustainable businesses.
When he's not blogging or working in his financial planning business, you'll find Allan playing guitar, reading or coaching his son's soccer team.

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8 Responses to What’s Your Strategy?
  1. […] This post was mentioned on Twitter by Allan Ward, Allan Ward. Allan Ward said: From my blog What’s Your Strategy? http://bit.ly/g9GYAZ #blogging […]

  2. Leon Noone
    November 30, 2010 | 1:17 pm

    G’Day Allan,
    Thanks for sharing Michael Porters insights. They’re very useful. Along the same lines, the marketing books of Al Ries, firstly with Jack Trout and later with his daughter Laura, support similar approaches.

    As a small businessperson myself, I believe that a narrow focus, a very specific target market and clear differentiation are absolutely essential for business success.

    We simply cannot be all things to all people, whether offline or online. The problems of the US auto industry over the last 25 or so years, are an excellent example of this.

    Anyway….. make sure you have fun.

    Regards

    Leon

    • Allan Ward
      November 30, 2010 | 9:27 pm

      Hi Leon,

      Thanks for the comment. I’ve got one of the Ries / Trout books – need to read it again. I totally agree with your comments – you can’t be all things to all people and the internet makes is possible to reach people in your target market from around the world. So it is possible to have a very narrow focus and still have a profitable business.

      Thanks for dropping by.

      Allan

  3. Tristan
    December 9, 2010 | 4:28 pm

    Great post, Allan! I really like how you applied these things to blogging (which makes sense, of course, on BloggerBusinessPlan.com!).

    I think that differentiation is the single greatest way that bloggers can stand out from the crowd. Sure, focus plays an important part in the success of a blog, but if people like your content and your unique voice, they really won’t care too much about what you have to say! They’ll like whatever you talk about as long as it’s somewhat related to your topic.

    I also really like the Headway customization you’ve done here! I recently bought a copy of Headway for a niche site or two and will probably be back in the future to read more about it.

    • Allan Ward
      December 9, 2010 | 7:55 pm

      Hey Tristan,

      Thanks for dropping by and leaving a comment. I was just thinking about this earlier today and came to the same conclusion – that a differentiation strategy is the best strategy for bloggers. I’m planning a couple more posts on the subject.

      Glad you like Headway. I’m loving version 2.0 – it’s made it a lot easier. I use it on all my sites now and love how flexible it is to try out new layouts.

      Good luck with your blogging.

      Allan

  4. How To Be Different From Everyone Else
    December 10, 2010 | 3:29 pm

    […] wrote recently about three business strategies you can use for your blogging. Out of the three strategies I looked at, the differentiation […]

  5. Ashley
    May 8, 2011 | 2:25 pm

    Hi Allan,

    I think this is great advice. Know your competition! That also helps to teach companies about what kinds of projections they should make. Ah, I love research…

    -Ashley
    @cartooninperson

    • Allan Ward
      May 9, 2011 | 9:25 am

      Hi Ashley,

      Thanks for the comment. Having a strategy is a pretty simple concept, but hard to implement. I’ve learnt a lot from understanding what my competitors are doing. I like your point about knowing what kinds of projections to make. Thanks for the comment.

      Allan

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