What happens if your small business is stuck in the middle?

Fresh Mozzarella Bread

Fresh Mozzarella Bread (Photo credit: Wikipedia)

On Sunday morning we went shopping at a Woolworths at Cresta Centre, Northcliffe. I noticed an instore bakery that had some delicious looking fresh breads in baskets on wooden racks. I bought a fresh wholewheat seed loaf in the form of a French loaf. I don’t think I would have bought the same whole-wheat loaf unless I had known that it had been freshly baked. It was delicious later that evening when we had it as an accompaniment with supper.

The supermarkets provide a good example of competitive strategy and the difficulties of positioning in the mind of the customer. Woolworths is generally associated with fresh quality foods. I mean, who offers prawns imported from India in South Africa? This strategy is not price driven and is therefore known as a differentiation strategy, if you look at the matrix provided by Michael Porter. On the other side of the spectrum is the Shoprite/Checkers supermarket chain that strives for lower prices, which is a low-cost or cost leadership strategy.

Then you have the Pick ‘n Pay supermarket chain that sways from offering lower prices to fresh quality foods and back again to promoting its price beating promotions on brands. This is known as a strategy that is “stuck in the middle”. Yes, this chain was once mainly focused on lower prices but it doesn’t have that same perception of low-cost as Shoprite/Checkers.

Yet, if you look at Woolworths, you will notice that most of the food offering is prepackaged. It’s only the chicken rotisserie and now the occasional install bakery and fish counter that provide on-the-spot fresh foods. It’s interesting that Pick ‘n Pay) doesn’t take advantage of their fresh food counters, which in many stores are superb. Here I’m talking about their cheese bars, delicatessen counters, fresh fish shops, butchery counters and in-store bakeries. If they spruced these sections up and promoted them better they would have a strong differentiation. Besides, if you look at the grocery sections you will find that the pricing in this area is often sharp but they don’t have the perception of being low-cost in the mind of potential customers.

Let me give you an example that applies to small business. If you were a small computer retail shop and you had a competitor similar to you that was offering excellent service and at the same time down the road you had a large computer discounter such as Incredible Connection, how would you position your business if you were stuck in the middle?

It’s difficult to be two or more things at once to customers. You need to have clear differentiation. For a small business, cost leadership is most unlikely as a strategy. You don’t have the economies of scale. This means that for a small business differentiation is crucial.

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By Chesney on October 9, 2014 · Posted in Main Content

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