Strategic Positioning in Higher Education

The concept of strategic position, as developed by Michael Porter, is commonly used in strategic management. The discussion that follows is based on insights from Rothaermel (2013) and Blocher, Stout, Juras, and Cokins (2013). There are two main positions—differentiation and cost leadership—and a third option that combines elements of the first two. All three of these positions are concerned with delivering value at a cost that the customer perceives to be reasonable. However, the three positions diverge in how they handle the tradeoffs that arise between cost and value.

A firm with a differentiation strategy aims to produce a product or service with distinctive, innovative features, often possessing higher quality than the competition. Differentiated products and services may be supported by a high level of customer service. A differentiation strategy seeks to provide higher value at a competitive cost. Since the distinctive features of the product or service entail higher costs, differentiation often relies on marketing to convince customers that the features are worth the higher price; such marketing may seek to associate use of the product or service with prestige.

A firm with a cost leadership strategy seeks to offer the same value as its competitors, but doing so at a lower cost. Its products and services are designed and delivered to exhibit sufficient quality to be perceived as valuable. Cost leaders typically rely on low-cost inputs as well as efficiencies in transformation, distribution, and/or other processes. In order to achieve these efficiencies, cost leaders may compete on volume, allowing for economies of scale and/or scope.

An integration strategy is a combination of differentiation and cost leadership. It is a difficult strategy to execute, usually requiring success in at least one of the two main strategies (Blocher et al., 2013). According to Rothaermel (2013), “Whether an integration strategy can lead to competitive advantage … depends on the difference between value creation (V) and cost (C), and thus on the magnitude of economic value created (V – C)” (p. 156).

Figures 1, 2, and 3 are examples of value chains for higher education institutions taking the three strategic positions.

References

Blocher, E. J., Stout, D. E., Juras, P. E., & Cokins, G. (2013). Cost management: A strategic emphasis (6th ed.). New York: McGraw-Hill/Irwin.

Rothaermel, F. T. (2013). Strategic management: Concepts & cases. New York: McGraw-Hill/Irwin.

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