In continuation to my other posts which make a huge impact on other people's lives (this is a joke, but could be true though) I decided to blog today about Porter's Strategies and then realized that the chewing gum example would be a very good one to help me explain about this. The picture above shows two different brands of chewing gum:
- Trident is sold for 60 piasters and has 10 pieces, so each piece is for 6 piasters
- 'Shaarawi' is sold for 1 piaster and has 2 pieces, so each piece is for half a piaster
Hence, in this example, 'Shaarawi' offers a very basic product but for the lowest price among its competitors. On the other hand, Trident's offering has been differentiated by promoting additional features such as a long lasting flavor, a sugar-free product plus a more appealing package which could have implications about the quality; from a consumer's point of view this justifies the price difference. Usually, when a new player joins an existing market it utilizes a Low Cost strategy to gain market share.
Porter's Strategies are not only restricted to business. For instance, a job applicant with a Differentiation approach would try to increase the likelihood of having a better paying job through emphasizing how different he/she is; including a solid list of qualifications or a background of voluntary work and extracurricular activities. Conversely, the applicant would try to secure the opportunity and settle for a very basic salary in case of a Low Cost direction.
One last thing, have you considered how a product being sold for 1 piaster manages to cover manufacturing cost and still has a profit margin?!
* Reference: Johnson, G., Whittington, R., & Scholes, K. (2011). Exploring Strategy: Text & Cases (9th Edition ed.) Harlow: Pearson.