Positioning on a Multi-Attribute Landscape

Abstract

Understanding positioning is a central concern for strategy. We offer a rich, but tractable, formalization of competitive positioning that is explicit about how the success of firms’ policy choices in the face of competition is impacted by the multiple attributes along which firms can create value for consumers. On the supply side, our theory incorporates multiple organizational design choices; on the demand side, it incorporates heterogeneous buyers with preferences over multiple product attributes. Critical parameters are the extent of trade-offs firms face in setting attribute levels and the degree of interactions among organizational design decisions. We use a value-based approach to characterize competitive interactions in the marketplace. In contrast to classic arguments by Porter, we find that increasing the extent of trade-offs can increase the number of viable competitive positions that can be occupied in an industry, and thereby reduce the need for choice. In contrast to prior work on NK models of rugged landscapes, we find that increases in policy interdependencies among design decisions (i.e., increases in K) can decrease the number of viable competitive positions, and thereby reduce heterogeneity in competitive positions in an industry. Finally we use our model to examine the well known, but under-conceptualized, notion of "stuck in the middle" positions, and characterize the extent to which the Porterian claims regarding competitive disadvantage hold.

Keywords: Competitive positioning, Value-based strategy, NK landscape, interdependencies

JEL Classification: D21, C71, L11