Low-cost leadership and differentiation strategies laura allard november 21, 2010 william hogan management cases upper iowa university abstract this paper discusses low-cost leadership and differentiation business strategies. Strategies that help an established player coexist with low-cost rivals can work initially, but as consumers become more familiar with low-cost options, they tend to migrate to them. Product differentiation and price discrimination are two strategies used in marketing and economics product differentiation is the process used to distinguish one company's goods and services. As with a focused low-cost strategy, narrow markets are defined in different ways in different settings some firms using a focused differentiation strategy concentrate their efforts on a particular sales channel, such as selling over the internet only. Cost leadership & differentiation - this thesis examines the fundamental trade-off between low cost and differentiation strategy at a business strategy level in 1980 porter introduced a model of generic strategies that has influenced much of the current thinking in.
Cost focus and cost leadership are both approaches to become the low-cost leader differentiation and differentiation focus are two similar but distinct differentiation strategies to establish a. Low cost, differentiation, and focus business professor and strategist, michael porter , wrote the book competitive advantage: creating and sustaining superior performance in 1985. Definition of low cost strategy: a pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share it is one of three generic marketing strategies (see differentiation strategy and focus.
In other words, their company’s strategy focused on differentiation, not just being the low-cost player the goal is to achieve a competitive advantage from initiatives like supplier-driven innovation, strategic risk management, and capital optimization. It will describe low cost strategy and differentiation strategy and its impact in key hr function such as hr planning, recruitment and selection, orientation, training and development, career planning, performance management, compensation management, health and safety and international operations. Blue ocean strategy is about pursuing both differentiation and low cost under traditional competitive strategy differentiation is achieved by providing premium value at a higher cost to the company and at a higher price for customers. Redesigned logo used from 2011-present (photo credit: wikipedia) there are essentially two factors that identify competitive strategies these are the target market (broad or narrow) and competitive advantage (low cost or differentiated.
Porter's generic strategies with examples 1 porter’s generic strategies (low cost) (product uniqueness) broad cost leadership differentiation (industry wide) narrow focus strategy focus strategy (market wide) (low cost) (differentiation) 5 cost leadership strategy aiming to become lowest cost producer the firm can compete on the price. Differentiation focus strategy describes a situation wherein a company chooses to strategically differentiate itself from the competition within a narrow or niche market differentiation simply means using product features or functionality, innovation, brand image or customer service to make. A low cost producer must find and exploit all sources of cost advantage if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average. Broad-scope, low-cost players are referred to as cost leaders walmart is a classic example of a company trying to appeal to a wide audience with the lowest-cost products walmart is a classic example of a company trying to appeal to a wide audience with the lowest-cost products.
The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments by contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. Differentiation and cost leadership one benefit available to low-cost operators in an industry is higher profit margins if you can sell products and services with a lower cost basis and. Low-cost provider, broad differentiation, focused low-cost, focused differentiation, and best-cost provider strategies which of the following is not an action that a company can take to do a better job than rivals of performing value chain activities more cost-effectively.
Low-cost and differentiation strategy harvard professor michael e porter of the harvard business school introduced the concept of strategic thought and planning in the business world managers evaluate and choose strategies they think fits the profile of their company to find success via a competitive advantage. The low cost, differentiation, and focus/niche strategies of american, japanese, and british companies operating in the united states: a comparative study three generic strategies of low cost, differentiation, and focus/niche, ie, the activities. Balancing cost leadership with differentiation through focus posted on september 18, 2015 topics: cost leadership, differentiation, a low-cost leader is also well positioned in a price war and can utilise low pricing to take on competitors in the industry.
A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or best-cost or focus/market niche strategy when: the offerings of rival firms are essentially identical, standardized, commodity-like products. Low-cost provider strategies, focused low-cost strategies, best-cost provider strategies, broad differentiation strategies, and focused differentiation strategies 6 a competitive strategy aimed at being the industry's low-cost provider tends to work best when. What is the chief difference between a low-cost provider strategy and a focused low-cost strategy also viewed the advantages of a product differentiation strategy. As indicated, a differentiation strategy serves a broad market lighting, store organization, and accessibility of customer service staff all differentiate macy’s from a low cost competitor differentiation offers many benefits to the firm as well advantage of a differentiation strategy.