The breadth of its targeting refers to the competitive scope of the business. If a firm is targeting customers in most or all segments of an industry based on offering the lowest price, it is following a cost leadership strategy; If it targets customers in most or all segments based on attributes other than price e.
They claim that a low cost strategy is rarely able to provide a sustainable competitive advantage. Overheads are kept low by paying low wages, locating premises in low rent areas, establishing a cost-conscious culture, etc.
But among firms that rent actual DVDs, Redbox offers unparalleled levels of low price and high convenience. Another important point is that the nature of the narrow target market varies across firms that use a focused cost leadership strategy.
According to Baden-Fuller and Stopford the most successful companies are the ones that can resolve what they call "the dilemma of opposites". In particular, Miller  questions the notion of being "caught in the middle". The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost reduction strategies.
The virtual platform and supporting the database of several products, updating the database and keeping the portal running was highly technical and challenging job. There are numbers of threats existing in the market place from all the players of the market.
Sharing the same view point, Hill cited by Akan et al. The key is to segment your market into sections that you can reach at low cost and that are cost-sensitive. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.
The result is a homeowner with a newly updated kitchen for less money. An example is the success of low-cost budget airlines who, despite having fewer planes than the major airlines, were able to achieve market share growth by offering cheap, no-frills services at prices much cheaper than those of the larger incumbents.
In other cases, the target market is defined by the sales channel used to reach customers. It is attempting to differentiate itself along these dimensions favorably relative to its competition.
Once that decision has been made, implement the right measures and tactics to support that strategy. In the event of a price war, the firm can maintain some profitability while the competition suffers losses.
Many companies, for example, have entered a market as a niche player and gradually expanded. These should be distinct groups with specialised needs. Excerpted from Short, J.
The identified group can be ready to pay premium for the products. To apply differentiation with attributes throughout predominant intensity in any one or several of the functional groups finance, purchase, marketing, inventory etc. Strong sales team with the ability to successfully communicate the perceived strengths of the product.
Brand If your competitive advantage includes selling a well-known brand, you have to use focus strategy to make sure you are reaching the consumers who have a positive image of the brand, need the product and can afford to buy it. This is where flat fee brokers have penetrated the market using cost leadership as an effective strategy to find new clients.
Professor Michael Porter, the father of competitive strategy, has written an entire text[i] on this topic. It was difficult to the competitors to imitate the uniqueness immediately. The first approach is achieving a high asset utilization. So in conclusion, for your business to be a successful, you must decide on whether to compete on price or on differentiating your products and services.
The Nature of the Focus Cost Leadership Strategy Focused cost leadership A generic business strategy that requires competing based on price to target a narrow market. Start studying Chapter 5. Learn vocabulary, terms, and more with flashcards, games, and other study tools.
The main difference between companies following a cost leadership strategy and those following a focused cost leadership strategy is A.
standardized market price. When technological change is low and customer needs are well. Cost leadership is an effective business-level strategy to the extent that a firm offers low prices, provides satisfactory quality, and attracts enough customers to be profitable.
differentiation attempts to convince customers to pay a premium price for its good or. Jun 29, · Cost leadership means you are offering products or services for the lowest price on the market. Examples are easily found in big companies that have a.
Start studying Chapter 5. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The main difference between companies following a cost leadership strategy and those following a focused cost leadership strategy is A. standardized market price.
When technological change is low and customer needs are well.
The Cost Leadership Strategy. Porter's generic strategies are ways of gaining competitive advantage – in other words, developing the "edge" that gets you the sale and takes it away from your competitors.
Cost. Low production cost is an effective competitive advantage, but it doesn't apply in all markets. The key is to segment your market into sections that you can reach at low cost and that are.Customer focused low cost leadership strategy