It is the straightforward strategy of selling at a lower price than your competitors.
Describe the nature of focused cost leadership and focused differentiation. Know the advantages and disadvantages of focus strategies. Companies that use a cost leadership strategy and those that use a differentiation strategy share one important characteristic: These efforts to appeal to broad markets can be contrasted with strategies that involve targeting a relatively narrow niche of potential customers.
These latter strategies are known as focus strategies Porter, A focused cost leadership strategy requires competing based on price to target a narrow market Table 5.
A firm that follows this strategy does not necessarily charge the lowest prices in the industry.
Instead, it charges low prices relative to other firms that compete within the target market. There are ways to view movies even cheaper, such as through the flat-fee streaming video subscriptions offered by Netflix. But among firms that rent actual DVDs, Redbox offers unparalleled levels of low price and high convenience.
Several examples of firms pursuing a focused cost leadership strategy are illustrated below. This allows the firm to attract customers that might not otherwise be able to afford a restaurant-quality pizza.
The strategy has worked: Providing indoor seating creates expenses for fast-food restaurants. Checkers Drive In keeps its costs low by not offering indoor seating. Checkers targets drive-thru customers and offers them big burgers at rock-bottom prices.
Another important point is that the nature of the narrow target market varies across firms that use a focused cost leadership strategy. In some cases, the target market is defined by demographics.
Redbox machines are available on university campuses nationwide. In other cases, the target market is defined by the sales channel used to reach customers. Most pizza shops offer sit-down service, delivery, or both.
In contrast to most fast-food restaurants, Checkers Drive In is a drive-through-only operation. To serve customers quickly, each store has two drive-through lanes: These savings allow the firm to offer large burgers at very low prices and still remain profitable.
The Nature of the Focused Differentiation Strategy Focused differentiation is the second of two focus strategies. A focused differentiation strategy requires offering unique features that fulfill the demands of a narrow market Table 5. 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. Others target particular demographic groups. One example is Breezes Resorts, a company that caters to couples without children.
The firm operates seven tropical resorts where vacationers are guaranteed that they will not be annoyed by loud and disruptive children. Thus the unique features provided by firms following a focused differentiation strategy are often specialized.
Several examples of firms pursuing a focused differentiation strategy are illustrated below. Whole Foods Market focuses on selling natural and organic products. After all, you are what you eat!
At Build-A-Bear Workshop, customers enjoy an interactive process of designing and assembling teddy bears.
Build-A-Bear customers are willing to pay a premium price because they receive a unique, hands-on experience rather than simply buying a stuffed toy. When it comes to uniqueness, few offerings can top Kopi Luwak coffee beans.
This price is driven by the rarity of the beans and their rather bizarre nature. Although many consumers consider Kopi Luwak to be disgusting, a relatively small group of coffee enthusiasts has embraced the coffee and made it a profitable product.
This illustrates the essence of a focused differentiation strategy—effectively serving the specialized needs of a niche market can create great riches.Being a low-cost provider is a basic business strategy.
It is the straightforward strategy of selling at a lower price than your competitors. But even such a basic strategy comes in two different. Low cost Strategy vs Differentiation Strategy. October 7, who have shown us that the low cost strategy can be effective.
On the other side of the spectrum there’s Apple Computer, BMW, and Nike who have used a differentiation strategy, to build tremendous brand equity.
BMW, and Nike who have used a differentiation strategy, to build. Cost Leadership & Differentiation - This thesis examines the fundamental trade-off between low cost and differentiation strategy at a business strategy level.
In Porter introduced a model of generic strategies that has influenced much of the current thinking in. 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.
Best-Cost Strategy VS Low-Low Cost Strategy Q1: What is the difference between best-cost strategy and low-cost strategy? Best-cost strategy is when the company makes an upscale product at a lower price which in turn gives more value to customers in . Best-Cost Strategy VS Low-Low Cost Strategy Q1: What is the difference between best-cost strategy and low-cost strategy?
Best-cost strategy is when the company makes an upscale product at a lower price which in turn gives more value to customers in exchange of money.