Competitive strategies - cost strategy vs. differentiation strategy

Cost leadership strives towards cutting costs to a minimum possible levels ... Cost strategy as well as differentiation strategy could be narrow or broad. Ljubljana,Slovenia,EU+38640673557 Competitivestrategies–coststrategyvs.differentiationstrategy  Competitivestrategyreferstoawayofcreatingcompetitiveadvantageovercompetitors.Itrepresentsagreatervalueforthecustomer,createdeitherbylowerpricesorbyprovidinggreaterbenefitsandservicesthatjustifyhigherprices. Generallyspeaking,therearefourpossiblewaystodifferentiateabusiness–tobecomeacostleader(meaningthatyoubecomethelowest-costproducerintheindustry)andtobecomeadifferentiationleader(meaningthatyoucompeteinareasotherthanpricevaluedbycustomers),bothinanarroworbroadscopeofbusiness’activities. Choosingtherightcompetitivestrategyiscrucialstrategydevelopmentstepforthecorporate,businessunitandproductsand/orservicessuccess.     Coststrategy Coststrategyisbuiltonno-frills.Costleadershipstrivestowardscuttingcoststoaminimumpossiblelevelsinordertoprovidecustomerswithlowerpricesandthusboosttheirsavings.Coststrategyprerequisitesnormallyrelatetohightechnicalcapabilitiesandaccesstocapitalforthecompanytoinvestintechnologyandassureeconomiesofscale. Inmostofthecasescoststrategyforfirst-moversleadtosignificantincreaseinmarketshareandcapacityutilization,thatfurtherdrivesdowncosts. Buildingastrategyonminimizingcostsrequiresacompanytoachieve: Highproductivity Highcapacityutilization Useofbargainingpowertonegotiatethelowestpricesforproductioninputs Leanproductionmethods(e.g.JIT) Effectiveproductionprocess Effectivedistributionchannels Leadingcostleadershipbrandshaveobtainedamajorsuccessbyintroducingrevolutionarybusinessmodelsbuiltonasinglebase–thelowestpossiblepricesforagivenperceivedvalue.   Differentiationstrategy Differentiationstrategyisbuiltonabeliefthatoneneedsaclearanduniquepositioning.Differentiationleadershipfocusesinprovidingperksthataddvalueforconsumers,whilehigherpricesareasortof“makeup”fortheirhighercosts. Buildingastrategyonadifferentiationrequiresacompanytocontinuouslyinvestinanddevelop: Superiorproductquality(features,benefits,durability,reliability) Branding(strongbrandrecognition,desireandloyalty) Industry-widedistributionacrossallmajorchannels(i.e.theproductorbrandisanessentialitemtobestockedbyretailers) Marketingcapabilities(advertising,sponsorshipetc.) Differentiationstrategycouldbefurtherdividedinto: Purification(decreaseinprice;decreaseinperceivedvalue)–examples:EasyJet,Tata,Loganetc. Hybrid(decreaseinprice;increaseinperceivedvalue)–examples:IKEA(SCMoptimisation),Loreal(newbrandsasaresponsetocrisis)etc. Sophistication(increaseinprice;increaseinperceivedvalue)–examples:Mercedes(status),VW(reliability);Toyota(TQM) Despitethefactthatthesebrandspointedoutaboveachievesignificanteconomiesofscale,theydonotrelyonacostleadershipstrategytocompete.Strongmarketingcapabilitiesenablethemtosellproductsforapremiumandatthesametimepersuadecustomerstobecomebrandloyal.   FocusOFTHEstrategy Coststrategyaswellasdifferentiationstrategycouldbenarroworbroad.Smallandmediumsizedcompaniesareoftenforcedtobecomefocused,namelyanicheplayer,sincetheyareunabletocompeteagainstbetter-resourcedbroadmarketcompanies’offerings.Onlytrueunderstandingofthemarketdynamicsandcustomers’uniqueneedsincombinationwithuniquelowcostorwell-specifiedproductsand/orserviceseventuallyresultinstrongbrandloyalty. Howtosuccessfullydifferentiateyourproductsand/orservicesinthemarket?Areyourproductsand/orservicesuniquelypositionedinthemarket?Ifnot–followthestepswrittenbelow: Step1:Examine existingpositioningofthecompanyanditsproductsand/orservicesincustomers’minds Step2:Choosethecompetitivestrategy(coststrategyvs.differentiationstrategy)youthinkyoushouldbefollowing Step3:Analyzethecompetitionanddeterminetheindustrystandard Step4:Studymarketdynamicsandsearchformarketgaps Step5:Chooseyourmostappropriatecompetitivestrategyandlookforpotentialpracticalsolutions Interestedinoursupport?Contactus!   OTHERRECOMMENDEDTOPICSTOCOMPETITIVEstrategy Youarekindlyinvitedtoreadalsoabout: leadingviewsonindustryanalysis(Porter’sfiveforcesmodel) selectedstrategicmanagementtool(Balancedscorecard)   AccesstocapitalBargainingpowerBenefitBrandloyaltyBrandrecognitionBrandingCapacityutilizationCompetitiveadvantageCompetitivestrategiesCompetitivestrategyCompetitorCostleaderCostleadershipCoststrategyCustomerCustomerneedsCuttingcostsDifferentiationleaderDifferentiationleadershipDifferentiationstrategyDistributionchannelEconomiesofscaleEffectiveproductionprocessFirst-moversFocusstrategyHighcapacityutilizationHighproductivityHigherpricesHybridIndustrystandardJITLeanproductionmethodsMarketdynamicsMarketgapMarketshareMarketingcapabilitiesNicheplayerNo-frillsPositioningPriceProductqualityPurificationSCMoptimisationSophisticationStrategydevelopmentTechnicalcapabilitiesTQM RelatedPosts Porter’sfiveforcesmodel–leadingviewsonindustryanalysis Theperformanceofeachcompanysignificantlydependsontheindustryinwhichitoperates.UsePorter’sfiveforcesmodelasatooltogenerateoutstandingresults. 009Oct2019 Casestudy:Acquisitionofclientdatabase Briefsummaryaboutthecomprehensiveconsultingsupportrelatedtotheacquisitionofclientdatabase,includingtheapproach,results,clientfeedbackandconsultantfinalthoughts. 025Sep2017 D.E.B.T.–asuccessstoryofaUSgiantHomeDepotInc. 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