Best Cost Focused Strategy By Thompson Et. Thompson Jr.

Our team decided to choose the “Broad Differentiation” strategy as the basic strategy for our company. We will attempt to differentiate our product line in several distinct dimensions. By providing products that are vastly superior and unique from our competitors and pricing the products with an affordable price, we can gain something that is beneficial for the company in the future, which is customers’ loyalty and awareness. We may change or modify our strategy for the next round depending how it performs against our competitors.

competition, both in attributes and in products. In order to supply an attribute that no

new product offerings by a competitor may require adjustments to one or more components of

A cost leadership strategy focuses primarily on “producing products and/or services that are the lowest in the industry” (Turban, Rainer, & Potter, 2003). This type of organization forms business alliances that support their inventory management through computers and computerized purchasing. A differentiation strategy focuses on being unique within the industry and provides high-quality products at a competitive price (Turban, Rainer, & Potter, 2003). These types of companies “provide their customers with a

Competition serves as an effective mean for businesses to identify ways to improve product quality, charge lower price, and to increase efficiency. Business that can offer the highest product quality at the reduced costs will succeed in a

In differentiation strategies, the emphasis is on creating value through sustainable uniqueness. This can be achieved through product innovations, superior quality, or superior service, which is then sustained and leveraged through creative advertising; brand-building and strong supply chain relationships. Another requirement for a successful differentiation strategy is that customers must be willing to pay more for the uniqueness of a product or service than the firm paid to create it. A differentiation strategy will lead to higher firm performance only if buyers value the attributes that make a product or service unique enough to pay a higher price for it or if they choose to buy from that firm preferentially. If

Porter's focus strategy is a mix of both the differentiation and the cost leadership strategies i.e. difference or cost leadership within a small target market segment. For instance: a company should be able to differentiate its products based on a particular target market segment because if the differences in products does not appeal to consumers in that target market as opposed to consumers in broad market, there would be no basis for differentiation and competitive advantage will not have been achieved.

Differentiation can be achieved in a variety of ways: unusual features, responsive customer service, rapid product innovations, technological leadership, perceived prestige and status, appeal to different tastes, and engineering design and performance. Methods of controlling costs, however, may be limited. The ability to price differentiated products competitively will be important for reducing upward pressure on customer prices so that they do not exceed the level customers are willing to

While playing the BSG I found the best strategy was the best-cost provider strategy. Using the best-cost strategy allowed me to continue using a decent amount of superior material while also offering prices that were below or around the same price as my competitors. My shoes where not the highest quality or most expensive, but it was also made with a small amount of superior material so it was also not the cheapest made shoe available. This strategy worked best because it attracted buyers who wanted a good quality shoe but did not want to pay high quality prices. Since there were so many companies offering the same product, offering a medium-quality product at a lower price helped my company to gain more customers and market share. A focused differentiation strategy worked least well. Concentrating on one niche results in a company missing out on potential customers. Competitors working outside of the niche will eventually find ways to match the firm’s capabilities in serving the target niche. If the wants and needs of the target market start to switch over time, entry into the focused market can become easier for competitors as people look for different products and services.

Successful use of the Porter Model Analysis includes identifying the sources of competition, the strength and likelihood of that competition existing, and strategic recommendations for the action a company should take to develop barriers to the various forms of competition (Prahalad and Gary, 1990). With the realization about intensity and power of competitive forces, organizations can develop options to influence them in a way that improves their own competitive position. The result could be a new strategic option, e.g. a new positioning; differentiation for competitive products of strategic partnerships.

There are also some risks for each strategy. Upholding cost leadership can be risky because of the requirement of frequent capital investment to sustain cost advantage, then cost surges narrow price differentials and diminish ability to compete with other’s brand royalty. Differentiation strategy has some threats, such as imitation decreases alleged differentiation, buyers need for differentiation falls. Meanwhile, the risks for focus or niche strategy are the differences in preferred products or services between the strategic market and target as a whole narrows, the cost discrepancy between wide ranged competitors and the focused firms broadens to eradicate the cost advantages of allocating a narrow target or to offset the

Different organization looks at the level of technology that competitors used in production of their services. Another crucial thing is the evaluation of what the competitor’s customer are complaining about and takes it as an advantage of attract customers to the organization (Matthew, 2010).

Michael E. Porter, associate professor published the article titled “How Competitive Forces shape Strategy” in Harvard Business Review in 1979. This article is retitled as “The Five Competitive Forces That Shape Strategy” and published in Harvard Business Review in 2008. Michael E. Porter developed the model of Five Competitive Forces which is defined as “Competitive Strategy – Techniques for Analyzing Industries and Competitors”. It has become a main device for analyzing an organizations structure in strategic practices.

            Other environmental influences, such as competition, may fuel the company’s desire to create more and better products that could well determine their location and standing in the global market. Increase in the number of competitors for the same line of products may mean that there

However, competitors do not always conform to theoretical models. Some will always compete on brand first and leave it to others to build market interest for the product form. Arguments can also be made that competitors will respond differently than what the PLC suggests on such issues as pricing, number of product options, spending on declining products, to name a few.