Respond to…
Describe the circumstances under which a firm chooses a low-cost strategy to attain a sustainable competitive advantage. What about the situations when a differentiation strategy is chosen? Provide specific real-world examples.
I feel if a company can keep its costs below its competition, it has secured a major advantage. A company can set itself apart by offering quality and unique products and superior customer service Differentiation and focus strategies for creating sustainable competitive advantage have changed the rules for marketing in an organization. No longer can a firm leadership direct their marketing activities toward a mass-market or broad demographic grouping. I would also like to point out that the company must systematically research customer’s preferences and its competitors to stay ahead of trends or to identify any threats.
Many apparel brands have used this strategy of a franchise-based model to expand and create a further reach into newer markets. The vertical restraints for this approach are the issue and concern regarding supply chain establishment. If this concern is not solved properly then there will be supply chain-related quality issues from the franchisee. It is more important in a food-related franchisee where quality needs to be the same throughout otherwise the brand value is diluted. Think of a brand like McDonald’s, if the quality at any of the franchisees is compromised the whole brand gets diluted. This is the primary reason where vertical restraints are creating a problem for franchise-based models. Organizations need to make sure that their supply chain is established and have no vertical restraints before using the franchisee based model to expand.
References
Douglas, E. (2012). Managerial Economics (1st ed.) [Electronic version]. Retrieved from https://content.ashford.edu/
Dupre, J. (2013) Shopper trends: Is a low price strategy sustainable? Just Food on October 22, 2014. Retrieved online at http://www.just-food.com/analysis/is-a-low-price-strategysustainable_id122341.aspx
Respond to…
The low-cost strategy is wherein a business produces its goods at a very lower price. The advantage of using a low-cost strategy is that it will help the business to capture the market share quickly when compared to companies that keep their product pricing high. This strategy works when the company during the market analysis identifies that there exists a demand for low-cost products. A firm may opt for a low-cost strategy to attain a sustainable competitive advantage. China has been very successful in implementing low-cost strategies for electronics and all other kinds of product manufacturing. It has helped many Multinational companies like Apple, HP, Samsung, etc. who enter into contract manufacturing and get their products manufactured at a much lower cost than they used to have when produced locally in the United States. Similarly, countries like Bangladesh have grown their textile industry and are manufacturing clothing for leading brands such as GAP, Tommy Hilfiger, etc. The low-cost strategy also works when the company understands that customers are not interested in paying more for a particular product or a service (Rothaermel, 2017).
A differentiation strategy is an approach which some businesses take to develop product or services which are unique and distinctive when compared to what is being offered by the competitors (Baroto, Abdullah, & Wan, 2012). An example of a product that is unique and distinctive is Apple iPhones and tablets. The customers are willing to pay a premium price for Apple products as they are exclusive and give a premium feel to the customers. The company takes advantage of product differentiation and earns enormous profits when compared to its competitors. Apple Inc has been very successful in creating hype around its products before they are launched. The company always provide attractive offers to its existing customers to upgrade their smartphone with the latest offering to help them feel valued. This strategy has help companies like Apple to differentiate itself from other smartphone manufacturers.
References
Rothaermel, F. T. (2017). Strategic management. New York, NY: McGraw-Hill Education.
Baroto, M. B., Abdullah, M. M. B., & Wan, H. L. (2012). Hybrid strategy: A new strategy for competitive advantage. International Journal of Business and Management, 7(20), 120.
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