Cost Leadership In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage.
You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have: Access to the capital needed to invest in technology that will bring costs down.
A low-cost base labor, materials, facilitiesand a way of sustainably cutting costs below those of other competitors. 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.
One successful way of doing this is by adopting the Japanese Kaizen philosophy of "continuous improvement. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.
To make a success of a Differentiation strategy, organizations need: Good research, development and innovation. The ability to deliver high-quality products or services.
Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings. Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes.
Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments. The Focus Strategy Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low-cost or well-specified products for the market.
Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors. As with broad market strategies, it is still essential to decide whether you will pursue Cost Leadership or Differentiation once you have selected a Focus strategy as your main approach: Focus is not normally enough on its own.
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But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche.
Generic strategies apply to not-for-profit organizations too.
A not-for-profit can use a Cost Leadership strategy to minimize the cost of getting donations and achieving more for its income, while one pursuing a Differentiation strategy will be committed to the very best outcomes, even if the volume of work it does as a result is smaller.
Local charities are great examples of organizations using Focus strategies to get donations and contribute to their communities.
But you do need to make a decision: Porter specifically warns against trying to "hedge your bets" by following more than one strategy.
One of the most important reasons why this is wise advice is that the things you need to do to make each type of strategy work appeal to different types of people. Cost Leadership requires a very detailed internal focus on processes.
Differentiation, on the other hand, demands an outward-facing, highly creative approach. Use the following steps to help you choose. For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face, if you adopted that strategy.
Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies.Porter's Generic Strategies offer a great starting point for strategic decision-making.
Once you've made your basic choice, though, there are still many strategic options available. Bowman's Strategy Clock helps you think at the next level of details, because it splits Porter's options into eight sub-strategies.
Download-Theses Mercredi 10 juin May 10, · Insights between environmental scanning activities and Porter’s generic strategies: An empirical analysis. Journal of Management, 18(4), Kim, E., Nam, D.
I., & Stimpert, J. L.
(). Testing the applicability of Porter’s generic strategies in the digital age: A study of Korean cyber malls. Journal of Business Strategies, 21(1), Ratings: 1.
Similar to Porters Generic Strategy, Bowman uses cost advantage and differentiation advantage strategies. Bowman’s Strategic Clock The Bowman’s Strategic Clock posts many strategic points at each point of the clock. Published: Mon, 5 Dec The aim of this report is to analyse and evaluate the competitive strategy that Easyjet have utilised in order to develop their current .
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