Team: Strategies
1. Broad Cost Leader
2. Broad Differentiator
3. Niche Cost Leader (Low Technology)
4. Niche Differentiator (High Technology)
5. Cost Leader with Product Lifecycle Focus
6. Differentiator with Product Lifecycle Focus
12.1 Broad Cost Leader
A Broad Cost Leader strategy maintains a presence in all segments of the market. The company will gain a competitive advantage by keeping R&D, production and material costs to a minimum, enabling the company to compete on the basis of price, which will be below average. Automation levels will be increased to improve margins and to offset second shift/overtime costs.
Mission Statement
Low-priced products for the industry: Our brands offer solid value. Our stakeholders are
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Automation levels will be increased to improve margins and to offset second shift/overtime costs.
Mission Statement
Reliable products for low technology customers: Our brands offer value. Our stakeholders are bondholders, stockholders, customers and management.
Tactics
Research & Development: We will concentrate our existing product line into the Low End and Traditional segments. The traditional product will migrate to the Low End segment. The High product will migrate to the Traditional segment. During the early years we will migrate (gradually) our Performance and Size segment products to the Traditional segment. We can also introduce a new product to work in the Traditional market.
Marketing: Initially we will attempt to keep pace with the awareness and accessibility of our competitors ' products. After we establish our cost leadership position we will revisit our situation to decide whether sales and promotion budgets should be reduced or if we should continue to match our competitors. Our prices will be lower than average.
Production: We will significantly increase automation levels on our products. However, because automation sets limits upon our ability to reposition products with R&D, we will postpone automation for the High End and Size products until they arrive in the Traditional Segment. We will prefer second shift/overtime to capacity expansions.
Finance: We will Finance our investments primarily through long-term bond
Integrating strategy and managerial characteristics suggests that when comparing market leaders and cost leaders, the market leader should be higher in all of the following EXCEPT
2/13/2017: Broad cost leader strategy is chosen by the team. The strategy’s impact on marketing to keep low costs and maintaining competitive pricing were discussed.
The cost Leadership strategy is able to provide products and services at a lower rate than competitors. The reason for Amazons strength is the fact that Amazon has a large variation of products to achieve economies of scale.
When figuring pricing strategies within the perfect competition model a firm must consider that the attributes of the product and any cost advantages will eventually be exposed, and will either be mimicked or beaten (Whinston, 1995). Though the perfect competition model is ideal, it is seemingly impossible for a single firm to consistently produce its services and goods at the lowest cost. Thus, the perfect competitor must continuously seek to improve cost management, its production technology, and even the economies of scope. The most effective way to do so is through the cost leadership strategy (Kimmons, 2013). This strategy both requires and allows the corporation to constantly seek ways to further decrease costs, enabling the firm to stay more advanced with leverage over the competition. This process needs to be repetitive, in order to maintain established leverage.
In cost leadership, a firm sets out to become the lowest cost producer in its industry.
"Cost leadership is where an organization accomplishes relatively lower costs than their rivals and competes across a broad range of divisions" Thompson, (2005). An organization must be willing to offer their products at the lowest possible price without making any compromises in the quality of the product. It does not imply that the company has to offer their product at the lowest market price as those products are often regarded as inferior. A company which concentrate on cost leadership strategy will be able to produce greater profit margins by marketing more product units. "Cost leadership can be accomplished by superior management, concentrating on cost-saving opportunities,
Price is considered as one of the most important 4 P’s of marketing. Price plays an important role toward the success of both types of small and large scale businesses. Price strategies are considered as basic step for marketing. Without deciding a price, companies cannot run their business in a well organized way. Price is considered as a flexible variable among the 4 P’s because price can be changes with changes in the overall marketing structure. My selected element from 4 P’s is price. In this essay, I will describe the ways through which price managers can perform their duties and responsibilities in an organized way.
Cost leadership: this is about gaining superior profits through lower cost. This strategy concentrates on aiming to become the lowest cost producer in the industry through economies of scale. This strategy allows the company to compete on prices with other producers and gain high profits. Here, company’s focus is onto cost reduction. In addition competitive advantage is gained by reducing costs.
The advantage in practicing cost leadership strategy is that a firm can maintain the company’s profit and expand their market share which Lenovo would be able to do if they using direct exporting. Besides, the cost leadership strategy also makes it difficult for new companies to enter the market because of thin profit margin. (Huebsch, 2016)
These types are cost leadership strategy, differentiation strategy and focus strategy.cost leadership strategy is when a organization exploits all opportunities that will have a cost advantages to become the lowest cost producer in the industry and be the lowest cost producer leader. Differentiation strategy is when an organization to be unique in the market by producing products and service that are patronized by customers and deemed different from competitors. The third strategy would be when a organization focus on one market or one group of segment in the industry, it narrows down its focus and aims to serve them well, this strategy is characterized as focus strategy or segmentation strategy. Thus, overall, the segmentation strategy is based on a narrow market scope, whereas differentiation strategy and cost leadership is based on the wider market sector. However, what distinguishes the cost leadership strategy from differentiation strategy is the low cost
money. By bundling our software and support, the need to seek other or outside IT
The goal of a cost-leadership strategy is to reduce the firm’s cost below that of its competitors. The cost leader, as the name implies, focuses its attention and resources on reducing the cost at which it is able to offer a product or service (and still make a profit in the long term). The cost leader optimizes all of its value chain activities to achieve a low-cost position. Although staking out the lowest-cost position in the industry is the overriding strategic objective, a cost leader still needs to offer products and services of acceptable value.
While researching online and throughout the reading it was very evident that it is important to remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services Porter (1985). The cost or price paid by the customer is a separate issue! For me understanding that the Cost Leadership strategy revolves around being the leader in relations to the cost in the industry or market in which our society thrives on daily. Over the years many companies have come to the realization that just being amongst the
In terms of future career, the case study equips me with the knowledge necessary to design a product and operation procedures that brings the best out of the entity by offering consumers non-compromised products and services. Value adding draws the difference between the best organizations and those that are lagging behind. Today, technology is a highly essential element of the business setting. It changes with every wake and consumers would like to know that their favourite entity is doing enough to stay at pace with current trends and ensuring their convenience. Through value adding procedures such as building a brand and ensuring consumer convenience, a company is able to create daylight between itself and competitors. The role of
The generic strategies include cost leadership, differentiation and focus apply in business unit level. Generally, the cost leadership strategy never applicable in luxury industry. This is because most of the consumer purchasing luxury goods do not care about price point.