Describe the nature of focused cost leadership and focused differentiation. Know the advantages and disadvantages of focus strategies. Companies that use a cost leadership strategy and those that use a differentiation strategy share one important characteristic: These efforts to appeal to broad markets can be contrasted with strategies that involve targeting a relatively narrow niche of potential customers.
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.
Differentiation In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers.
It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.
Focus The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants.
Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry.
The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments.
Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments.Cost leadership and focused, cost leadership Cost leadership is a strategy that companies use with an aim of obtaining supremacy in cost.
Companies that use this strategy look for various ways in which to lower their costs most.
It’s a fantastic perspective to have for a company that is so single-mindedly focused on cost leadership. Occasionally, some entrepreneurs and even business leaders will come up with an idea and immediately revert to the plan of doing it for the lowest price.
A focused cost leadership strategy requires competing based on price to target a narrow market. A firm that follows this strategy does not necessarily charge . A focused cost leadership strategy requires competing based on price to target a narrow market (Figure “Focused Cost Leadership”).
A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Focused differentiation occurs when _____. A product has a better product/service within an industry segment. Focused cost-leadership is observed when a product has the lowest cost ________.
Learn focused+cost+leadership+s trategy with free interactive flashcards. Choose from different sets of focused+cost+leadership+s trategy flashcards on Quizlet.