Differentiation vs low cost provider

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Differentiation vs low cost provider

Differentiation vs low cost provider

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.

Differentiation vs low cost provider

These latter strategies are known as focus strategies Porter, A focused cost leadership strategy requires competing based on price to target a narrow market Table 5.

A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Instead, it charges low prices relative to other firms that compete within the target market.

There are ways to view movies even cheaper, such as through the flat-fee streaming video subscriptions offered by Netflix.

But among firms that rent actual DVDs, Redbox offers unparalleled levels of low price and high convenience. Several examples of firms pursuing a focused cost leadership strategy are illustrated below.

This allows the firm to attract customers that might not otherwise be able to afford a restaurant-quality pizza. The strategy has worked: Providing indoor seating creates expenses for fast-food restaurants. Checkers Drive In keeps its costs low by not offering indoor seating.

Checkers targets drive-thru customers and offers them big burgers at rock-bottom prices. Another important point is that the nature of the narrow target market varies across firms that use a focused cost leadership strategy.


In some cases, the target market is defined by demographics. Redbox machines are available on university campuses nationwide. In other cases, the target market is defined by the sales channel used to reach customers.

Most pizza shops offer sit-down service, delivery, or both. In contrast to most fast-food restaurants, Checkers Drive In is a drive-through-only operation. To serve customers quickly, each store has two drive-through lanes: These savings allow the firm to offer large burgers at very low prices and still remain profitable.

The Nature of the Focused Differentiation Strategy Focused differentiation is the second of two focus strategies. A focused differentiation strategy requires offering unique features that fulfill the demands of a narrow market Table 5.

As with a focused low-cost strategy, narrow markets are defined in different ways in different settings.Cost Leadership & Differentiation - This thesis examines the fundamental trade-off between low cost and differentiation strategy at a business strategy level.

In Porter introduced a model of generic strategies that has influenced much of the current thinking in. Being a low-cost provider is a basic business strategy. It is the straightforward strategy of selling at a lower price than your competitors. But even such a .

Low cost Strategy vs Differentiation Strategy. October 7, who have shown us that the low cost strategy can be effective. On the other side of the spectrum there’s Apple Computer, BMW, and Nike who have used a differentiation strategy, to build tremendous brand equity.

BMW, and Nike who have used a differentiation strategy, to build. Firms that charge relatively low prices and offer substantial differentiation are following a best-cost [1] strategy (Figure “Best-Cost Strategy”).

This strategy is difficult to execute in part because creating unique features and communicating to customers why these features are useful generally raises a firm’s costs of doing business. Definition of low cost strategy: A pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share.

It is one of three generic marketing strategies (see differentiation strategy and focus. Differentiation vs. Low Cost Provider Essay The first type of strategy we will discuss is the differentiation strategy. Differentiation strategy can be defined as a business strategy in which a company tries to gain a competitive advantage by providing a unique product or service, or providing a unique brand of customer service.

Cost Leadership or Differential