Best-Cost Strategy VS Low-Low Cost Strategy
Q1: What is the difference between best-cost strategy and low-cost strategy?
Best-cost strategy is when the company makes an upscale product at a lower price which in turn gives more value to customers in exchange of money. This means that the strategy involves focusing towards customers who are value-conscious and are willing to pay money in exchange of a good that has upscale features. Low-cost strategy focuses on niche customers. They sell their products to those niche customers at a lower price than other produces selling the same products to the particular market segment. Their products have features and attributes that fit the tastes of the niche customers. Best-cost strategy creates competitive advantage as it looks at the broad market and there is much differentiation between products of their rivals where as the low-cost strategy they compete with rivals cost effectively by trying to reduce the cost of production inside the company and there is very little differentiation between their products to that of their rivals.
Q2: Give an example of both?
An example of best-cost strategy would be Toyota’s best-cost producer strategy for its Lexus line. They changed from making high quality Toyota models to premium quality Lexus models at a cost lower than other luxury car makers and they were able to do this because “Toyota’s supply chain capabilities and low-cost assembly know-how allowed it to incorporate high-tech performance features and upscale quality into Lexus models”.
An example of low-cost strategy would be Vizio, a company that designs flat panel LCD and Plasma TVs. They are among the lowest priced brands while having very high quality and the reason why they are able to keep their costs low is because they are manufacturing in Thailand and they have a major stakeholder called AmTran Technology, a company that handles the production. Making AmTran a stakeholder is a tactful low-cost strategy...
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