Business strategies are the course of action adopted by an organization for each of its businesses separately, to serve identified customer groups and provide value to the customer by satisfaction of their needs. *Business level strategies can be classified into the following types:*- Cost leadership
COST LEADERSHIP STRATEGY
Benefits associated with cost leadership strategy:
Cost leadership strategy provides the best insurance against ill-effects of competition with its low cost structure of products and services. Threat of cheaper substitutes can be offset to some extent by lowering the prices. Cost advantage acts as an effective entry barrier for potential entrants, who cannot offer the services at lower prices. Risks associated with cost leadership strategy:
Cost advantage is not for permanent basis, competitors can easily imitate them and duplication of cost reduction techniques makes the cost leader position in danger. This strategy is not market – friendly. Cost reduction can dilute customer focus and limit experimentation with product attributes. Companies successfully *following *c*ost leadership strat*egy: Sainsbury: It is UK’s largest grocery supermarket chain. They keep costs down, and have prices which are competitive, and get tremendous turnover. Failure of cost leadership strategy:
*Benefits associated with differentiation *strategy:
Distinguishing on the basis of product features leads to lessen competitive rivalries. Powerful suppliers can negotiate price increases that the organization can absorb to some extent as it has band loyal customers, who are less sensitive to price changes. It is a market and customer focused strategy leaves buyer satisfied as they get the special...