Cost Leadership

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Cost leadership Strategy

Strategy used by businesses to create a low cost of operation within their niche. The use of this strategy is primarily to gain an advantage over competitors by reducing operation costs below that of others in the same industry.

For example, The Swedish furniture retailer Ikea revolutionized the furniture industry by offering cheap but stylish furniture. Ikea is able to keep its prices low by sourcing its products in low-wage countries and by offering a very basic level of service and it allows Ikea to offer lower prices that attract customer.

Differentiation strategy
Approach under which a firm aims to develop and market unique products for different customer segments. It is usually employed where a firm has clear competitive advantages, and can sustain an expensive advertising campaign.

For example, in consumer electronic there is Sony Company. Sony provide a lot of thing in electronic thing like Vaio for computer, Xperia for hand phone, Sony walkman for music players and etc which they are different from other rival in such their style, specification and quality.

Focus strategy

Refer to the business level strategy based on providing products or services to a specific niche within industry. The firm would narrow its focus on a smaller market niche and decide whether to go for cost leader or differentiation focus.

For example firm who decide focus on cost is Mydin that provide low cost product which their focus is for middle class people who can afford their price. While another example for focus on differentiation is Ferrari which have differentiation strategy focus in car industry. They made their product by hand made.

Achieving a sustainable competitive advantage over the other competing products and firms in a market is a one of goals for the company. It can be achiece by using Porter's Generic Strategies.

Diagram above show the three generic business level strategies adopted from Porter, 1985. The three...
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