Porter’s Generic Business Strategy
Cost Leadership Strategy
It is a low cost strategy focusing on broad mass market.
- Requires good scale facilities, tight cost and overhead controls and cost minimization in selected functional areas like manufacturing cost, marketing, r & d and advertising
Reasons for cost reduction:-
Frito Lay’s is a worldwide leading manufacturer of snack chips and has 8 to 10 top ten famous brand with brand loyalty customers. They have skills and thereby increase the productivity of the labour.
Specialisation and division labour
Standardization of work may increase productivity by labour. Efficency is the key factor with less training.
- Economies of scale
Mass production will reduce the cost. As per test market, Frito Lay’s will be serving about 1.98 million households that are identified as users of snack chips at the area of Minneapolis – St. Paul Metropolitan.
- Control of expenses can charge lower price to customer - Low price strategy serves as a barrier of entry to competitors
It is pursued when the product can be differentiated
Sun Chips Multigrain Snack is a crispy consisting of blend whole wheat, rice, corn and oat flours with lightly salty multigrain taste and slightly sweet aftertaste. Brand loyalty able to create barriers to entry for new entrants Frito Lay’s has good reputable brand name with their other well-known brand and it is difficult for competitors to entry for new entrants due to high cost of marketing. Frito Lay could use their brand name as the key differentiating strategy in attracting new customer
- Focuses on certain segments of the market in selling products
Frito Lay’s target market segment is those who is taking snack but not...