Low Cost and Differentiation Strategies

Topics: Strategic management, Cost, Value Pages: 4 (1383 words) Published: January 22, 2011
Low-Cost Leadership and Differentiation Strategies
Laura Allard
November 21, 2010
William Hogan
Management Cases
Upper Iowa University

This paper discusses Low-Cost Leadership and Differentiation business strategies. The paper explains what each strategy is and how they can be applied, utilized and maximized as strategies for a company. Suggestion of methods to implement and the strategies are discussed, including when the strategies work best.

Low-Cost and Differentiation Strategy
Harvard professor Michael E. Porter of the Harvard Business School introduced the concept of strategic thought and planning in the business world. Managers evaluate and choose strategies they think fits the profile of their company to find success via a competitive advantage. The two sources that yield the highest competitive advantage are in the businesses cost structure, and its ability to differentiate its business from their competitors. Also, a business that chooses to implement strategies based upon one or both of these strategies usually experience above-average profits, compared to a business that does not create choose to create competitive advantages with cost or differentiation that usually experience below-average profitability (Pearson J.A. & Robinson R. B., 2011, p. 215). However, to support a sustained competitive advantage, a firm must possess some specific capabilities. The purpose of this paper is to discuss the required make or break capabilities in detail. Low-Cost Leadership Strategies

A low-cost strategy is to gain a sustainable cost advantage over competitors by either underpricing them to increase market shares, or earning a higher profit by selling at the industry average. Low-cost leadership means low overall costs, not just manufacturing or production costs. To sustain a low-cost leadership strategy a business should have access to capital, skill and expertise in designing products, and a low cost base and/or other methods...
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