Cost Leadership and Differentiation Strategies Simulatenously Essay Example

Cost leadership and differentiation strategies are popular research topics within the field of strategy and have been widely discussed, in particular since Michael Porter presented his model of generic strategies in 1980. Some rearchers, in fact, refer to this model as being among the most significant contributions to the strategic management literature. Whether cost leadership and differentiation strategies are mutually exclusive is a far less discussed issue however, as evidenced by the relatively scarce literature on the topic. During the end of the 1980s and the beginning of the 1990s there was a debate going on regarding the existence of a trade-off but it seem to have faded with the introduction of Japanese cost control methods, i.e. Total quality management (TQM) and Just in time (JIT). Grant (2005) argues: “Common to the success of Japanese companies in consumer goods industries such as cars, motorcycles, consumer electronics, and musical instruments has been the ability to reconcile low cost with high quality and technological progressiveness. The total quality managements methods that they adopted exploded the myth that there is a trade-off between high quality and low cost. Thus while adherents of Porter’s theory argue that cost leadership and differentiation strategies are irreconcilable, opponents advocate that a trade-off does not necessarily need to be, and refer to companies i.e. IKEA, Southwest Airlines, Toyota, IBM, Caterpillar, Wal-Mart and McDonald’s as examples of firms that have successfully reconciled both strategies and thus enjoy “dual competitive advantages
It is possible for a company to continue a cost leadership strategy and a differentiation strategy simultaneously but it does not work for everyone. Some businesses rather follow the low cost way by striving for efficiencies and economies of scale rather than focusing on differentiating themselves from the competitors in a way other than price. Some companies like Toyota have