A useful framework for a firm to obtaincompetitive advantage over its rivals
1. Cost leadership
to be the lowestcostproducer in an industry.
compete on price
earn the highest unit profits
to achieve cost leadership:
Seek to setup production facilities for mass production as these will facilitate the economiesof scaleadvantages
Invest in the latesttechnology – improved
Seek to obtain favourable access to sources of raw materials.
Look to develop product designs that facilitateautomation.
Minimiseoverhead costs by exploiting bargaining power
Concentrate on productivity objectives and
constantly seek to improveefficiency and economy, e.g., value chain analysis.
provides something unique that is valuable to buyers
Differentiation occurs when the differentiated product is able to obtain a price premium in the market, which is above the cost incurred to create the differentiation.
As a consequence of differentiation being about uniqueness it is not really possible to give an exhaustive list detailing how a firm may differentiate itself.
To truly differentiate yourself we must understand the product or service offered and the customer to whom you are selling it
A focus strategy is based on fragmenting the market and focusing on particular market niche.
The firm will not market its products industry-wide but will concentrate on a particular type of buyer or geographical area.
Cost focus: This involves selectinga particular niche in the market and focusing on providing products for thatniche. By concentrating on a limited range of products or a small geographical area the costs can be kept low.
Differentiation focus: Select a particular niche and concentrate on competing in that niche on the basis of differentiation, e.g., luxury goods.