Exam (elaborations)
BUS 5117 Unit 5 Discussion Assignment
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A guide to assignment on cost-leadership strategy vs focused differentiation
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IntroductionEvery business requires a specific strategy to achieve its goals and stay competitive in its
industry. Professor Michael Porter has developed a generic business-level strategy that will help
firms to maintain their competitive edge and achieve long-term success (Kennedy, 2020). The
most common type of these strategies are cost leadership, differentiation, focused cost leadership
and focused differentiation.
These strategies are based on two competitive dimensions which are the firm's source of
competitive advantage and the firm's scope of operations (Kennedy, 2020). The first dimension
focuses on gaining a competitive edge by lower costs or by delivering new products with unique
features. The second dimension focuses on the scope of the market segment. This means if the
firm is looking to target a specific group of the market using high-end products or other
approaches or is aiming to attract the general market.
A cost leadership strategy is a strategy that focuses on lowering the firm's cost to gain a
competitive advantage. This strategy would be successful when the products or services provided
by the firm are generic and no real differentiation exists (Woodruff, 2010). Hence customers are
only interested in buying the cheapest that fulfills the minimum requirement. Firms that produce
or provide a large number of similar goods can focus on lowering costs by utilizing efficient
operations and minimizing transaction costs.
A focused cost leadership strategy is a strategy used by firms that compete in a narrow market
using the price to gain a competitive advantage. This is different from the above strategy in that
the firms don't compete with every other firm in the industry rather they compete with the firms
within their market scope. Here, the scope is very limited and a study of the firms operating
within this limited scope and their price needs to be known. Other firms may provide similar
products or services for a lower price but if these firms are outside the firm's market niche it
wouldn't be an issue.
A focused differentiation strategy is similar to the above strategy in that the market scope is
limited or focused when applying differentiation. The firm will focus on providing products or
services with a unique set of features that will allow it to stand out from its competitors in that
market group. This strategy is great for local firms that focus on developing brand loyalty by
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