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Business strategy low cost differentiation. In this book. Low cost leadership and differentiation strategies laura allard november 21 2010 william hogan management cases upper iowa university abstract this paper discusses low cost leadership and differentiation business strategies. For example if two companies make essentially identical products that sell at the same price in the market place the one with the lower costs has the advantage of a higher level of profit per sale.
Others are cost leadership and focus. In a low cost strategy the true winner is the company with the actual lowest cost in the market place. Low cost strategy vs differentiation strategy october 7 2006 by charles sipe there are basically two strategic paths a business can travel down.
The value added by the uniqueness of the product may allow the firm to charge a premium price for it. There are three four generic strategies either lower cost differentiated or focus. Differentiation leadership focuses in providing perks that add value for consumers while higher prices are a sort of make up for their higher costs.
An integrated low cost differentiation strategy is where a business has differentiated products that are offered at a lower cost. Business professor and strategist michael porter wrote the book competitive advantage. Low cost differentiation and focus.
A company also chooses one of two types of scope either focus or industry wide offering its. Porter s generic strategies describe how a company pursues competitive advantage across its chosen market scope. Take the low cost path cutting costs as much as possible and then pass those savings to the customer in the form of lower prices.
When a firm pursues differentiation strategy it attempts to become unique in the industry by offering those products and services which have value to the customers. Differentiation strategy is built on a belief that one needs a clear and unique positioning. Leading cost leadership brands have obtained a major success by introducing revolutionary business models built on a single base the lowest possible prices for a given perceived value.
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