Barmaliejus Being in the right location is a key ingredient in a business's success.
The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses.
Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time.
The cost leadership strategy usually targets a broad market. Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether.
If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. Firms that succeed in cost leadership often have the following internal strengths: Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.
Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. High level of expertise in manufacturing process engineering. Each generic strategy has its risks, including the low-cost strategy.
For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage.
Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. Differentiation Strategy A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition.
The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product.
Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily.
Firms that succeed in a differentiation strategy often have the following internal strengths: Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product.
Corporate reputation for quality and innovation. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments.
Focus Strategy The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it.
A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.
Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist.
Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well.
Some risks of focus strategies include imitation and changes in the target segments. Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. Finally, other focusers may be able to carve out sub-segments that they can serve even better.
These generic strategies are not necessarily compatible with one another. If a firm attempts to achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. For example, if a firm differentiates itself by supplying very high quality products, it risks undermining that quality if it seeks to become a cost leader.
Even if the quality did not suffer, the firm would risk projecting a confusing image. For this reason, Michael Porter argued that to be successful over the long-term, a firm must select only one of these three generic strategies. Otherwise, with more than one single generic strategy the firm will be "stuck in the middle" and will not achieve a competitive advantage.
Porter argued that firms that are able to succeed at multiple strategies often do so by creating separate business units for each strategy. By separating the strategies into different units having different policies and even different cultures, a corporation is less likely to become "stuck in the middle.International Business Chapter 12 Simplified Market Penetration Grid.
Chapter 8-Political Forces 6. How can international companies use their strengths to influence government policies? International business is not merely a passive victim of political forces.
It can be a powerful force in the world political arena. We are discussing the marketing mix of Pepsi. We know that the marketing mix is a dynamic process and is always changing with respect to price and alphabetnyc.com, kudos to Pepsi, which has always kept changing their marketing mix with the changing environment..
Here is . Four product/ market expansion grid stretegies Essay 1. Name and describe the four product / market expansion grid strategies and explain which strategy Google implemented with the Nexus One.
The Business plan on Four Product/ Market Expansion Grid Stretegies new products into new markets. The product/market expansion grid strategies which Google implemented with the .
Analysis of data from the Niger Delta and South-western Nigeria confirms that the cost of building construction in the Delta is about four times higher than South-western Nigeria, non-oil producing region. Jan 01, · The Product Market Expansion Grid, also called the Ansoff Matrix, is a tool used to develop business growth strategies by examining the relationship between new and existing products, new and existing markets, and the risk associated with each possible relationship.5/5(2).