Management 596

The five generic strategies involve the overall low cost leadership, broad differentiation, focused low cost, focused differentiation, and best cost provider. The overall low cost leadership strategy’s goal is to try to outperform rivals by having a lower cost structure. This can be done in two ways; under-pricing competitors and still make same profit margin or sell products at the same price and make bigger profit margins because of lower costs. There are multiple cost drivers in this strategy like economies of scale making the unit cost lower or even bargaining powers. Though this seems good there are also some weaknesses. The greatest weakness would be that theoretically it is very easy to imitate. The concept is easy to grasp but very hard to implement. Also the company may lose sight of major shift due to obsession over price. The best example of a company using this strategy would be Wal-Mart.

The broad differentiation strategy is striving for customer loyalty by offering a unique product to a broad spectrum. There is very little rivalry in this type of strategy due to companies being protected by brand loyalty. Looking at substitute products is nonexistent because it is a unique product. The barrier to entry is very high due to the differentiation. The drawbacks to this strategy would be that tangible products can be imitated. A great example of a company using this strategy would be Toyota. Most people know Toyota as a car company with very good history of being reliable and are not going to part ways with them.

The focused low cost strategy is concentrating on a narrow buyer segment and outcompeting rivals on costs, thus being in position to win buyer favor by means of a lower priced product offering. This strategy has a more specific product trying to meet the needs of a more specific customer such as; the rich, young, college student, etc. A good example of a company with this strategy would be Motel 6. They target the customers who want a pretty...