Introduction
In today’s market, competition plays an important role for companies. The battle of competition forces companies to draw attention and create competitive advantage. The ultimate goal for a company’s future survival or success is to meet customer demands while keeping the costs down. Michael Porter, the write of “competitive Advantage: Creating and Sustaining Superior Performance”, defines three cost leadership approaches as generic strategies (Porter 's Generic Strategies, 2015). According to Porter, generic strategies include Cost Leadership, Differentiation, and Focus. He also subdivided the Focus strategy into two parts of Cost Focus and Differentiation focus. Cost leadership strategy refers to the lowest cost of operation …show more content…
This tactic is called Differentiation Strategy (Strategic Management Niche Differentiation, 2016). Usually there is only one Cost Leader in the market, as there is a high risk for others to enter the price war with the Cost Leader. Such attempt involves high risks and the results may be catastrophic for companies that have already invested heavily in Research and Development and product distinction. Ultimately, there is only one company that emerges as the true Low Cost Leader in each industry. Taking the second or third lowest price ranking will not change the game as there is always one winner in the industry (Strategic Management Niche Differentiation, 2016). For example, Southwest Airlines challenged the industry by promoting itself as a Low Cost Leader in the market. The company is known by its low prices and services, such as free checked bag or snacks that other airlines no longer offer. The airline reduces its costs by minimizing taxing and time spent on tarmac which increases the number of flights and passengers. But in response to Southwest, other airlines follow differentiation strategy by marketing “assigned seats”, a passenger comfort that Southwest does not offer (Strategic Management Cost Leadership,
In today’s market, competition plays an important role for companies. The battle of competition forces companies to draw attention and create competitive advantage. The ultimate goal for a company’s future survival or success is to meet customer demands while keeping the costs down. Michael Porter, the write of “competitive Advantage: Creating and Sustaining Superior Performance”, defines three cost leadership approaches as generic strategies (Porter 's Generic Strategies, 2015). According to Porter, generic strategies include Cost Leadership, Differentiation, and Focus. He also subdivided the Focus strategy into two parts of Cost Focus and Differentiation focus. Cost leadership strategy refers to the lowest cost of operation …show more content…
This tactic is called Differentiation Strategy (Strategic Management Niche Differentiation, 2016). Usually there is only one Cost Leader in the market, as there is a high risk for others to enter the price war with the Cost Leader. Such attempt involves high risks and the results may be catastrophic for companies that have already invested heavily in Research and Development and product distinction. Ultimately, there is only one company that emerges as the true Low Cost Leader in each industry. Taking the second or third lowest price ranking will not change the game as there is always one winner in the industry (Strategic Management Niche Differentiation, 2016). For example, Southwest Airlines challenged the industry by promoting itself as a Low Cost Leader in the market. The company is known by its low prices and services, such as free checked bag or snacks that other airlines no longer offer. The airline reduces its costs by minimizing taxing and time spent on tarmac which increases the number of flights and passengers. But in response to Southwest, other airlines follow differentiation strategy by marketing “assigned seats”, a passenger comfort that Southwest does not offer (Strategic Management Cost Leadership,