Cost Leadership And Product Differentiation

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Outline the concepts of cost leadership and product differentiation (5 marks).

The concept of cost leadership is often directed by how efficient the company is, the size of it, the scale and scope of the company and how much experience the company actually has.

One of the strategies a company will have to ensure their cost leadership is efficient is making full use of the scale of the product production, they will also have a good product scope and even a good purchasing approach to what products they purchase. These strategies produce highly standardized products and also use a high amount of technology.

The concept of cost leadership “involves aiming to have the lowest costs or to be the most price-competitive in the market. A key aspect
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This ensures the supplier obtains a guaranteed minimum return.
The company can save money because of economies of scale generated.
This guaranteed supply means the business can ensure that stock levels are maintained.

In marketing, WireFree Technology can use the competitive strategy of product differentiation. This is the process of distinguishing a product or service from other products and services, to make it more attractive to a particular target market that the company has. This involves making the product different from the company’s competitor’s ' products as well as the company’s own products.

“Product differentiation means distinguishing products (goods or services) in some way from those of competitors”. Besides cost leadership, another strategy that the operations managers from Wire Free Technology can use is competing in the market with their own style of product differentiation.
This method can be applied in simple and more complex ways for WireFree Technology’s product.
Differentiating the products include:

Varying the actual product
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Keeping this awareness across a range of business activities will help the company to identify where other competitors are strong and where they are weak. This allows companies like WireFree Technology to see where other businesses are open to competition.
This can also help in analysing the sources of competitive advantage for the business.
WireFree Technology would need to ensure they have a easy to understand process to :be able to regularly collect and share relevant information about the other businesses in the same market, both inside and outside of the business’s sector. An example if focusing on a specific issue such as online marketing. They would research the other business’s online marketing and share the information with each other, discuss the information with each other and they’d learn from it.

3. Focus most of the business’s attention on the IT

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