Low Cost Strategy Essay

1697 Words 7 Pages
Chapter 5

1. Describe low-cost strategy. How does this relate to differentiation?
A. Low cost strategy is a business model where companies do everything in their power to reduce or lower their costs structure to compete in the market to sell their goods at a lower price than its competitors while maintaining the product quality. There are two types of strategies that include in implementation of the low cost strategies, they are:
a. Functional strategies &
b. Competitive strategies
Functional Strategies: functional strategies are those which help in design to improve the operating performance.
Competitive Strategies: are those which are intended to influence industry competition in its favor.
Company gains more and more profits when the company
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Porsche is one of the other company cars that concentrates only on young, youth and adventurous customers who would like to drive sports cars and Porsche is one of its kind company that produces a limited cars based on customer needs.

Focused differentiator, can create or invent new things for its customers and keep his market share stable and can increase the market share as the company doesn’t need to compete a large market where the competition is more which has more advantage over differentiator. Focused differentiator needs to keep up with the market changes to keep his market share as a competitor can replicate and make things work that can also produce products to attract over focused differentiator.
Despite of whatever the company manufactures or produces the company has to maintain and outperform their competitors and remain on top of the
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What opportunities and advantages do consolidated industries offer that fragmented industries do not?
A. Consolidated industry consists of those companies which are small in number but the companies are large in size whereas fragmented industries are quite opposite where it consists of large number of companies which are small or medium sized companies. In order to become a top notch leader in the industry companies need to consolidate and use new strategies like chaining, franchising, merging use of internet etc.
Chaining: cost leadership can be achieved by pursuing chaining strategy and allows large price reduction and maximize responsiveness. Cost and differentiation advantage can be achieved by chaining.
Franchising: The essential role of franchising is to; wide-spread the company business and maintain the quality and standards so that customers are always satisfied what they expect it from the previous franchise owner to the current franchise owner.
Merger/Merging: This strategy or merger is a type of business model which tries to own companies that are in the same industry or same space that helps in reducing competition as it takes over the other company in the same

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