Sun. Mar 24th, 2019

Identifying Basic Competition Strategies.

Cost leadership, differentiation and focus as competitive approaches in business

The three competitive strategies.

Basic Competition Strategies That Are Derived From Competitive Advantages And Competitive Scope

Identifying competitive strategies is vital to the success of every one’s business. This is done to minimize cost, gain a large market share and maximize profit.

Below are the competitive strategies which a business can undertake to best suit their needs and objectives.

Cost Leadership Strategy.

Cost leadership strategy, according to Wikipedia, is establishing a competitive advantage by having the lowest cost of operation in the industry.

To implement the cost leadership strategy, the firm should have several advantages, already in place, examples are;

  • The infrastructure should be large enough to enjoy a scale advantage..
  • The business or firm should have a source of cheap materials or availability to cheap materials.
  • The firm should seek to cut production costs at all stages.

READ HERE [ The Marketing Environment ]

The foundation for all business strategy is to seek cheaper production costs than competitors, and attention should also be paid to quality and service.

Advantages Of Cost Leadership Strategy.

  • Large scale investment.
  • Sell at a low price to gain market share.
  • Buy materials at a cheaper price once a high market share is achieved.
  • High profit, continue to invest to reduce prices.
  • Ability to negotiate with your suppliers since materials are bought in large volume.
Lowest Prices Guaranteed Under The Cost Leadership Approach
Lowest Prices Guaranteed Under The Cost Leadership Approach

READ HERE [ Developing Marketing Strategies.]

How Can Low Costs Help The Business To Compete ( According To Porter’s 5 Forces Model )

  • Customers; firms can offer lower prices to their customers relative to other competitors.
  • To potential competitors, low cost creates a barrier and makes the market less attractive to other people that wants to enter the market.
  • To substitute products, low cost creates a more favourable position for the firm.

Summarily

When selecting the cost leadership strategy, the business should have some advantages in place in order to be able to implement it and have the ability to continously improve its skills and also match organisations strategy.

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