Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. Low-cost leadership strategies enable an organization to develop standardized products in large volume at low cost, which give that organization a competitive edge over the competitors in the market. With reverse positioning, a strategy to be used during the mature stage of the industry life cycle, a product escapes its category by deliberately associating with a different one. Cheesecake Factory differentiates itself along several different dimensions at once by offering, A successful differentiation strategy lowers entry barriers because of customer loyalty and the, A successful differentiation strategy increases rivalry since buyers become more price-. An important issue in evaluating the sustainability of a unique strategy is whether or not rivals will be able to imitate its strategy or create a viable substitute. Competitive advantage is not affected by actions by rivals from within and outside of the industry. ), vanilla/chocolate swirl ratio (I like my MooseTracks to have high vanilla content :-)), etc. Walmart is the low-cost option and Macy’s is (in theory) the high benefit option. So they decide to switch strategies to move into a benefit leadership position. Vigorous pursuit of cost reductions from experience. Walmart stores are not nearly as nice as Target’s and their store brand is arguably inferior to Target’s store brands. Jeff Bezos, their CEO, had this to say about his company’s strategy: There are two kinds of companies: Those that work to try to charge more and those that work to charge less. Given the attractiveness of premium pricing during the growth stage of the market life cycle. Long before Ron Johnson came, JCPenney customers had become accustomed to constant sales and coupons to the point where JCPenney was seen as essentially a benefit leader who was always willing to cut prices like a cost leader. Innovation is saying ‘no’ to 1,000 things. This is, The desktop computer is in the decline stage of the industry life cycle, but it is not dead because. His goal is that none of them die and they all come back after having captured many other dollars in the “battle” (the investment). Probably right inbetween those two but since it’s unclear to me exactly where, I typically choose Walmart or the specialty store because at least at those locations I know what I’m going to get. List of the Advantages of Cost Leadership Styles 1. Where does KMart fit? CA type 1: Cost Leadership Achieving Cost Leadership means that a firm sets out to become the low cost producer in its industry. The last thing I’ll mention on this subject is the idea of getting stuck in the middle between benefit leadership and cost leadership. Decisions, especially purchase decisions, are only made after estimating the net result of a cost/benefit analysis. 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