Big Lots Inc. can be taken as an example of a firm using a cost leadership strategy. This firm is the largest broadline closeout discount chain in the United States. It sells name-brand products which are less expensive than a discount retailer (35% less). Big Lots Inc. purchases its goods from foreign countries. The firm tries to decrease its costs in identifying various business / management approaches to satisfy the needs of its customers. Firms using this strategy use the value chain analysis to determine which part of its activity create value and which one doesn't create value. The firm may decide to get rid of some part of its activity in function of the result of this analysis as this will permit to reduce costs.
[...] The target of this type of firms is customers who value differentiation more than low prices. This strategy has as competitive advantage the uniqueness and broad target as competitive scope. As an example, Lexus proposes goods with a high level of quality and that makes the difference: people are different with this kind of vehicle because products have unique attributes. If a firm decides to sell a product that the price exceeds the cost of creating, it could be a way of differentiation and the firm can earn above- average returns. [...]
[...] The TQMS permit to have a bigger flexibility and to catch opportunities in reducing costs and in increasing differentiation. As every strategy, this one is not without risk. The main risk is that it is very difficult to be performing in the same time in low costs and in differentiation which create a value for customers. This is the riskiest strategy; the problem is that customers needs and wants tends to be more and more requiring: lower prices and more personalized and differentiated products. That's why firms integrate more and more this strategy: to answer to customers needs. [...]
[...] The business-level strategies (cost leadership, differentiation, focused cost leadership, focused differentiation and integrated cost leadership/differentiation) In this, the five business-level strategies are exposed: Cost Leadership, Differentiation, Focused Cost Leadership, Focused Differentiation and Integrated Cost Leadership/Differentiation. For each strategy, its advantages and drawbacks are presented. The first part deals with the Cost leadership strategy. The cost leadership strategy is strategy where the firm produces goods at low prices relative to its competitors. This strategy uses Cost as competitive advantage and a broad target as competitive Scope. [...]
[...] The fourth part is about the integrated cost leadership/differentiation. This is a strategy which is at the cross-point of the four last strategies. This is a combination if them. In our actual society, purchasers want differentiated goods at low prices. That's the reason why some firms try to cross these two advantages: low costs, Cost Leadership, and differentiation. The aim of firms which use this strategy is to produce products with some differentiated characteristics. Firms which have integrated this strategy must have adapted themselves to new technologies and rapid changes in their external environment. [...]
[...] The first is that a rival may focus on a more narrowly defined competitive segment and the result is that is “outfocuses” the focuser. The second risk is that another company finds the focuser segment pr target interesting and tries to enter in. For example Gap Inc. who decided to launch a new collection for a new target which is the same as Anne Fontaine. Gap Inc. is a very famous brand and Anne Fontaine will suffer from this new entrant. [...]
APA Style reference
For your bibliographyOnline reading
with our online readerContent validated
by our reading committee
