Cost Leadership is achieved by an organization that is in a position to bring a product to market which offers the lowest price and ideally highest quality in a particular product or service segment. Many companies are using this strategy to gain market shares and compete with other competitors. Major objectives of the companies implementing cost leadership strategy are either gain market share or earn a higher profits than rivals.
Examples of Cost Leader companies : Nissan and Dell computers
Nissan - Nissan uses global deployment to lower it production costs, which makes its products less expensive than other car manufactures. Moreover, Nissan's promises competitive parts pricing is ensured through an elaborate Annual Parts Price Survey in collaboration with Principals. Therefore, customers are assured of the lowest cost of ownership.
Dell - Dell's mission statement has stated that the company is providing competitive price to its customers. Compare to other computer manufactures, Dell's computer is relatively lower than others. Most people will categorize Dell as the low price computer producer.
Differentiation involves creating a product that is perceived as unique. The unique features or benefits should provide superior value for the customer if this strategy is to be successful. Because customers see the product as unrivaled and unequaled, the price elasticity of demand tends to be reduced and customers tend to be more brand loyal. This can provide considerable insulation from competition.
Examples of Product/Service Differentiate companies: Dr. Pepper and Jenn-Air
Dr. Pepper - Dr. Pepper is a soda company that offers a regular soda, a diet soda, a decaffeinated soda, and a diet-decaffeinated soda all under the same brand name. Each type of soda is directed at a different segment of the soda market, and the full line of products available will help to establish the company's name in the soda category.
Jenn-Air - Jenn-Air differentiates by its features of different ranges. Jenn-Air appeals to customers as the "proud gourmet." The emphasis is design elegance and a contemporary aesthetic.
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3 comments:
Having a unique product sure helps to gain market share in a perticular industry but the product has to good also. Imagine a regular citizen walking into a store, do you think he would most likely go for Dr. Pepper, Coca Cola, or Pepsi? People are familiar with Pepsi's taste because its been around for a while. Also, last year Profit Margin of Dr. Pepper was no where near Pepsi or Coca Cola company's PM.
I am totally agree with your opinion. I think a company just being product differentiated is not enough and that is why Dr. Pepper is not so well positioned in the market. However, product differentitation is the business strategy that Dr. Pepper uses to survive in this competitive market.
Dell is a great example of the cost leadership strategy. Technology has advanced in the last couple of years. Today, personal computers can be purchased fairly inexpensively. Many computer companies have adopted Dells strategies as a model for their own company. Dell, no longer possess the same advantage as it once used to. It has a very strong brand name but, consumers have much option when it comes to purchasing a personal computer. On another note, I agree that Dr Pepper has an established brand name but, I disagree that it possesses a competitive edge over other soda companies. It does offer a variety of products but, it is the same as every other soda company. The soft drink industry is very competitive and it is difficult to say whether one company has a competitive edge over another. Coca-Cola has a much more established history and is served in every restaurant therefore it is a dominant player in this industry.
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