Program: banking and finance course: marketing of finances and coustomer services course code: bf
Definition of Competivive strategies
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mf test 2 2019
| Definition of Competivive strategies As mentioned above, competitive strategy is a long-term action plan of firms so as to gain a competitive advantage over its rivals in the industry. This strategy is focused to achieve above average position and generate a superior Return on Investment (ROI). This strategy is very important when firms having a competitive marketplace and several similar products available for consumers. The following are the four types of competitive strategies COST LEADERSHIP STRATEGY ➢ In business strategy Cost Leadership is establishing a competitive advantage by haveing the lowest cost of operation in the industry. Cost leadership strategy is difficult to implement for small scale businesses as it involves making long term commitment for offering products and services at lower prices in the market. Cost leadership is driven by cost efficiency (how much a company can peoduce in relation to the amount of time, money and resources needed,) size, scale scope and cumulative experience (growing in quantitative, strength or effect by successive additions or gradual steps). For this purpose firms need to produce products at low cost otherwise it will make no profits. ➢ Cost Leadership Strategy aims to exploit scale of production, well defined scope and other economies producing highly standardized products using advanced technology. Since the cost leadership means to become to become a low cost producer or provider in the industry any large scale business which can manufacture and provide products at low cost by attaining economies of scale (cost advantages reaped by companies with effective production) cost leader companies do compete on price and are very effective at such a form of competition having a low cost structure and management. ➢ There are many cost leadership factors such as ● efficient operation: The ratio between the output gained from the business and the input required to ran the business. ● Large distribution channels: A chain of business or large intermediaries through which a good or service passes until it reaches the final buyer of the end consumer. ● Technology advancement: the generation of information or the discovery of knowledge that advances the understanding of technology. ● Bargaining Power: The relative power of parties in a situation to exert influence over each other. Cost leadership is one strategy where a company is the most competitively priced product on the market, meaning it is the cheapest. You see examples of cost leadership as a strategic marketing priority in many big corporations such as China Mall, Choppies, Food Lovers Market etc. While it is difficult for many small businesses to compete with conglomerates on cost leadership, there are examples you find at a local level. Other examples of Cost Leadership companies are: ◇ HUNGRY LION The company has optimized the processes of cooking food, making them simple and easy to learn by all employees, reducing the learning curve as much as possible.Training – additionally, the company has a division of labour that allows them to recruit and train freshers as opposed to hiring already trained cooks, which allows them to pay low wages.Vertical integration – compared to competitors, Hungry lion owns the facilities that produce the the ingredient mixtures for their products, further minimizing its costs. In other words, the company manages to cut costs not only when it comes to raw materials and optimized human resources, but also by high asset utilization – yes, the one we saw in the previous point. Because they are able to produce the food as fast as possible, they are able to serve more clients as opposed to their competitors in the same amount of time. ◇ FURN CITY Furn City is an absolute leader in the furniture industry when it comes to low costs, and here is why: Standardized products – as opposed to competitors, Furn City doesn’t offer personalized products. Practically all of them are standardized, which allows the company to produce them in huge quantities for all of its stores worldwide. And achieve economies of scales that smaller competitors are just not able to.Self – assembly – the retailer seeks for suppliers who are able to manufacture quality subassemblies at the lowest costs possible, with customers having to assemble the furniture themselves. Which is one reason why their prices are so low, as Furn City doesn’t spend budget on employees for the assembly process. You could hire them additionally, but they are not included in the basic product price.Outsourcing – as many other companies do, Furn City also outsources the manufacturing of its products in low-wage countries, which allows them to cuts on costs additionally. Interestingly enough, Furn City also follows a differentiation strategy to a certain extent, along with its cost leadership advantage. The company practically fell invented a completely new and innovative business model that people love. DIFFERENTIATION LEADERSHIP STRATEGY This is one of the competitive strategies that involves identifying attributes of a product which are unique from competitors in the industry and using them to the firms’ advantage to build customer loyalty. The aim of this strategy is to identify and distinguish the attributes of its products and services from similar products that may exist in the market. It is the key to a successful marketing, competing and building a sustainable competitive advantage. Having a superior product is nothing if the customers are not able to separate it from other products, this now where we see the importance of these special features. Hence we see these firms invest so much in the development of making their products and services unique in terms of a superior brand image. Some of these may include the quality of the customer service, the design of the products and the special features that the product may include. Differentiation Leadership Strategy benefits businesses by; Download 470.67 Kb. Share with your friends:
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