What Is Cost Leadership And Differentiation?

What Is Cost Leadership And Differentiation?

1 Answer

  1. To gain a sustained competitive advantage over the rival firms, Porter came up with 4 generic strategies as explained below:
    1. Cost leadership: It is a strategy to become the lowest cost producer. Cost leadership is achieved by firms through economies of scale. They produce in large volumes and hence their production cost decreased. Businesses that are into offering of standard products without much customization opt for this strategy.
    2. Differentiation: This is a strategy where you position yourself as a business offering a unique product over your rivals. In differentiation strategy businesses usually charge their customers a premium amount because the offering is unique.
    3. Cost Focus: Here businesses focus on smaller markets and with a basic product offering which already exists at a higher price range. With this strategy they target smaller markets and at a lower price.
    4. Differentiation Focus: With this strategy businesses focus on niche markets with their unique offerings. The market segment is small, price charged is premium and the product offerings are customized or unique.

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