Cost Leadership and Differentiation Strategies

Business-Level Strategy

Strategy focusing on competitive advantage and market scope.

Competitive Advantage

Edge gained over rivals through cost or differentiation.

Cost Leadership

Strategy aiming for lowest operational costs in industry.

Example: Walmart - "Everyday Low Prices"

Differentiation Strategy

Creating unique product offerings to attract customers.

Example: Rolls-Royce - Luxury and exclusivity.

Focused Cost Leadership

Competing on price within a narrow market segment.

Focused Cost Leadership: Budget airlines (e.g., Ryanair, Spirit Airlines).

Focused Differentiation

Offering unique products for specific customer needs.

Focused Differentiation: Luxury watch brands (e.g., Rolex).

Cost Leadership Advantages

Higher sales volume, price competition, market share.

Cost Leadership Disadvantages

Risk of price wars, reduced quality perception.

Differentiation Advantages

Customer loyalty, premium pricing, reduced competition.

Differentiation Disadvantages

Higher costs, risk of imitation by competitors.

BCG Matrix

Tool categorizing business units by market share and growth.

Cash Cows

High market share, low growth; generate significant cash.

Stars

High market share, high growth; consume and generate cash.

Dogs

Low market share, low growth; not worth investing.

Question Marks

Low market share, high growth; potential for stars.

Mergers & Acquisitions

Buying competitors to eliminate threats

Quality Perception

Marketing strategies to highlight superiority

Driving Competitors Out

Pricing or strategic positioning

Government Influence

Lobbying for favorable regulations

Which of the following is NOT one of Porter's four generic business-level strategies?

Market Penetration

A company that offers unique products to a broad market is following which strategy?

Differentiation

Which of the following is a key feature of cost leadership?

Low-cost operations and pricing

The BCG Matrix categorizes business units based on

Industry growth rate and relative market share

What is a disadvantage of the differentiation strategy?

High investment costs for R&D and branding

Which of the following is a key factor for sustaining cost leadership?

Building strong supplier relationships

What is the main advantage of the Focused Differentiation strategy?

Higher brand loyalty within a niche market

A business unit with high market share in a high growth industry is classified as a

Star

Why might a company choose a cost leadership strategy?

To compete on low prices and high sales volume

In the BCG Matrix, which business unit should a company "milk" for cash with minimal investment?

Cash Cows