The cost leadership strategy is suitable for businesses

Strategic Management
0
Strategic Management

Strategic Management
1
Part A
Porter’s Generic Strategies
Porter's generic strategies help a business to develop a competitive advantage within the target
market. The strategies that are given in this model include differentiation strategy, cost strategy
and focus strategy (Johnson,2016). A business chooses one of the strategies from these three in
order to be successful and to get a competitive advantage. Porter generic strategies are useful
for businesses as any business competes in the market by lowering the costs, by differentiating
products from other competitors and by using focus strategy. These three strategies are
described below in detail:
Source: (Johnson, 2016)
Cost Leadership Strategy: The cost leadership strategy focus on offering products and services
to the target market at a lower cost than competitors. Through offering low cost the company

Strategic Management
2
can gain a competitive advantage. The cost leadership strategy is suitable for businesses that
have direct control over the operating costs and have a good relationship with its suppliers that
strengthen the supply chain. With the help of a cost leadership strategy, the company can operate
in the market in the long run as this strategy is difficult to imitate by other competitors
(Echchakoui, 2018). The most suitable example is Wal-Mart.
Differentiation Strategy: This strategy focuses on product differentiation that means offering
unique and innovative products to the broader target market at the premium price. Businesses
with this strategy increase their profit margin and sustain in the market until the product becomes
obsolete (Viltard, 2017). Furthermore, this strategy is useful for businesses whose target
customers pay higher prices and not price sensitive and ready to pay an extra amount for value
and services such as Apple Inc. and Google.
Focus Strategy: The focus strategy includes targeting a niche market with one of the two
strategies stated above. The cost focus strategy includes offering products and services at low
cost to the niche segment or the narrow target market. The differentiation focus strategy includes
targeting a small group or niche market with innovative products and a unique proposition.
Strategy Clock
The strategy clock concept was founded by Bowman and David, hence named as Bowman’s
strategy clock. According to Bowman, “the factor of competitive advantage is then the factor of
cost advantage and influences the strategic positioning of the company and product position in
the market”. The purpose of this concept is to make businesses aware of the competition level in
the market so that accordingly they can select a strategy (Desai, 2019). This model evolved from
porter generic strategies and based on two aspects that are value perceived by customers from