Key Strategy Development Tools

Running Head: Key Strategy Development Tools 1
Competitive Strategies
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Key Strategy Development Tools 2
Introduction
The competitive advantage of any business is adopted through four generic strategies,
which allows the scope of business to differentiate products. However, the only key to strategic
challenge for many businesses is by finding a way of achieving a suitable competitive advantage,
with other firms. Porter introduced four competitive strategies; cost leadership, focus, leadership
differentiation as well as focus differentiation of a complete definition of competitive advantage
based advantages Magretta,2012 112). Thus, the strategies involve taking invasive practices,
with the aim of generating a defendable position in the firm. However, the strategies are crucial
since they aid businesses in coping with competitive forces they face, to do better than other
organizations. Literally, the firm only pursues one of the four strategies, although business makes
an effort of pursuing more than one approach. Nonetheless, Cost control and variation strategies
are primary ways that a firm would likely incur a competitive advantage.
Cost Leadership
The basic strategy of cost leadership is based on the lowest cost producer in the industry
since it is crucial in the market segments with the emphasis of minimal cost. However, cost
leadership is mainly associated with large-scale organizations that offer products with little
differentiation readily acceptable in the market. Occasionally, business under low-cost strategy
would likely set discounts on products and sales to ensure it generates a significant cost
advantage over competition (Reitsperger, Daniel, Tallman & Chismar, 2013 15). The strategy
main focus is based on efficiency, whereby business produces high volumes of standardized
products. Thus, the business’ hope of taking advantage of economic scales and experience curve
effects is satisfied. According to Porter, a business aiming to succeed through the low- cost
strategy should ensure that it shares preferential access to raw materials as well as components

Key Strategy Development Tools 3
(Banker, Mashruwala &Tripathy, 2014 874). However, no firm would avoid the effect of
increasing cost though, few have factored into theory competitive strategies.
It has never been easy for a business to select strategic cost analysis, due to inflation
which affects industries and companies differently. However, setting a lower-cost strategy must
involve the construction of a model that indicates value added at each step in the entire market
process (Thompson & Martin, 2015 55). Thus, the analysis background provides a backdrop of
formulating effective, as well as a defensive strategy which aids creating a competitive pricing
trap. To be precise, considering the beginning of modest companies, Wal-Mart was one of the
least company expected to expand. Wal-Mart accomplishment story is a distinctive model of a
business, which followed the lower-cost strategy by pursuing the core philosophy of cost
leadership (Rainer, 2011 312). Wal-Mart began in by establishment of discount stores in smaller
towns. In modern days, Wal-Mart has launched numerous groceries in the United States, and it is
the best example of companies which have achieved huge success over decades.
Cost Focus
Firms achieving higher efficiency of their products and services opt to widen the gap
between cost and perceived values, to create a greater profit margin. However, efficiency is
enhanced through cost focus by holding outputs and inputs in different ways. It has been argued
that larger companies create an efficient competitive nature through cost focus strategy since
they are likely to achieve economies of scale as compared to other small business. However,
with this strategy business seeks a low-cost advantage in a smaller number of the market
segment. Further, companies using cost focus strategies ensures that their products are basic, to
possibly ensure that similar products featured in the market are acceptable by consumers. Thus,
companies cost focus strategy do not basically change product prices, but relatively charges