21 September 2016
Learning Journal # 1 – Cost Leadership
Michael Porter developed a concept known as the competitive strategies. It consists of 3 separate approaches to create the framework for your business. I have decided to focus on the Cost leadership approach.
Cost leadership is the strategy that concentrates on keeping expenses down in order to offer the product at the most economical price. Keeping consumers happy with low prices ensures the business will always have a large customer base. It can be a very beneficial strategy and if implemented correctly, can be very lucrative. Lots of research and investigating must be done to ensure success. Also keep in mind that when you become the cost leader, you still have to maintain that position. This involves keeping your costs down in order to keep the selling price less than rivals, while still maintaining acceptable quality.
Competition helps us all strive to be better, if our competitors start providing a service for cheaper or start producing higher quality items it encourages us to do the same. I lived in a small town in Saskatchewan, if you needed anything from groceries to an electrician you only had one option. Therefor you either weren’t supporting the town or you were paying 7 dollars for a jug of milk. If another grocery store moves in you now have competition, and to compete you must adjust in some way. A cost leadership strategy is one of the ways to do this. On the opposing side businesses can offer quality over quantity, incomparable service over lacking customer service. My family owns a business in Maple Creek. We have a saskatoon orchard, farm to table bakery, and a gift shop. We try to get gifts made mainly in Canada, and flour...
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...e all cost in the value chain” (Thompson & Strickland, 1996, p. 228). Customers tend to want “Canadian made” items, but at “imported from China” cost. Industries need the balance of the cost leaders and the differentiation companies to give consumers the options and variety they want. Either strategy has been proven to work,
Davis, T. (2016). NEWLEAF EYES SOUTHERN MARKETS. Travel Courier, 51(29).
Huebsch, R. (n.d.). Cost Leadership & Competitive Advantage. Retrieved from Small Business: http://smallbusiness.chron.com/cost-leadership-competitive-advantage-35159.html
Stankevičiūtė, E., Grunda, R., & Bartkus, E. (2012). PURSUING A COST LEADERSHIP STRATEGY AND BUSINESS SUSTAINABILITY OBJECTIVES: WALMART CASE STUDY. Economics & Management, 17(3).
Thompson, A. A., & Strickland, A. J. (1996). Strategic management: Concepts and cases. USA: Irwin McGraw-Hill.
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