Question

In an essay of 200 words discuss possible drawbacks and possible benefits of applying cost leadership and differentiation strategies along different brands of the same corporation.

Answer 1

A strategy is a pattern or program that incorporates into a consistent linear decision sequence the main strategies, priorities and actions of an organization.

1. One benefit in the case of cost leadership is that the focus of cost leaders on productivity makes them well-positioned to withstand rival market rivalry. The organization has a wide reach and covers many sectors of business, and can also work in similar industries; the size of the company is also essential to its cost advantage. Cost-benefit sources are diverse and rely on market structure. These can involve the achievement of economies of scale, patented technologies, raw material preferential access, and other factors. A low-cost commodity needs to identify and leverage all of the cost-benefit sources.

2. The most serious drawback to cost leadership is technological disruption that annuls the organization's past investment or learning. Often the management's inability to see or predict the changes needed in the change of product or market is a serious handicap. The benefit of the company may also be neutralized if there is low cost learning by newcomers to the industry or inflation in the cost of products or procedures that offer a competitive advantage for the organization.