Business strategy and models - Generic competitive strategies
3 important questions on Business strategy and models - Generic competitive strategies
What are the 3 means of achieving competitive advantage?
- Having structurally lower costs than your competitor.
- Having products that are differentiated from competitor's products or services that are so valued by customers that it can charge higher prices that cover the additional costs of differentiation.
- Focusing either on a narrow or a broad scope.
What are the 4 key cost drivers that help deliver cost leadership?
- Input costs
- Economics of scale - important when there are high fixed costs. Increasing scale reduces average costs of operation.
- Experience - cumulative experience gained by an organisation leads to reduction in unit costs.
- Product/process design
What are the 2 requirements for cost-based strategies?
- A business's cost structure needs to be lowest cost (i.e. lower than all competitors)
- Low costs should not be pursued in total disregard for quality.
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