Broad Target
Narrow Target
Lower Cost
Differentiation
- Cost Leadership – the firm sets out to be the low-cost producer in the industry (also called the cost leader).
- This can be achieved by firms where low-cost producers sell a standard product to a broad target of the industry customers
- Examples: IKEA and Walmart
Broad Target
Narrow Target
Lower Cost
Differentiation
- IKEA and Walmart are examples of cost leaders.
- They make large profits by selling their products a little cheaper.
- Differentiation – the firm offers something unique compared to other firms in the industry. In this case a firm tries to find the aspects of the product that customers appreciate.
- It may be
- The product itself (technology/design)
- Service (during and after the sale)
- Image (brand)
- The customer is willing to pay a premium for those aspects compared to the standard product in the industry.
- Examples: Elisabeth Arden
Caterpillar
Broad Target
Narrow Target
Lower Cost
Differentiation
- Cosmetics from Elizabeth Arden.
- This is a B2C product where they differentiate themselves from competitors in the industry with their brand image and how their products are displayed in stores.
- Construction machinery from Caterpillar
- Their differentiation is the product itself ( it has a very high quality) and after sales service it’s easy to get spare parts. These two factors are very important parameters in the construction industry for which customers are willing to pay a premium.
- Focus Strategy is different from the previous two because it rests on the assumption that there can be a narrow competitive scope within an industry.
- The focuser selects a segment or a group of segments in the industry. It tailors the strategy to serving them to the exclusion of others. By optimizing its strategy for the target segments, the focuser seeks to achieve a competitive advantage in its target segment.
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