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Focused cost leadership strategy - strategic management - Manu Melwin Joy

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A focused cost leadership strategy requires competing based on price to target a narrow market.
A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Instead, it charges low prices relative to other firms that compete within the target market.

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Focused cost leadership strategy - strategic management - Manu Melwin Joy

  1. 1. Focused cost leadership strategy Strategic Management
  2. 2. Prepared By Kindly restrict the use of slides for personal purpose. Please seek permission to reproduce the same in public forms and presentations. Manu Melwin Joy Assistant Professor Ilahia School of Management Studies Kerala, India. Phone – 9744551114 Mail – manu_melwinjoy@yahoo.com
  3. 3. Business Level Strategies
  4. 4. Focused cost leadership strategy • A focused cost leadership strategy requires competing based on price to target a narrow market. • A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Instead, it charges low prices relative to other firms that compete within the target market.
  5. 5. Examples of Focused cost leadership Redbox uses vending machines placed outside grocery stores and other retail outlets to rent DVDs of movies for $1.
  6. 6. Cost Leadership • Perhaps the most famous cost leader is Walmart, which has used a cost leadership strategy to become the largest company in the world. • The firm’s advertising slogans such as “Always Low Prices” and “Save Money. Live Better” communicate Walmart’s emphasis on price slashing to potential customers.
  7. 7. Common characteristics • The ability to charge low prices and still make a profit is challenging. • Cost leaders manage to do so by emphasizing efficiency. • As part of the effort to be efficient, most cost leaders spend little on advertising, market research, or research and development. • Many cost leaders rely on economies of scale to achieve efficiency. Economies of scale are created by selling more items.
  8. 8. Examples of Cost leadership • McDonald's - McDonald's has been extremely successful with this strategy by offering basic fast-food meals at low prices. They are able to keep prices low through a division of labor that allows it to hire and train inexperienced employees rather than trained cooks.
  9. 9. Examples of Cost leadership • Ikea -The Swedish furniture retailer Ikea revolutionized the furniture industry by offering cheap but stylish furniture. Ikea is able to keep its prices low by sourcing its products in low-wage countries and by offering a very basic level of service.
  10. 10. Examples of Cost leadership • Southwest Airlines - Southwest attempts to offer the lowest prices possible by being more efficient than traditional airlines. They minimize the time that their planes spend on the tarmac in order to keep them flying and to keep profits up.

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