Majority of the
successful businesses follow mainly four generic strategies. Cost leadership is
mainly companies serving price-conscious customers. A good example in the USA
would be McDonald's, Walmart, Dollar Tree. When you think about McDonald's, you
can think about their drive-throughs, or the questionable meats, either way
there one can find a quick bit for a $1. The same thing with Dollar Store,
everything is $1 and that is a great attraction for price-sensitive customers.
Differentiation is
another strategy that works. Think about Zappos, which does not offer such
discounts, but due to their quality and service they can charge a premium to
their customers. Likewise, when we think about Whole Foods Market, this grocery
chain attracts a health-conscious crowd who mainly follow some sort of diet.
Whole Foods Market has all organic foods and diet-specific grocery. Because of
that, people following those special diets are often regular to the Whole Foods
Market, despite the higher price tags.
Focused Cost
leadership – Apple is a good example of focused cost leadership. Apple
manufactures premium products and only people above a certain income level can
afford Apple products.
Focused
differentiation – Carvana is a good example of focused differentiation. They
sell cars online, deliver it to your doorstep, and it is targeted towards the
millennials who love to shop online.
In this paper, I
will discuss “Focused differentiation”. For any company to be successful in the long term needs to differentiate itself from the competition. The major component
in focused differentiation is finding a niche demand and serving that market.
That niche can be a product or service. Finding that niche is most critical, like
whole foods market has found organic health food, Carvana has found selling cars
over the internet. Size of the Auto industry is worth 1 trillion, Carvana offers used
cars, financing to delivery(Forbes,n.d.).Apple has created an ecosystem and
keeps the customers inside that ecosystem. So, the differentiation in the
product or service happens when a segment is not served or could be served
better. Like when Blockbuster used to rent out CD/ DVDs Netflix came up with a monthly fee for unlimited DVD rental or unlimited streaming. The service got
differentiated and it was focused on the group who were not happy with
Blockbuster’s policies or had access to high-speed internet.
For any
organization following one strategy is essential but might not be enough. While
Walmart was a cost leader, Amazon grew quickly and became a cost leader too. Mostly
because of the scale, these firms can offer cheaper prices. In today’s world,
none of the strategies are impenetrable. While Amazon Prime was offering 2 days
free shipping, Walmart started offering the same and then Amazon is offering one-day
shipping now. WhatsApp was a differentiated product, but Facebook bought the
whole company to kill the competition. Being agile, customer-focused is very
important for every firm. Being customer-focused means, knowing or anticipating
what customer wants or might want and addressing those. Being a cost leader is
important but that cannot be the only one differentiator. McDonald's had a bad
reputation about the meat they use, and they had to launch “Our Food, Your
Questions” campaign to regain reputation. They have a long supply chain, but
they were open to having a 2 ways conversation with customers and skeptics about
the pork or beef they use ( Starkman,2014).
References -
Retrieved on
7/21/2019. Retrieved from https://www.forbes.com/companies/carvana/#34e6584c959e
Starkman, N (
October,2014). What McDonald’s New 'Transparency' Campaign Is Hiding. Retrieved
from https://time.com/3501921/mcdonalds-transparency-campaign/
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