MARKETING MANAGEMENT (PAZARLAMA YÖNETİMİ) - (İNGİLİZCE) Dersi Strategic Management, Competition, and Marketing soru detayı:
SORU: The first strategy of Porter’s Generic Strategies is Overall Cost Leadership. What does it mean and how does it work?
The first strategy of Porter’s Generic Strategies is Overall Cost Leadership. What does it mean and how does it work?
CEVAP: The first strategy is Overall Cost Leadership, which highlights efficiency. The objective here is to achieve lowest production and distribution costs to offer lower prices than competitors. For achieving this, company offers standard products which are suitable for majority of customers. As a result, the company could obtain higher market shares. To reach cost advantage, companies may try to reach economies of scale (e.g. product designs aim to reduce manufacturing costs), obtain proprietary technology (e.g. advanced process technologies), or access to diverse and scarce raw materials (e.g. sourcing from most efficient suppliers or from diverse countries with different materials)63. One of the most popular companies using this strategy is Wal-Mart. At the centre of the company’s business model price leadership lies. Thus Wal- Mart provides products at lower prices than its competitors in retailing industry. With a motto of “Everyday Low Prices”, Wal-Mart adapts overall cost leadership strategy and retains its top position in Fortune 500 list for six consecutive years64. With low operational and overhead costs, Wal-Mart achieves reducing costs, therefore prices for customers. Furthermore, in the new fiscal year, by investing in e-commerce for its grocery sales (e.g. see proprietary technology above), the company aims to attract price sensitive customers to purchase more of its lowest priced products anywhere anytime. By providing lowest prices as well as shopping convenience, the company wins market share from its competitors. In Turkey, similar to Wal-Mart, A101 and BIM are following the same competitive strategy.
The first strategy is Overall Cost Leadership, which highlights efficiency. The objective here is to achieve lowest production and distribution costs to offer lower prices than competitors. For achieving this, company offers standard products which are suitable for majority of customers. As a result, the company could obtain higher market shares. To reach cost advantage, companies may try to reach economies of scale (e.g. product designs aim to reduce manufacturing costs), obtain proprietary technology (e.g. advanced process technologies), or access to diverse and scarce raw materials (e.g. sourcing from most efficient suppliers or from diverse countries with different materials)63. One of the most popular companies using this strategy is Wal-Mart. At the centre of the company’s business model price leadership lies. Thus Wal- Mart provides products at lower prices than its competitors in retailing industry. With a motto of “Everyday Low Prices”, Wal-Mart adapts overall cost leadership strategy and retains its top position in Fortune 500 list for six consecutive years64. With low operational and overhead costs, Wal-Mart achieves reducing costs, therefore prices for customers. Furthermore, in the new fiscal year, by investing in e-commerce for its grocery sales (e.g. see proprietary technology above), the company aims to attract price sensitive customers to purchase more of its lowest priced products anywhere anytime. By providing lowest prices as well as shopping convenience, the company wins market share from its competitors. In Turkey, similar to Wal-Mart, A101 and BIM are following the same competitive strategy.