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Competitive Scope
• Competitive scope can be in terms of two factors: broad target and narrow target:
i. Broad targeting: The firm can offer a full range of products / services to a wide
range of customer groups located in widely-scattered geographical area.
ii. Narrow targeting: The firm can choose to offer a limited range of products / services
to a few customer groups in a restricted geographical area.
We could classify business strategies into the following three types:
• Cost leadership (lower cost / broad target market) When the competitive advantage of an
organisation lies in lower cost of products or services relative to what the competitors have
to offer, it is termed as cost leadership.
• Differentiation (differentiation / broad target market) When the competitive advantage
of an organisation lies in special features incorporated into the product / service which is
demanded by the customers who are willing to pay for it then the strategy adopted is the
differentiation business strategy.
• Focus (lower cost or differentiation / narrow target market) They are niche strategies and
rely on either cost leadership or differentiation but cater to a narrow segment of the total
market.
• Quick Response (Responding to the market needs faster than your rivals).
Cost Leadership as a Business Strategy
• The basic objective in achieving cost leadership is to ensure that the cumulative costs
across the value chain is lower than that of competitors.
• Several actions could be taken for achieving cost leadership as mentioned below:
– Accurate demand forecasting and high capacity utilisation is essential to realise cost
advantages.
– Attaining economies of scale leads to lower per unit cost of product / service.
– High level of standardisation of products and offering uniform service packages using
mass production techniques yields lower per unit costs.