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Thread: Discussion 2 Post: RE: Discussion 2 Author:

Posted Date: September 21, 2018 12:08 PM Status: Published Overall Rating:

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Rita Vasquez

Hello Brittany,

I agree with your examples of low-cost business versus differentiation strategy. I would like to make one point however: there is a major difference between cost and value. Patrons may frequent McDonald's not only for the price of the items on the menu, but also based upon selection of taste. Meaning that some individuals prefer the taste of McDonald's food over one of their rivals, like Burger King. In this way customers place value in the taste of their food offerings, no matter what the price of the items are. In the same light many patrons frequent Starbucks for the atmosphere and are willing to pay the premium for it.

Thread: Discussion 2 Post: RE: Discussion 2 Author:

Posted Date: September 19, 2018 1:16 PM Status: Published Overall Rating:

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Sara Tisdale

Hi Brittany -

Thanks for sharing your thoughts on McDonald's and Starbucks. I couldn't agree more with your assessment of low cost and differentiation. Personally, one thing that drives my decision making is the quality of the actual food and how it was raised. I'll pay for a product that I know is on my plate as a result of intentional fair treatment and thoughtful growing practices. As a consumer, thinking globally is key for me and I am willing to find a company like Starbucks that offers organic meal choices, sustainably raised beans, and supports diversity through their hiring practices and donation choices. Starbucks ability to differentiate itself in the booming coffee market helps me come back time and time again regardless of price.

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Thread: Discussion 2 Post: Discussion 2 Author:

Posted Date: September 18, 2018 7:15 PM Status: Published Overall Rating: Brittany Edwards

A low-cost strategy is when a company can offer their products at a low cost compared to its competitors. "In commodity markets, competitive advantage goes to the company that has the lowest costs. Low costs enable a company to make a profit at price points where its rivals are losing money. Low costs can also allow a company to undercut rivals on price, gain market share, and maintain or even increase profitability," (Hill, Shilling, Jones, 2016). Essentially, a low cost strategy is when a company can provide the lowest cost for its product that attracts customers to choose their product/service. Differentiation is when a company distinguished itself from its rivals by offering something that is very hard to match. "Differentiation gives a company two advantages. First, it can allow the company to charge a premium price for its good or service, should it choose to do so. Second, it can help the company grow overall demand and capture market share from its rivals," (Hill, Shilling, Jones, 2016). I think that one main difference between the two strategies is that in differentiation, they are not just offering things at a cheaper price, but creating more value for the customers. Customers are willing to pay whatever price for that product because it holds more value to them. The low cost strategy may not mean that the product is better or more valuable, the customer just wants to buy it to save money.

A company that uses a low-cost strategy is Mcdonalds. Mcdonald's is a very commonly known fast food restaurant that sells breakfast, lunch, and dinner. Along with this they sell coffees, drinks and other desserts. Mcdonald's customers know they can get a full meal for less than $10, or even if they want to get something cheaper they can order from the dollar menu. I chose this company because it is a very well known example. I do think that this strategy is working for them. They have been around for a very long time, and they continue to change their menu in order to satisfy their customers. They do this all while maintaining their low-cost structure. If they wanted to become a high quality sit down restaurant, customers would probably no longer go there because they are used to the low-cost burger that they could get within minutes before.

A company that uses a differentiation strategy is Starbucks. Starbucks is known for their high- quality coffee drinks. You can also purchase breakfast, lunch, desserts, and other snacks at Starbucks. When ordering from there, there is no dollar menu, in fact you cannot buy anything from there for $1. Starbucks coffee has a distinct taste that customers value, which is why they choose to buy their coffee from there. I chose this example so I could compare them to Mcdonalds. I do think that Starbucks strategy is also working for them because of their distinct taste that customers value.

For example, if a potential customer is on their way to work in the morning and they want to grab a coffee. If they want to get a cheap coffee, they will go to Mcdonalds and get a small coffee for $1. If they are in the mood for a high-quality coffee drink, they will go to Starbucks and get their usual order from there, and probably spend around $4-$5. This is not to say that Mcdonalds coffee isn't good, it is just showing that some people place more value on Starbucks because it has its distinct taste that they enjoy, while others may place more value on the

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Mcdonalds coffee because it is cheaper.

Reference:

Hill, C. W. (2016). Strategic management theory & cases lms integrated for mindtap

management, 1-term ... access: An integrated approach. Place of publication not

identified: South-Western.

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