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9/22/18, 2(52 PMCollection – MSA 603 Strategic Planning for the Admin ...

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

Posted Date: September 20, 2018 9:46 PM Status: Published Overall Rating:

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Rita Vasquez

Of course. My understanding is that whenever a differentiation strategy is approached it increases the total cost to produce a good or service intrinsically. I believe the book gives the example of both Wal-Mart and Nordstrom. Each of these companies has taken a different business strategy, low-cost for Wal-Mart and differentiation for Nordstrom. Were Nordstom to try and emulate Wal-Mart's business strategy they would soon find that their implementation to reach a similar economy of scale would be impossible, the barrier to entry is much too high.

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

Posted Date: September 20, 2018 6:31 PM Status: Published Overall Rating:

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Elizabeth Spaman

My understanding is that low-cost and differentiation strategies can be compatible approaches in dealing with competition. Companies that pursue a both strategies may achieve higher performance than those firms that pursue a singular strategy. It’s like the old saying “don’t put all your eggs in one basket” because relying only on one strategy can lead to a company being vulnerable and having other companies copy the strategy.

Thread: Discussion#2 Posted Date: September 19, 2018 8:37 PM

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9/22/18, 2(52 PMCollection – MSA 603 Strategic Planning for the Admin ...

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Rita Vasquez

There are two main types of business-level strategy choices: low-cost and differentiation. These types of strategies intend to both define who a business is trying to target and how they intend to market to those customers. It is essentially the core extension of what a businesses mission statement intends to accomplish.

A low-cost business level strategy is seen in an industry where similar products are offered. For example, Family Dollar is a discount retail store that offers a number of home goods and items at a very low price, typically a dollar or more. They are in competition with other companies like Dollar Tree and Dollar General. They source many products from facilities that mass produce products, like aluminum foil and Halloween decorations at an extremely low cost. The products offered in each store may vary little from their rivals but they gain their competitive advantage from selling large quantities of items at a low enough cost to create an economy of scale. Some of the product offerings may be even from the same supplier. In some instances they may even sell the products before they pay their suppliers, which keeps their inventory costs even lower and can add to their total return on invested capital. These stores are very successful in their own industry, extreme discount retail. This would explain why there are a handful of these stores found in almost every city.

On the other hand, differentiation strategies are those that involve distinguishing a particular products, or set of products from their rivals. A company can distinguish their product offering in a number of ways: better design, superior function, or better branding, etc. An example of a business with a differentiation strategy is Urban Decay. They produce quality cosmetic products for women. They distinguish their products from their competitors, like Lorac and Too Faced by marketing to edgy younger woman who are looking for extreme colors and textures in makeup at a reasonable price ($15-45). They use ultra-modern color palettes that are said to be 'makeup that stays up'. Their common sayings include 'feminine, dangerous, and a lot of fun', which distinguish their offerings from their competitors that are more day-appropriate and colors that are more subdued. I personally use these products for different times of days and special occasions. Urban Decay is extremely successful in marketing and targeting a group of customers (young women out on the town) while still turning a considerable profit.

While there are merits to each of these types of business strategies, they are somewhat, mutually exclusive. It is not possible to be both the lowest-cost producer of an item while still being able to distinguish that product from its competition through discernible differences in quality, design, or marketing.

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