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Thread: Week 4 Post: RE: Week 4 Author:

Posted Date: September 20, 2018 3:02 PM Status: Published Overall Rating:

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Elizabeth Spaman

Hi Brian,

Great feedback and great point! I started with using McDonald's as a low-cost strategy but then read deeper on their strategy about how they have adapted to a balanced approach by focusing on the low-cost but also focusing on providing differentiation such as the speciality drinks, double drive-thru lanes, etc. I would definitely say they are continually meeting their efficient frontier!

Thread: Week 4 Post: RE: Week 4 Author:

Posted Date: September 19, 2018 7:21 PM Status: Published Overall Rating:

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Brian Mcleod

So, I went with McDonalds with using a low-cost strategy, but I can see your point that you make. They do offer specialty items that bring in specific customers, but I still feel that the ability to outperform competitors is due to the low-cost strategy that the company uses that leads to the specialty products that they sell. This quote on their website, “Regaining the customers we had lost by improving the taste and quality of our food, enhancing convenience and offering strong value" shows that they are committed to value for the customer. I don’t believe customers who go to McDonalds are not going there for a specialty items, I think they are more going for the value of the low-cost items and add on the specialty items when they are there. If there is a hybrid between the two strategies I believe that what McDonalds is doing would fall under that, as they are using a little of both.

https://corporate.mcdonalds.com/corpmcd/about-us/our-growth-strategy.html

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Thread: Week 4 Post: Week 4 Author:

Posted Date: September 18, 2018 12:49 PM Status: Published Overall Rating: Elizabeth Spaman

What are the main differences between a low-cost strategy and a differentiation strategy?

Low-cost strategy and a differentiation strategy are very different from one another as for as “gaining a competitive advantage” (Schilling, 2017)

The company whose business model is low-cost strategy is to produce large amounts of product or commodities to drive down costs. Having the cheapest product can be more attractive to the buyer enabling the company to make a profit from their ability to price point when their competitors are unable to.

The company whose business model incorporates the differentiation strategy takes on the higher costs of products to keep the differentiation (Schilling, 2017). A company can sue the differentiation strategy to help the company grow their overall demand and capture market share from its competitors. This strategy also has some downfalls which can lead to can increase cost structure if the costs outweigh the demand for the product.

If a company has an efficient internal business than it’s important for companies to the understand the strategy about achieving the right “balance between differentiation and low costs.” (Schilling, 2017) It’s extremely hard to achieve both low-cost and differentiation but the efficiency frontier tool is mention in the book as a way a company can find out if they should adopt the strategy of using the differentiation or low-cost model for their business strategy. The “efficient frontier” is a tool that pushes innovation and never stays the same but shows the best possible return a company can expect from their portfolio, given the level of risk that they’re willing to accept. It’s important for managers to understand their companies “why and how” in the industry to obtain a business strategy that effectively and efficiently operates to achieve a place where the company has reached the efficient frontier. Once a company has reached the frontier, they have truly achieved the competitive edge.

Low-Cost Company – ALDI

Aldi has maintained providing a provider of discounted products at up to 50% cheaper than their competitors and has been successful at this low-cost

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business strategy. Aldi doesn’t have the “bells and whistles” other department stores have which does provide an experience as well as higher costs. Aldi requires customers to bring and bag their own items and like Trader Joes, the majority of the products in Aldi stores are products from the company’s own brand line. Aldi also doesn’t sell most of the name brand products and believes that these brands make the customers pay for all their marketing expenses. The company is successful because they keep it simple, efficient and very clear of their “why and how” they operate.

Differentiation Strategy Company – McDonald’s

McDonald’s uses its intensive growth strategies to support continued business development and expansion. The company is widely known as a successful fast food chain that provides some low-cost foods compared to others but really focuses on developing and creating their own different mixtures of ingredients. McDonald’s strategy is working. Throughout the years, they have needed to apply the differentiation strategy to have the competitive advantage. McDonald’s is known for marketing the “Happy Meal” that included $0.50 toy that’s placed into a child’s lunch bag to make it more appealing for parent to purchase. In the past few years, they have developed the McCafé products. McDonald’s focuses on quality, convenience, and service.

References

Aldi. What is Aldi? https://www.feedough.com/aldi-business-model-aldi- cheap

Hill, C. W. L., Schilling, M. A., Jones, G. R. (2017). Strategic Management: An Integrated Approach, Theory & Cases. Boston, MA: Cengage Learning.

McDonald’s. Our Business Model. https://corporate.mcdonalds.com/corpmcd/about-us/our-business-model.html

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