Assessing cost leadership strategy and differentiation strategy

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What is cost leadership strategy and differentiation strategy? Is it possible for a company or business unit to follow a cost leadership strategy and a differentiation strategy? Why or why not? Support the answer

Cost leadership strategy emphasizes efficiency. By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. Walmart can be said to following a cost leadership strategy.

Differentiation involves creating a product that is perceived as unique. The unique features or benefits should provide superior value for the customer if this strategy is to be successful. Because customers see the product as unrivaled and unequaled, the price elasticity of demand tends to be reduced and customers tend to be more brand loyal. This can provide considerable insulation from competition. However there are usually additional costs associated with the differentiating product features and this could require a premium pricing strategy.

Companies like Mercedes Benz tend to be following such strategy.

source: http://en.wikipedia.org/wiki/Porter_generic_strategies#Cost_Leadership_Strategy

It is quite difficult to merge both cost leadership and differentiation strategy as a firm pursuing differentiation strategy will require higher investments in terms of R&D, product marketing and positioning, customer service, etc. and thus, will not be able to survive with cost leadership strategy. The company will need a premium pricing to remain motivated and continuously pursue such differentiation strategy.

What are the three (3) advantages and three (3) disadvantages of being a first-mover in an industry? Give an example of a company which used this strategy demonstrating the advantages and disadvantages.

The primary advantages of being a first mover are:

1) Ability to earn extraordinary profit margins, higher revenues and profitability due to absence of competition.

2) Ability to set standards and benchmarks in the industry and earn brand recognition and loyalty.

3) The first mover always possess a competitive advantage in terms of capitalizing new trends, changes,etc. in a business segment.

The disadvantages are:

1) The first mover strategy can be risky as well as costly to implement in the sense that the customer acceptance, needs and wants are relatively unknown and companies need to spend extensively on creating demand in a relatively new ...