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Cost Leadership and Differentiation Strategy

Answers must be detailed and in paragraph format 2-3 for each (please do not use what may already be posted on BrainMass). Give source(s) if possible.

a. Is it possible for a company or business unit to follow a cost leadership strategy and a differentiation strategy simultaneously? Why or why not?
b. Discuss how a corporation's structure and culture could be internal strengths and/or weaknesses
c. According to Porter, what determines the level of competitive intensity in an industry? Do you agree or disagree and why?

Thank you.

Solution Preview

Hi,

Good questions! Let's see what the business literature has to say.

RESPONSE:

a. Is it possible for a company or business unit to follow a cost leadership strategy and a differentiation strategy simultaneously? Why or why not?

Yes, it is possible, and often recommended.

According to the business literature, for example, integrating cost leadership and differentiation strategy is indeed advantageous and well suited for today's business world. And, it is predicted that this 'hybrid' strategy may be even more important--and more popular--as global competition increases. In comparison to companies who use one generic strategy, this hybrid strategy allows the company to adapt more quickly to changes in the environment and learn new skills and technologies.

This hybrid approach would leverage core competencies across business units and product lines more effectively and would also help produce products with differentiated features or characteristics that customers value and provide these differentiated products at a low cost when compared to the competition. This is the direct result of the multiple, additive benefits of successfully pursuing the cost leadership and differentiation strategy simultaneously. That is, differentiation allows the company to change premium prices, while cost leadership allows the company to charge the lowest competitive price. Thus, the company is able to achieve a competitive advantage by delivering value to its customers based on product features and low price

(See more detail and chart at URL:
http://www.openlearningworld.com/olw/courses/books/Business%20Strategies/Business%20Strategy/Integrated%20Cost%20Leadership%20-%20Differentiation%20Strategy.html).

b. Discuss how a corporation's structure and culture could be internal strengths and/or weaknesses.

Books like 'Search of Excellence' (Peters & Waterman, 1982, as cited in URL: ...

Solution Summary

This solution looks at the possibility of a company or business unit following a cost leadership strategy and a differentiation strategy simultaneously, and if so, why. It also discusses how a corporation's structure and culture could be an internal strength and/or weakness. Based on Porter's theory, factors that determine the level of competitive intensity in an industry are also explored. References and other links for further research are provided.

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