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S98 - Anuieas Alvin NuNT - Stiategic Nanagement Page

I. Abstract.
The strategy applied in business organizations is a impression that is rather compound
and extensive. As Subba (2010) stated that "each strategy as the creation of a unique
and valuable position involving a different set of activities". Basically, the placement
strategy aimed at choosing activities that have the possible to produce greater
profitability since they occur to be very different from those of rivals and thus generate a
sustainable competitive advantage. However, no competitive advantage can be in fact
immortal and that is why the strategy should distinguished from other closely related
concepts, operational efficiency. This report wills dicussed about how succesful the low
cost strategy into the business field as well as how do the enterpreneurship implement
the differentiation strategy into the business.

II. Low cost Ieadership strategy
The idea stipulating throughout the entire overall cost leadership approach and the
purpose is the low cost relative to competitors. This is clearly overall firm's cost
leadership. Destructive aim and structure of efficient scale facilities and active pursuit of
cost reductions through experience, tight cost and overhead control, avoidance of
marginal customer accounts, and reduction in areas like research and development,
service, sale force, advertising, etc will achieve cost leadership(Jeyarathmm, 2008).
Low cost relative to competitors is the main outline in succession through the whole
strategy when attempting to accomplish an overall cost leadership position. t is
necessary to recognize the gains of low-cost position in order to understand how overall
cost leadership strategy may generate superior profitability. As suggested by Porter
offers an industry a defense against rivalry from competitors, since its lower cost suggest
strategies that it can still gain returns after its competitors have fully exhausted their
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profits through rivalry(Potter, 1996). A low-cost position protects the firm from influential
buyers because they can exert influence, only to push down prices to the level of next
efficient competitor. Low cost, by providing more flexibility to cope with input cost
increases, acts as a defense against powerful suppliers. n terms of scale economies or
cost advantages the factors that lead to low-cost position also provide necessary entry
barriers (Subba, 2010). A low cost position often places the firm in a suitable position in
respect of substitutes relative to its competitors in the industry Achieving a low overall
cost position frequently requires a high relative market share because scale economies
and cost advantages tend to guard a firm from powerful buyers and suppliers and
provide substantial entry handles. Put in a different manner, by reducing the five threats
of entry, such as: rivalry, substitutes, suppliers and buyers, cost advantages can create
value for a firm.
Business competitors cannot easily copy the strategy when a firm creates a sustainable
cost advantage .Sources of cost superiority that tend to be difficult to imitate include:
differential access to cost productive inputs and technological software .f, learning
economics and technological hardware is proprietary, duplication may be difficult.
Particular consideration to the organizing structure, management controls, compensation
policies, and leadership strategies must be put in place while organizing a cost
leadership strategy. The arrangement of the organization and implementation tools
should comply and reinforce the strategy. Porter has divided necessities of overall cost
leadership strategy into; commonly required skills and resources; and common
organizational requirements (Tony, 2000). Commonly necessary skills and resources
when executing cost overall leadership are available capital investments and availability
of capital, process engineering skills, and intense supervision of labour, ease designed
products for manufacture , and low-cost distribution systems .Common organizational
necessities constitute of serious cost control, frequent detailed control reports structured
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organization and responsibilities, and incentives structured to meet strict quantitative


objectives. According to Berney & Hesterly (2006), limited layers in the reporting
structure, easy reporting relationships minimal corporate staff, and focus on thin range of
business functions are properties of organizational structure that authorize firms to
achieve the full portencial of cost leadership strategies. Management control systems
that reinforce the implantation of cost leadership are, strict cost control systems,
quantitative cost goals, direct supervision of labour, raw materials, inventory a cost
leadership philosophy. Rewards for cost reduction and incentives for employees to be
involved in cost reductions are good examples of good compensation policies.

III. Differentiation Strategy
Differentiation entails differentiating the product or service provided by the firm. n other
words, it's the creation of a product that is perceived industrial-wise to be
unique .Differentiation can be attained in various ways, for example, through design,
name of the brand, brand image, technological features, customer delivery, and dealer
network. Structures of differentiation can be sorted into three categories .To induce
differentiation, a firm may target directly on product attributes, e.g., features of a product,
complexity of the product, launching of the product or location. A firm may emphasis on
the relationship between itself and its customers, e.g., by customizing the product,
consumer marketing and product reputation (Saloner, et al, 2001).
n Addition, differentiation can be applied by focusing on the linkage within or between
firms, which considers linkage within functions of a firm, linkage within other firms
product composition, distribution channels and service support .To be ideal the firm must
differentiate itself along several dimensions. As a matter of fact, Barney & Hesterly (2006)
argue that, product differentiation is entirely an expression of creativity and innovations
of individuals and groups within the firm .t is only hindered by the opportunities at hand,
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or that can be generated, in a particular industry, and by the willingness and capability of
the firm to creatively explore ways and means to take advantage of the opportunities.
Porter (1980) argues that "the differentiation can produce great profits for the reason that
provides cover against competitive rivalry because of loyalty to the brand by customers
and the resultant price sensitivity. t also enhances the margin which helps in avoidance
of low-cost position. The expected customer loyalty and the need for a competitor to
overcome uniqueness produce entry barriers (Tony, 2007). Differentiation provides
higher margins with which to counter with supplier power and it clearly adjust strategies
to buyer power because buyers lack comparable alternatives and are therefore price
sensitive. Finally, differentiated firms in order to achieve customer loyalty must be better
positioned in respect of substitutes than its competitors. Apart from reducing the threat of
the five such as entry, rivalry, substitutes, suppliers and buyers, differentiation adds
value by facilitating a firm charge a premium price that is greater than the marginal cost
incurred by differentiation. Successful differentiation requires that the strategy be rare,
scarce and costly to duplicate. And scarce, rare and costly structures for differentiation
are sources of sustainable competitive advantage .As stated earlier, Barney & Hesterly
(2006) suggest the uncommonness of a differentiation move depends on the ability of
individual firms to be innovative and creative in finding new ways to differentiate their
products. n other words, innovative and creative firms will always manage to
differentiate themselves from competitors. As rivals move in to imitate these firms' last
differentiation move, innovative and creative firms will already be working on new moves
thus they will be one step ahead of competition. n general, bases and structures for
differentiation that are costly to imitate and duplicate include, between functions timing
location reputation distribution channels and services, and support (Jeyarathmm, M,
2008).Depending on the circumstances, product contents, with other firms ,product
customerisation and complexity, and consumer marketing could be costly to imitate or
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duplicate. Preparations to launch a differentiation strategy need particular consideration


to the organizational structure, management controls, compensation policies, and
implementing cost leadership strategies.
Mentioned earlier, organization and implementation tools must fit and also reinforce the
strategy. According to Porter (1980) the commonly required skills and resources for
initiating differentiation are; strong marketing abilities, product engineering, creative and
innovative flair, basic research strong capability, corporate reputation for quality or
technological leadership, long industrial tradition or unique and rare combination of skills
taken from other businesses, and strong cooperation from reliable channels.
Strong coordination among functions in the functions of product development and
marketing, subjective measurement and incentives, and amenities to pull professional
and highly skilled labor, scientist strategies or innovative and creative people, are the
common organizational requirements. n addition Barney & Hesterley (2006) suggested
that, an organizational structure in support of differentiation may be characterized by
cross-divisional and cross-functional development teams, complex matrix structures and
scattered pockets of intense creative efforts Typical management control systems that
support differentiation are broad management - making guidelines, managerial freedom
within guidelines and policy of experimentation. An example of compensation policy that
supports differentiation is rewarding risk-taking, creativity and multi dimensional
performance. n Contrast to overall cost leadership, differentiation can become a
hindrance to high market share. This is because differentiation typically demands a
perception of exclusivity with high market shares.
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Reference

Barney & Hesterly (2006). Strategic Management and Competitive Advantage: Concepts
and Cases. New Jersey, USA: Pearson Prentice Hall

Jeyarathmm, M (2008). Strategic Management. Mumbai, ndia : Global Media

Porter, M.E. (1980). Competitive strategy: techniques for analyzing industries and
competitors. New York, USA : Free Press

Porter, M.E. (1996). What is strategy? Harvard Business Review, November-December,
pp 61-78

Saloner, G., Shepard, A. & Podolny, J. (2001). Strategic Management. New York, USA :
John Wiley & Sons

Subba Rao, P. (2010). Strategic Management. Mumbai, ndia : Global Media

Tony, M. (2007). Principles of Strategic Management. Abingdon, Oxon, GBR : Ashgate
Publishing Group

Tony, P. (2000). Strategic Marketing : An Introduction. London, GBR : Routledge

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