Irhr Study Notes

The location of apt areas of production is what determines the overall cost per unit or qualityof the product. For distribution and logistics the factors such as payment of tariffs and

Operational excellence. Many industry players are facing strong competitive pressure, so cost leadership is another key to success.

- Focus: If the company cannot compete with both of the two above strategies, then it should think about focusing on occupying only one or a few market segments (niche market), with typical groups of customer. The customers of niche market are usually interested in either low price or differentiation, but other typical features instead. As these features are not popular, the product range of the companies following cost and differentiation cannot reach, and the company following focus strategy can avoid the fierce competition with the other two groups. Roll Royce is a typical example for this

5) The bargaining power of suppliers: The cost of factors of production (e.g. labor, raw materials, components, and services such as expertise) provided by suppliers can have a significant impact on a company's profitability. As such suppliers may refuse to work with the firm or charge excessively high prices for unique resources.

To begin with, I am going to look at overall cost leadership from the 3 generic strategies. This strategy is for a firm who wants to achieve the lowest production and distribution cost so they can undercut the competition. This is actually very similar to the operational excellence

c. a focused low cost strategy: concentrating on a narrow buyer segment and outcompeting rivals by having lower costs than rivals and thus being able to serve niche members at a lower price.

Porter's five forces framework is a model of competitive industry structure. These are the threat of entry of new competitors, the threat of substitutes, the bargaining power of buyers and of suppliers and the rivalry between the existing competitors. Where these forces are intense, below-average industry performance can be expected; where these forces are mild, superior performance is common. (Jobber, 2007).

The second strategy I opt would be the Focus on Market Niche. A niche is a focused, targetable part of the business sector. This strategy is implemented

Also, they have very efficient logistics and a low cost base such as labor, materials and facilities (Ibid, 1985). Essentially, if a firm can achieve and maintain cost leadership, it can obtain above average performance whilst the prices are still affordable in that industry. Hence, the cost leader does not try to be the industry innovator, it seeks to position its products to appeal to the average customer taste. The aimed goal is to increase efficiency and lower its costs in relation to competitors. Some of the

Cost leadership strategy: Producing products/services at the lowest cost in the industry. There are examples of companies that became cost leaders by incorporating IT into their management information systems. Dell Computer Online build to order system resulted in Dell becoming the lowest cost producer of computers and thus dealing a heavy blow to rivalry competitors.

Even if you have the most exciting idea ever, it is often difficult to enter a new market or industry and compete directly with established incumbents. You have certainly noticed how I have repeated Michael Porter’s three basic competitive strategies in every chapter. Implementing, cost leadership, differentiation, and strategic focus alone, or a blend of these three things can help any business increase its competitive advantage. For this reason I will dedicate the next few paragraphs to these three concepts.

There are many types of organisational structure a business may decide to adopt. This assignment will examine the four main different business structures and present the advantages and disadvantages of each one. The business structures that I will be examining are as follows:

Fords five forces of competition are; competitive rivalry, New Entrants, Substitutes, bargaining power of customers and bargaining power of suppliers.

Differentiation: In Differentiation strategy, a company ‘s goal is to create uniquely desirable products and service, that are different and more attractive than their competitors. It is rewarded for its uniqueness with a premium price.

We have chosen to build our strategy upon a focused strategy, since it allows a much more narrow approach towards the market segment. In this case we have chosen focused differentiation.