Project Cost leadership is a concept that a business use as one of the business strategies. Cost leadership describes ways that a business can establish a competitive advantage over other businesses. Cost leadership describes how the business can adopt the lowest means and cost of production in the firm (Andy, 2013). The cost leadership strategy of a company is driven by the firm’s size, efficiency, cumulative experience, scope, and scale. The cost leadership strategy aims at exploiting the various scales of production defining the industry’s economies, and scale of production. This will make the firm produce standardized products through using efficient technology. However, a company uses differentiation strategy to distinguish various products to make the products attractive in the targeted market (Andy, 2013). A firm uses the differentiation strategy to differentiate their products from that of their competitors. This is a source of a competitive advantage, because the firm will demonstrate some of their unique product aspects that make sense more than that of their competitors’ products and services.
It is possible for a firm or company to follow a differentiation and cost leadership strategies simultaneously. For example, Wal-Mart uses these two strategies to gear up competition and gain an upper hand over their competitors. The Wal-Mart Company uses the cost leadership strategy to minimize the costs and expenses they incur in the production and operation processes (Andy, 2013). They reduce their expenditure as much as possible to attain their corporate goals and projections. Differentiation will enable the Wal-Mart Company to charge various premium prices while the cost leadership allows the company to charge low competitive prices. The company achieves a competitive advantage and they deliver value to their customers basing their products on product feature at low price (Andy, 2013).
The two approaches can be simultaneously be employed by a company because the task that is involved in achieving the two strategies is different. The cost leadership strategy allows a business unit to outsource raw materials that are cheap reducing the expenditure of the company. However, the company uses differentiation strategy by inculcating technology and innovations in their daily operations (Andy, 2013). These strategies greatly enhance the Wal-Mart company competitiveness compared to their rivals. The Wal-Mart Company has integrated amazing technology in their outlets and they have reduced their expenditure by outsourcing some of the vital raw materials from abroad (Andy, 2013).
Andy, P. (2013, March 15). Marketing Strategies. Retrieved March 23, 2013, from Marketing Strategies: http://www.marketingstrategies.com