A list of successful companies using cost leadership strategies
Posted: Wed Dec 04, 2024 6:56 am
In the business world, companies sometimes appear that dominate the market share with low prices that defy conventional wisdom. Recently, Temu and SHEIN , which are often seen on the Internet , might be examples of this.
This was also the case for 100-yen shops, Uniqlo, and HIS. Although people had doubts, such as "Are these prices okay?" and "Aren't the quality poor?", and although the initial quality was certainly not good, they gained customers with the powerful weapon of "cheapness," and grew rapidly. Then, with the profits gained, they improved the quality, expanded into new businesses, and became large corporations.
How on earth can they achieve such low prices?
In fact, it is analyzed that such companies are adopting a cost leadership strategy.
In this article, we will explain what cost syria b2b leads leadership is and introduce examples of successful companies with cost leadership strategies.
What is a Cost Leadership Strategy?
The cost leadership strategy is one of the three competitive strategies proposed in 1980 by Michael Porter, an American management scholar and professor at Harvard Business School .
A cost leadership strategy is a strategy that aims to produce products and services at the lowest cost in the market and increase profits. For example, while competitors in the same industry make a 100 yen product at a cost price of 35 yen, a cost leader in the industry will build a system to manufacture the product at the lowest cost in the industry, 20 yen.
Cost = expenses, costs
Leadership = initiative
Companies that adopt a cost leadership strategy generally gain market share in large markets with a large number of customers by adopting a low-price strategy. It is also a strategy that is suitable for large companies with financial resources, as it is called the strategy of the strong.
Cost Leadership Strategy and Two Related Strategies
In his book " Competitive Strategies ," Porter advocates three competitive strategies: "differentiation strategy," "focus strategy," along with the cost leadership strategy . This is a well-known framework known as "Porter's three basic strategies," and is still effectively used in management today.
What is the concept of "competitive strategy"? - 1
Differentiation Strategy
A differentiation strategy is a strategy that establishes a competitive advantage in the market by using the uniqueness of your company's products that your competitors do not have. There are many different ways to differentiate your product, including the following approaches:
Function and quality: Use of the latest technology, multi-function, high functionality
Brand image: the story behind the product, sophisticated design, and packaging
Scarcity: scarcity of raw materials, tradition, techniques that cannot be mechanized (artistic quality, craftsmanship)
Value-added services: speed of delivery, refund system
Business model: A new business model
The key to a differentiation strategy is to make it difficult to imitate. Differentiation through brand power and scarcity of raw materials has the advantage of being difficult to imitate. In an era when other companies are catching up very quickly, differentiation based only on functionality runs the risk of being swallowed up by the wave of commoditization if the company does not have the financial strength to continue investing in functionality .
Focused Strategy
A focus strategy is a strategy that focuses a product or service on a specific market. For example, a focus strategy might be to develop a product or service only in Fukuoka Prefecture instead of nationwide, or to target only plus-size women instead of all women in apparel, or to focus on a vertical strategy for SaaS.
Furthermore, it is divided into two methods: a differentiation strategy in a specific market and a cost leadership strategy.
Cost focus strategy: Cost leadership strategy in a specific market
Focused differentiation strategy: Differentiation strategy in a specific market
A concentration strategy is generally adopted by small and medium-sized enterprises, and is synonymous with a niche strategy. Even if a company is at a disadvantage in terms of financial resources, it can become number one in a certain area by concentrating on that area.
This was also the case for 100-yen shops, Uniqlo, and HIS. Although people had doubts, such as "Are these prices okay?" and "Aren't the quality poor?", and although the initial quality was certainly not good, they gained customers with the powerful weapon of "cheapness," and grew rapidly. Then, with the profits gained, they improved the quality, expanded into new businesses, and became large corporations.
How on earth can they achieve such low prices?
In fact, it is analyzed that such companies are adopting a cost leadership strategy.
In this article, we will explain what cost syria b2b leads leadership is and introduce examples of successful companies with cost leadership strategies.
What is a Cost Leadership Strategy?
The cost leadership strategy is one of the three competitive strategies proposed in 1980 by Michael Porter, an American management scholar and professor at Harvard Business School .
A cost leadership strategy is a strategy that aims to produce products and services at the lowest cost in the market and increase profits. For example, while competitors in the same industry make a 100 yen product at a cost price of 35 yen, a cost leader in the industry will build a system to manufacture the product at the lowest cost in the industry, 20 yen.
Cost = expenses, costs
Leadership = initiative
Companies that adopt a cost leadership strategy generally gain market share in large markets with a large number of customers by adopting a low-price strategy. It is also a strategy that is suitable for large companies with financial resources, as it is called the strategy of the strong.
Cost Leadership Strategy and Two Related Strategies
In his book " Competitive Strategies ," Porter advocates three competitive strategies: "differentiation strategy," "focus strategy," along with the cost leadership strategy . This is a well-known framework known as "Porter's three basic strategies," and is still effectively used in management today.
What is the concept of "competitive strategy"? - 1
Differentiation Strategy
A differentiation strategy is a strategy that establishes a competitive advantage in the market by using the uniqueness of your company's products that your competitors do not have. There are many different ways to differentiate your product, including the following approaches:
Function and quality: Use of the latest technology, multi-function, high functionality
Brand image: the story behind the product, sophisticated design, and packaging
Scarcity: scarcity of raw materials, tradition, techniques that cannot be mechanized (artistic quality, craftsmanship)
Value-added services: speed of delivery, refund system
Business model: A new business model
The key to a differentiation strategy is to make it difficult to imitate. Differentiation through brand power and scarcity of raw materials has the advantage of being difficult to imitate. In an era when other companies are catching up very quickly, differentiation based only on functionality runs the risk of being swallowed up by the wave of commoditization if the company does not have the financial strength to continue investing in functionality .
Focused Strategy
A focus strategy is a strategy that focuses a product or service on a specific market. For example, a focus strategy might be to develop a product or service only in Fukuoka Prefecture instead of nationwide, or to target only plus-size women instead of all women in apparel, or to focus on a vertical strategy for SaaS.
Furthermore, it is divided into two methods: a differentiation strategy in a specific market and a cost leadership strategy.
Cost focus strategy: Cost leadership strategy in a specific market
Focused differentiation strategy: Differentiation strategy in a specific market
A concentration strategy is generally adopted by small and medium-sized enterprises, and is synonymous with a niche strategy. Even if a company is at a disadvantage in terms of financial resources, it can become number one in a certain area by concentrating on that area.