Low-cost leadership strategy
A company pursuing this strategy hopes to become the lowest producer in the market. The firm hopes to earn higher profits through this strategy. The goal is to allow the firm to drive down costs, thereby gaining a competitive advantage. In order for a cost leadership strategy to succeed, the firm should be the cost leader, and it should not compete with another firm for this position. The strategy is most suited for price-sensitive customers. One of the risks of adopting this strategy is that other firms in the market could also be in a position to reduce their costs as well. Rival firms could also leapfrog your production capabilities by adopting the latest technology. This reduces your competitive advantage. The strategy could also result in damaging price wars. Furthermore, it might prove hard to sustain cost leadership, ultimately.
Broad differentiation strategy
In a broad differentiation strategy, the firm develops a service or product with unique features. Customers recognize the service or product to be of better quality and different in comparison with that of rivals. The firm may decide to sell the product or service at a premium on account of its unique features. An important basis for product differentiation includes durability or product image, quality, after-sales, and other additional features.
However, differentiation requires research capability, flair, and strong marketing. One of the risks of a broad differentiation strategy is the high cost involved. Also, in case customers are price-sensitive, they may decide to choose a product/service based on price, as opposed to uniqueness. In addition, the differentiation factor may no longer appeal to customers. There is also the risk of imitation by competitors, not to mention the changes in customers’ tastes. In addition, competing firms can also attain enhanced differentiation in particular market segments.
Focused differentiation strategy
A firm pursuing the focus strategy is mainly concerned with a narrow segment of the market. Once the firm has identified the segment, it tries to achieve differentiation by providing the target market with a product with customized attributes. This approach rests on the premise that once you focus excessively on the needs of a specific group, you are likely to service it better. Firms that decide to pursue a focus strategy usually enjoy high levels of customer loyalty. The entrenched loyalty acts as a deterrent factor to rivals from competing directly. Their bargaining power with suppliers is also less. Nevertheless, such firms can still pass on higher costs to customers because there are no substitute products. One of the risks involved in this kind of strategy is the likelihood of the firm outgrowing the market, even as growth opportunities remain limited.
Focused low-cost strategy
The strategy entails outdoing rivals and focusing on a particular narrow buyer segment by providing products or services at a lower cost in comparison with rivals. Consequently, the business is able to serve the target niche market at comparatively lower prices. One of the risk of this strategy is that the firm is could be faced with the risk of imitation, while changes taking place in the target market could also be another risks factor for the firm. Furthermore, the firm could also be in danger of decline in its niche or segment of choice.
Best-cost provider strategy
This strategy is concerned with offering additional value to customers for their money by adopting “good-to-excellent” product features and providing them to customers at a lower cost relative to competitors. The main goal is to achieve the best (lowest) prices and costs relative to rivals. One of the risks facing this strategy is that it may not be sustainable in the long run. In addition, customers might interpret your low cost of products as suggestive of low-quality products.
The business value of a DSS
DSS enables companies to enhance customer relationship management and supply chain management. A number of companies may decide to exploit the company-wide data offered by the enterprise systems. In addition, DSS enables modern-day companies to harness the interactive ability of the internet with the aim of providing decision-support tools to customers and employees alike.
Qualities that distinguish ESS and DSS types of system
DSS mainly entails solving problems specific to a particular business, such as ascertaining optimized delivery routes and deciding on the most ideal pricing strategy for a given product. On the other hand, ESS has specifically been designed for use by company executives in managing the firm, in addition to providing the company’s overview of both internal and external information. This helps in assessing some of the more general business situations that could be facing the firm. In addition, the ESS modeling tools also find application in providing various views of status, as opposed to having to evaluate large amounts of data in order to reach the solution to a specific problem.