What are the Differences between a Cost Leadership Strategy and a Differentiation Strategy? Provide an example of each
Cost leadership strategy refers to a company that is a producer of economic value in an industry at a low cost up to a certain level of specification. In effect, this means that the firm either sells the products at the normal market price or sells at a lower price in comparison to its competitors. Cost strategy enables a company to produce cheaply and remain profitable for a longer time than the competitors do. McDonald’s is a good example of a firm that practices a cost leadership strategy. The company maintains low prices by training employees, who do not have the experience, instead of hiring professional cooks (Smith, n.d.).
Differentiation strategy, on the other hand, refers to a firm that focuses on coming up with and marketing distinctive products targeting various consumer segments. The strategy is usually adopted by those companies that have existing competitive advantages and tend to invest in serious advertising (BusinessDictionary.com, n.d.).
Companies that adopt a differentiation strategy provide value to the consumer by offering unique features in the product but not through low prices. When a company engages in a differentiation strategy, it can charge an extra price since it is well-known that the customers will not get a substitute for the unique product (QuickMBA, n.d.). Intel is known for such a strategy. Its uniqueness lies in the alacrity and innovation of its products (Open Learning World.com, 1999).
What is the Difference between Integration and a Diversification Strategy? Provide an example of each
Integration refers to cross-training of staff, reduction of incompetent communication as well as cutting costs incurred from paying suppliers. Integration can be personnel, vertical, or data. Cross-training of employees means that employees are trained to handle different departments and roles for more efficiency and stepping in case a colleague is absent. For instance, in banks, a customer care representative, so trained, can stand in for a teller.
Vertical integration occurs when a company owns more components of the supply chain that brings the finished product to the consumer. For instance, companies in the auto business can decide to own the assembly and distribution of products. Data integration involves the merging of computer networks.
Diversification is the process of coming up with new products that are different from the core products of a firm or entering new markets away from the traditional markets of the firm. The aim of diversification is to enable a firm to get into new lines of business that are dissimilar to the ongoing operations (Ryken, 2012). The Coca-Cola Company has diversified its products in the recent past and plans to diversify even further. It diversified from carbonated drinks to non-carbonated drinks like bottled water and fruit juices such as Dasani bottled water and 5 alive fruits juice (Merret, 2007).
What is the Difference Between an Acquisition and a Merger? Describe a recent example of each scenario
Acquisition happens when one company takes over another company and in effect becomes the new owner or the sole proprietor. Legally, the company taken over does not exist anymore. Usually, the company being taken over is unwilling (Peterson, 2005). A clear example of acquisition is Manulife Financial Corporation’s takeover of John Hancock Financial Services in 2004 (INVESTOPEDIA, n.d.). In an acquisition, no new company is formed.
A merger is the coming together of two companies, usually similar in size, to form a new company (Peterson, 2005). Everything including the management is combined as one as companies give up their identities to the new company. JDS Fitel Incorporated and Uniphase Corporation merged in 1999 (INVESTOPEDIA, n.d.).
Describe your Plan for Executing a Strategy
A strategy is basically a scheme of activities put in place to achieve certain objectives. I intend to execute a strategy by firstly coming up with a model. Michael Porter’s theory of comparative advantage comes in handy here. I have to keep in mind my competitive advantages over my competitors and utilize them (QuickMBA, n.d.).
Secondly, I will choose the most appropriate metrics. I, therefore, intend to make sure that the sales in the company are as high as possible and that the best methods for marketing are utilized. Once the company is known, things will look up (QuickMBA, n.d.).
Having come up with a plan, the plan itself must be revisited from time to time lest it should be forgotten. This will be enforced by constant monitoring and evaluation of the strategy. I will constantly check whether we are doing the right thing as agreed on the plan and whether the plan is adding value to the company (QuickMBA, n.d.).
I intend to maintain communication with all the stakeholders involved at regular intervals. This will assist in getting feedback and correcting or improving any situation if it is necessary. Employees will receive information as much as others will be provided with periodical information too. Staff meetings will be arranged to monitor the progress that should be reported to the top management, shareholder, and all other stakeholders (QuickMBA, n.d.).
BusinessDictionary.com. n.d). Differentiation Strategy. Web.
INVESTOPEDIA. (n.d). Mergers and Acquisitions. Web.
Merret, N. (2007). Diversification drive benefits Coca-Cola Enterprises. Web.
Cola-Enterprises Open Learning World.com. (1999). Differentiation Strategy. Web.
Peterson, M. (2005). The Difference between Mergers and Acquisitions. Web.
QuickMBA. (n.d.). Porter’s Generic Strategies. Web.
Ryken, C. (2012). Growth Strategy #4: Diversification. Web.
Smith, M. (n.d.). Examples of Cost Leadership & Strategy Marketing. Web.