In this question, you will consider the four main generic strategies.

Select one of them (cost

leadership, differentiation, focused cost leadership, or focused differentiation) and describe its
major components. Is it sufficient to just use a generic strategy for a firm? Why or why not?

Cost Leadership is the mechanism of creating a competitive advantage by ensuring the lowest cost of
operation in the industry as this ensures market benefits in areas where the price is a crucial factor.
The firm aims to become the cheapest producer as compared to their competitors by ensuring large
scale production as it helps the firm to attain economies of scale or by innovating the production
process.

There are two major ways of achieving a Cost Leadership strategy:

 Increases profits by reduced costs, while charging industry-average prices.  Increases market
share by charging lower prices, while making a rational profit on each sale due to reduced costs.
And these cost leadership have been achieved by companies if they have (Mind tools, n.d.)
 Enough capital needed to invest in latest technologies that will bring down production cost  Highly
efficient and planned Supply chain system  Low operating costs like labour, materials, facilities, etc.
and a way of sustainably cutting costs below those of other competitors.

Developing an effective cost leadership strategy requires time, research and persistence as the
company needs to update its cost leadership strategy regularly in order to account for change in
price of labour and raw materials, market change and entry of new competitors. This is achieved by
analysing existing operations, researching competitors, identifying strategies to reduce costs and
keeping track of progress (Indeed, 2020).

This strategy has several advantages where is has not only helped the business to gain the market
share but also increase profits as the low cost products are always preferred by customers which
increases their market reach and rise in sales volume (Bhasin, 2020). The low cost also ensures
enhanced sustainability as it will ensure market stability during price was or price tantrums in the
market. This also ensures the reduction in competition as the lowest prices are the favourable ones
and they tend to create a very high challenge for upcoming competitors.

The cost leadership is not a generic strategy which could be implemented easily based on the
theoretical based procedures as it need the business to take a huge risk while having a highly
developed strategic team to back the implementation. This could only be implemented after an
extensive market study, and strong hold of having cheap operating expenses with a highly optimized
logistics system as these form the basic criteria to produce cheapest goods. This creates a risk for
business to generate low profit margins on each product and in case the strategies don’t go well, it
could create risk of downfall.

Reference
Ketchen, D & Short, J. (2012) Strategic Management: Evaluation and Execution. This book is licensed
under a Creative Commons by-Nc-sa 3 license.

Kataria, K. (2019). Cost Leadership – Definition, Examples, & Strategies. Retrieved from:
http://ww/.Feedough/cost-leadership-definition-examples-strategies/
Mind tools (n.). Porter's Generic Strategies. Retrieved from:
http://ww/.mindtools/pages/article/newSTR_82.htm/

Indeed, 2020. How to Create a Cost Leadership Strategy. Retrieved from:

http://ww/.Indeed/careeradvice/career-development/create-cost-leadership-strategy/

Bhasin, H. (2020). Cost Leadership – Strategies, Advantages, Disadvantages. Retrieved from:

http://ww/.marketing91/cost-leadership/