4H

Question 1

Porters generic strategies(n.)

Answer 1

A strategic management tool to determine whether an organisation should implement lower cost or differentiation to gain competitive advantage.

Question 2

Porters differentiation strategy(n.)

Answer 2

-Porter’s differentiation strategy(n.)=[Porter’s differentiation strategy involves offering customers unique services or product features that are of perceived value to customers, which can then be sold at a higher price than competitors.

Question 3

Compare between differentiation and porters lower cost strategy

Answer 3

Lower cost only=
* Sells at similar or lower prices than competitors
* Targets cost-conscious customers
* Internal focus on operating processes
Differentiation only=
* Sells at premium prices
* Targets customers that are not price-sensitive
* External focus on meeting customer needs
Both=
Increase a business’s profitability by providing a competitive advantage

Question 3

Porters lower cost strategy(n.)

Answer 3

-Porter’s lower cost strategy(n.)=[Porter’s lower cost strategy involves a business offering customers similar or lower-priced products compared to the industry average, while remaining profitable by achieving the lowest cost of operations among competitors.

Question 4

Porters differentiation benefits and disadvantages

Answer 4

Advantages=
-Customers are often loyal to the business because of unique product features or services not offered by competitors.
-Quicker sales from loyal customers when new products or services from the business are introduced.
-Can charge premium prices for products as customers cannot purchase the product elsewhere.

Disadvantages=
-Can be difficult to prevent competitors from replicating points of differentiation.
-New employees may require additional training to adapt their skills to match the business’s point of difference.
-Higher investments of time and money may be required, such as on research to develop innovative products or improve service levels of employees.
-Higher selling prices can deter cost-conscious consumers.

Question 5

Porters lower cost benefits and disadvantages

Answer 5

Advantages=
-Attractive to cost-conscious customers.
-Creates barriers to entry for new competitors as it is often challenging for them to match lower prices, whilst simultaneously reducing costs of operations and still remaining profitable.
-Business operations are optimised and must remain efficient to maintain low costs of production.
-Reduces the expense of operations.

disadvantages=
-Standardised or basic products may not meet the needs of customers who have specific needs.
-Customers are not loyal to particular brands. If another business were to offer a cheaper alternative, these customers would likely switch to the new business immediately.
-Low prices may result in customer perceptions that the good or service is of lower quality.
-Thin profit margins and reliance on low operating costs can leave a business vulnerable to unexpected increases in expenses, such as suppliers raising their prices.

Question 6

Not price sensitive(n.)

This is not important

Answer 6

Price sensitivity(n.)=Price sensitivity is the degree to which the price of a product affects consumers’ purchasing behaviours

Not price sensitive(n.)=The price of the product does not affect consumer’s purchasing behaviours

Question 7

Price sensitive(n.)

This is not important

Answer 7

Price sensitivity(n.)=Price sensitivity is the degree to which the price of a product affects consumers’ purchasing behaviours

Price sensitive(n.)=The price of the produce affects consumers purchasing behaviours