porters generic strategies

Question 1

explain Aldi’s lower cost strategy

Answer 1

economic sclae:
- smaller range with only high turnover stock, therefore shelf space used efficiently

Question 2

what are the advantages of lower cost strategy?

Answer 2

• gains competitive advantage
• attracts price sensitive customers
• potential for improved profitability

Question 3

what are the disadvantages of lower cost strategy?

Answer 3

• may be reduced quality perception in the market
• if prices are lowered, sales volumes needs to increase to make substantial profits
• constantly lowering costs may impact the quality of the product

Question 4

what is differentiation? and what is product differentiation?

Answer 4

• differentiating their good or service from others in the market

product differentiation:
- product is unique and point of difference from others in the market
- achieved through delivery, branding, advertising

Question 5

what are advantages of differentiation?

Answer 5

• gains a competitive advantage
• can develop brand loyalty
• reduces price sensitivity