Unit 4 outcome 1.2 Flashcards
Lower cost
A business seeking to become the lowest costs in the industry. This can be achieve by reducing costs and improving efficiency.
Advantage of lower cost
Profit per unit can increase which may increase profitable
Saving can be put towards differentiation at a later date
Disadvantage of lower cost
Difficult to differentiate in the future if the cost advantage disappears
Customer may perceive a product as being of poor quality
Differentiation
The use of brand names, delivery methods and advertising to establish differences between substitutable products. Ensuring high quality product multiple branding and innovation and development
Advantage of Differentiation
Can develop customer loyalty
If able to charge at a premium price, business can make revenue gains
Market share can increase
Disadvantage of Differentiation
Initial cost must not outweigh the benefit
Time-consuming process and during that time consumer taste or preferences may change
Suppliers power
How easy it is for suppliers to drive costs up
Buyer power
How powerful buyers are in driving prices down
Competitive rivalry
The number and capability of competitors
Threat of substitution
How easy it is for customers to find a similar good or services
Treat of new entry
How easy it is for new competition to enter the market
niche market
A niche market is a narrowly selected market segment within a larger market. In a niche market there is very little competition and the product is differentiated and so a strategy will need to have a narrow focus.
