Business Essay Sample on Differentiation and Low-Cost Strategies

The business environment is dynamic, and in competitive market structures, enterprises are allowed to enter and leave the market freely. Such freedom leads to a rise in competition levels, such that a firm or few enterprises cannot dominate the market. Therefore, organizations adopt marketing strategies such as low-cost strategy and differentiation to ensure that they remain competitive in the market (Dess, 2012). The applicability of these approaches depends on factors such as the ability to maximize the on the utilization of the fixed inputs, products standardization, and levels of innovativeness. Hence, the essay will highlight how an organization may decide on the best approach to adopt between differentiation and low-cost as the levels of competition rise.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Product differentiation entails the creation of an organization's merchandise to appear unique in the market, and be in a way that the clients will be willing to accept a price premium. Therefore, this approach depends on the creativity and its ability to establish customer loyalty. Moreover, the targeted customer segment should not be price sensitive, and ought have specific needs, which are underserved by the current line of producers. Therefore, an organization can be able to utilize this method if it has enough resources, which can be used to tailor its products to the specific client's specifications. Such a move will make it possible for the firm to retain its customers regardless of a slight increase in price levels (Kiechel, 2010). Additionally, the enterprise should make sure that the competitors do not copy its design. Moreover, the company should have access to employees who are creative and can establish a unique form of its merchandise, which will make it make it stand out in the market. Therefore, if an organization that has created strong customer loyalty, and its clients are not price sensitive, the enterprise may utilize standardization as a marketing strategy.

However, the low-cost strategy approach concentrates on the price-sensitive markets. It relies on the utilization of low prices, where such firms aim at reducing the production cost, making it possible to reduce the rates charged on their products. Hence, initially, an enterprise should have the ability to maximize the outputs from fixed assets. More so, it should be able to reduce its direct and indirect costs. For instance, its staff should be willing to work without additional incentives, and also utilization of outsourcing method in production. Hence, this strategy favors businesses that can be able to minimize the overall cost, which translates into lower prices in the market (Dess, 2012). Additionally, the method is operative in organizations that participate in the production of a high volume of products, and also those that access economies of scale. This means that they have access to a significant market share, hence able to exhaust the merchandise produced. Therefore, if the business is large, serves price sensitive clients, can be able to maximize its fixed assets and have access to economies of scale, they can utilize this approach.

In conclusion, the essay has highlighted how an organization may decide on the best approach to adopt between differentiation and low-cost as the levels of competition rise. Therefore, the management may take the standardization approach if the organization has established strong customer loyalty, and its clients are not priced sensitive. On the other hand, low-cost method is suitable for an organization that is large, serves price sensitive clients, can be able to maximize its fixed assets, and have access to economies of scale.

References

Dess, G. (2012). Strategic management. New York: McGraw-Hill/Irwin.

Kiechel, W. (2010). The lords of strategy. Boston, Mass.: Harvard Business Press.