Effect This causes greater efficiency which is a competitive advantage. 2.3 Disadvantages of Cost Leadership Strategy Its creates little customer loyalty and the firm may lose revenues if it lowers prices too much and it creates price wars. 3. Criticism of the cost leadership strategy Datta has criticized the cost leadership strategy saying it is not a low-cost strategy but rather a differentiation strategy based on low cost price. Also, market share leaders do not compete based on low price but rather on differentiation.
As also mentioned before, they rarely offer discounts. This further communicates their quality and enhances customer perception because, if it is the highest quality, it shouldn’t be discounted. Many discounts cheapen your overall brand and communicate that you need help selling your product. Lululemon maintains that their products are only for those that can afford to indulgence in the premiums of the
What is normally suggested is that if a firm is producing, manufacturing or reselling goods that they usually export since it is the easiest and least risky method. The risk that occurs if this type of strategy is used is that the firm depends on the company that will be exporting to and their customers in order for their product to be known. Yet other strategies include a joint-venture, licensing and franchising, foreign direct investment, and strategic alliances which even though they have more risk than just exporting they are more likely to be used than full ownership. These strategies give the firm the opportunity to still have some control, at different levels, of how the product will be managed in the foreign country. An example of this is Kia Motors direct investment in Slovakia in 2004 or Volkswagen’s joint-venture with Skoda for a period of time in 1991.
8.Easy price comparison forces companies to set their prices competitively which is a positive point for customers. 9.Stable prices in the market helps customers plan and stabilize their expenditure, which in turn may lead to stabilization of trade cycle. Disadvantages of Oligopoly 1.Setting of prices may be advantageous for the firms, but if done unrealistically, it may prove to be a great disadvantage for consumers. 2.Creative ideas or plans of small businesses in the oligopolistic market fail to realize because they cannot overcome the control of major market players. Their realization is only possible when one of the major player adopts it for use.
This new chip can decreased the sales revenue in a short term because it seems to be unnecessary for customers who already owned the computer with this effective chip. However, if the company not promote this chip, sales revenues will remain stable, unsurprisingly. Therefore, if we apply the utilitarianism to this case, it is certain that the happiness of customer is the highest priority. In other words, the manager should select the choice that will ensure the happiness of most customers (Chryssides and Kaler, 1993). For this reason, there is another involving factors that need to be considered: how happiness can be
We can also rule out LEC’s culture being detail-oriented since paying attention to individual customer preferences as the company’s leading competitive edge is not the case. At first glance, it might look like as though LEC is a people-oriented culture since fairness in equity is a top priority. Additionally, there are rewards and health care and a low turnover rate. However, on closer look it proves to be more of an outcome-oriented one. According to Carpenter, M., Taylor, B., Erdogan, B.
In the case of technological advancements, these usually results in faster manufacturing times and would require less workers, resulting in lower manufacturing costs and higher supply (Gueye, n.d.). Price elasticity is usually negative, when the price of goods goes up, the demand goes down except when goods are Veblen or a Giffen goods which means that as the price goes up the demand goes up contrary to what the law of demand states. There are products which are inelastic and hence a change in price does not change the demand of the product. These are usually essential items such as medicines. Gatorade is not an essential product and hence it is elastic and highly responsive to a change in price.
The traditional response models are insufficient to target the highest-spending or most profitable customers. In fact, response models can potentially target the most responsive customers who actually spend the least, especially when promotional offers involve free items or when there is no purchase requirement. To evade the unnecessary marketing costs associated with targeting lower-spending and less profitable customers, statisticians in the financial service industries have enhanced response models by extending the models to predict customer spend as well as customer response. It is important to briefly mention that within retail businesses, this development has been considerably slower to emerge. These models predict combinations of customer
Because they are not subject to heavy regulation they can also offer services that banks are not able or are not willing to. Con’s: The flexibility and price competitiveness that shadow banking offers does not come without a cost. These costs include; Much lower
As mentioned above, market economy has its advantages over planned economy. However, this does not mean that the transition towards the market economy is flawless as there are several disadvantages to this movement as well. The first reason to why this transition is not encouraged is because unequal distribution of wealth is bound to occur with low or no government intervention (Barbanel, 2014). Although it is believed that everyone has an equal chance to flourish in a market economy, Intelligent Economist (2017) has specified that misallocation of resources would cause market failures to be inevitable. In other words, those who own the resources for businesses such as land would prosper while those who do not own any resources would suffer.