It is the strategy used by the businesses to sell similar products in low price to get high revenue and for competitive advantages. If any business offer products on lower price customer like to buy product from them. They always compare price with other. For instance, Walmart have low cost strategy to achieve competitive advantage. Walmart directly and indirectly try to compete with other companies such as, Costco and Amazon. They influence Walmart to strategic management to implement their generic competitive strategy.
Advantages of low-cost strategy:
Focused differentiation strategy: this type of strategy offers unique features which will fulfill the demands of narrow market niche better than rivals. Some firm using this strategy on sales. Such as, Amazon they are selling their products online only.
Charging high price, in this case firm can charge high price as compare to the other by following focused differentiation strategy.
Market and Competitive circumstances strategy focused on low -cost and differentiation strategy when:
It is corporate strategy used by the combination for two different existing company into new one company on a new name.
There are many reasons for preferring merger instead of alliance or partnership:
There are some organizations which prefer alliance because unlike merger alliance does not involve the development of a new combined entity. They can retain their individual entity. This allows companies to entering into market through it would be beneficial from local knowledge of the local company.it bring both firms with mutual interest but having different strength to work on certain project which give benefits to both.
It is about varying a company’s product offering and competitive approach from country to country. It gives opportunity to local business managers to make strategic decisions according to the customer preferences, buyer purchasing habits. For example, McDonald is the multidomestic corporation. They have same brand name in different country for their stores, but they have different menu choices according to local customer preferences.
Pros of multidomestic strategy:
It is used when any company wants to expand their business globally. They standardized their company according to customer preferences, buyer purchasing habits, distribution channels or marketing methods. Some companies use this strategy such as Canon.
Diversifying the business can be beneficial for existing business if new business performs better together under same corporate umbrella. Stand-alone firms and performing independent producing synergistic. Such as, company X diversifies their business by purchasing Y into another industry. If X and Y having combine profit not greater than they were earned their own in years, then the company X won’t provide any added value to the shareholders. Then, they achieve the same 1 1=2 result by only purchasing stock in Y. Diversification may added shareholder value if it passes three tests industry attractive test, cost of entry test and better-off test. The businesses will perform better together than a stand a-lone firm, producing 1 1 =3 having effect on shareholder value.
A middle ground approach requires the basic competitive theme such as low-cost and greater differentiation in each country which allow managers to incorporate whatever country specific variations in product attributes are required to satisfy local customers. Managers must make adjustments in distribution, production and marketing are needed to respond to local market conditions and able to complete with the local rivals.