Make achievement of meaningful lower costs than rivals the theme of firm’s strategy
Include features and services in product offering that buyers consider essential
Find approaches to achieve a cost advantage in ways difficult for rivals to copy or match
Low-cost leadership means low overall costs , not just low manufacturing or production costs! Keys to Success
Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals
Find ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivals
Not spending more to achieve differentiation than the price premium that can be charged
Keys to Success Objective
Best-Cost Provider Strategies
Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation
Make an upscale product at a lower cost
Give customers more value for the money
Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectations
Be the low-cost provider of a product with good-to-excellent product attributes, then use cost advantage to underprice comparable brands
Best cost strategy
Best cost strategy is the strategy of increasing quality of products while reducing costs. This strategy is hybrid. It balances a strategic emphasis on differentiation which is understandable from the following figure:
Precaution for company to become a best cost provider
It must have the resources and capabilities to achieve high quality at lower costs than the competitors.
It must incorporate appealing (attractive) features at a lower costs than competitors.
It must match product preference and at a lower cost than competitors.
It must provide good to excellent customer service at a lower cost than competitors.
Generic Competitive strategy
Although Toyota Motor Company is known for its low cost strategy, it applied best cost strategy when it manufactured its luxury car Lexus models. To compete against such luxury car makers as BMW and Mercedes Benz, Toyota management started making Lexus a car with premium quality at low costs below its competitors.
Market situation: where best cost strategy works well
Buyer diversification: Best cost strategy works well in a market where product differentiation becomes the norm because of buyer diversification. And also a substantial number of Byers are sensitive to price quality.
2. Positioning advantage: With a medium quality product at below average price or with a very good product at a medium price
3. Resource and capabilities: it will work best when the company has the resource know how and capabilities to incorporate upscale product attributes at a lower costs.