Can a company pursue both the cost leadership and differentiation strategies? If

Question

Can a company pursue both the cost leadership and differentiation strategies? If so, give an example of a company that pursues both the cost leadership and differentiation strategy, and discuss how the firm of your choice implements both strategies. Also name the company Can a company pursue both the cost leadership and differentiation strategies? If so, give an example of a company that pursues both the cost leadership and differentiation strategy, and discuss how the firm of your choice implements both strategies. Also name the company

Explanation / Answer

Cost leadership strategy is the strategy where the company makes higher profit by providing the product at the cheapest rate and differentiation strategy offers unique features to attract the customers. Mostly the differentiation strategy may involve higher cost for the company, but the company can pursue both the strategies through proper planning utilizing innovation. The example for a company that pursues both cost leadership and differentiation strategy includes Southwest Airlines. Southwest has become the cost leader in the US airline industry. The net margin of Southwest has been the highest for many years. Apart from providing the services at low cost, they also offer unique features to the customers. One of them is the nonstop origin-destination flights offered by Southwest unlike the hub and spoke system followed by most of the airlines. It helps Southwest to make cost advantage also by achieving higher utilization rate. Southwest has also discarded the use of tickets, uses only one kind of airplane and serves pea nuts instead of meals. These features have helped to achieve low cost along with uniqueness. Southwest has also achieved high levels of customer satisfaction through best baggage handling, fewest customer complaints and best on time performance which makes the service unique in terms of quality.

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