Lecture 2 (Farmanara)

Question 1

The three generic basic strategies according to M. Porter (1980)

Answer 1

1. Cost leadership (Aldi, Ryan Air, Ikea) ( Similar product at a lower price)
   - Lowest cost position in the market
   - Lowest price in the market

2. Differentiation ( Unique
product at a price premium) ( Google, Apple, Coca-Cola)
- Unique selling proposition
- High added-value (benefit) for
customers
- Price premium

3. Focus/Niche( Pet owners, LUSH) Nichemarket is a balance between being a small, targetable market and being a big enough market to be profitable. It has unique preferences.

Question 2

Important levers for differentiation

Answer 2

1. Innovation, patents
2. Quality Apple (durability, reliability)
3. Services (Amazon)maintenance, short delivery times
4. Brand (Haribo, CocaCola)emotional experience

Question 3

Approaches for cost leadership strategies

Answer 3

1. Economies of Scale ( Transport by water, US soft drink market, Tesla, Panasonic) - An economy of scale is the cost advantage a company has with the increased output of a good or service.
   - Fix cost depression
   - Higher capacity utilization
   - Deployment of more efficient production machines and equipment
2. Economies of scope ( Food&beverage sales in petrol stations) state the average total cost of a company’s production decreases when there is an increasing variety of goods produced.
   - One plant is cheaper than 2 plants
   - Nike‘s umbrella brand advertising
   - Food&beverage sales in petrol stations