SUBMITTED BY

SOORAJ S
Registration number: 11809348

MASTER OF BUSINESS ADMINISTRATION (MBA)

Mittal School of Business

LOVELY PROFESSIONAL UNIVERSITY

Phagwara, Punjab June 2022
1. Discuss any 3 companies that follow a Cost leadership strategy. Explain how
these companies pursue this cost leadership strategy

What is Cost Leadership strategy?

When a corporation portrays itself as the cheapest maker or provider of a specific product or
commodity in a competition, this is referred to as cost leadership. It is tough to implement the
plan since management must continually seek to reduce costs at all levels in order to remain
competitive.

Examples of cost leadership strategies show that it refers to the approach that a business does
to position itself as the cheapest provider of a specific product. It is a very effective marketing
approach for increasing market share and gaining client attention. Any cost leadership case will
emphasise the challenges that management experienced in implementing this approach, as
costs must be lowered at every level to remain competitive.
A cost focus strategy example will also show that firms following this approach do not have to offer
cheaper items at the expense of quality. Big Bazaar in India is a good example of concentrated cost
leadership since it cornered the market by delivering quality products at lower prices than other
firms selling the same or comparable things.
COST LEADERSHIP STRATEGY EXAMPLES

A cost leadership example shows how businesses can increase efficiency and reduce costs at every
level. To understand this better, let’s look at some cost leadership strategy examples-:

Walmart
McDonalds

Amazon
Walmart-Walmart is an internationally renowned example of concentrated cost leadership. By
selling branded things at low prices, they obtained a competitive edge. They are a cost-cutting model
that teaches us how to reduce expenditure, achieve low operating expenses, reduce outsourcing
costs, and even assist suppliers in reducing costs

McDonalds- This list would be incomplete if McDonald's was not mentioned as an

example of a cost-cutting tactic. This technique was implemented to reduce delivery time,
create effective training methods, and generate in-house ingredients. They reduced
salaries, raw material expenses, and human resource costs by maximizing asset utilization.
This cost-cutting strategy example also shows how to serve more customers in the fast-
food business by using good time management..
AMAZON- Amazon is the most well-known example of concentrated cost leadership in e-
commerce. To enhance processing capacity and warehouse storage, the business employed
porter's strategy principles and researched other cost leadership examples. By automating the
purchasing and delivery procedures, they were able to reduce expenses and boost operational
efficiency. They are a fantastic illustration of concentrated cost leadership for firms seeking to
gain a competitive advantage through technology and differentiation.
Now we will discuss about the Cost leadership strategy of Amazon-:
Amazon is the most well-known example of concentrated cost leadership in e-commerce. To
enhance processing capacity and warehouse storage, the business employed Porter's strategy
principles and researched other cost leadership examples. By automating the purchasing and
delivery procedures, they were able to reduce expenses and boost operational efficiency. They are
a fantastic illustration of concentrated cost leadership for firms seeking to gain a competitive
advantage through technology and differentiation.

Amazon, the indisputable king of eCommerce leverages economies of scale, advanced technology,
and process automation to maintain a competitive edge
• By increasing processing capabilities and warehouse storage, they are able to get more products
out to customers.
• By automating the purchase and delivery processes, they also increased operational efficiency.
• That’s the reason Amazon can save costs and offer products at cheaper prices.
McDonald’s is a household name when it comes to global fast-food
chains. McDonald’s hardly hires chefs. Rather what they do is to develop an optimized
food preparation process, recruit people and train them to become part of their
workforce.
That helps them to save the cost they should have spent hiring experts.

The company also own facilities where they produce ingredients mixes that are used in their meals.

That means they are also saving costs in the raw materials value chain.

• Walmart-
Walmart is a multinational retail leader based in the US. The company’s competitive
strategy is based on the sales of branded products at cheaper prices.

How do they do it?

Walmart pays considerably low wages to reduce costs. Only people who can accept
such wages are welcome to work there.

Besides, there’s a lot of automation in their process. They manage their own
distribution chain and own fleet of trucks and trailers in their thousands, cutting
costs that would have been spent on third party companies.

Also, the company has a well-coordinated network of stores, distribution centres

and suppliers that make it possible for them to order goods in larger quantities and
at reduced prices.
2. Discuss any 3 companies that follow a differentiation strategy. Explain how these
companies pursue this cost leadership strategy.

As opposed to cost leadership, the differentiation strategy allows companies to take on an

innovative approach for their products, and charge premium prices for it. For example,
Starbucks goes beyond selling coffee by providing a unique coffee experience in their
coffeehouses.

Building a successful differentiation strategy typically necessitates solid R&D, innovation, and,
most importantly, an in-depth grasp of what the client truly wants and desires.

Of course, I feel that the best approach to grasp this notion is to look at some real-world
examples. So, without further ado, here are some of the most amazing instances of
differentiation strategies-:
Apple- When we think about distinctiveness, one of the first brands that comes to mind is Apple. The firm,
founded in 1976 by Steve Jobs, Ronald Wayne, and Steve Wozniak, has had an undeniable influence on the
consumer electronics and computer software industries.
When we think about distinctiveness, one of the first brands that comes to mind is Apple. The firm, founded in
1976 by Steve Jobs, Ronald Wayne, and Steve Wozniak, has had an undeniable influence on the consumer
electronics and computer software industries.

Ever since its creation, Apple has been well-known for its innovative products, including their
Macintosh line computers, the iPod, iPad, and of course – the iPhone. And it has successfully managed
to distinguish them from their competitors through a multi-layered approach:
Product Design Operating System
Pricing Strategy Brand Loyalty

Retail Outlets
Cost leadership Strategy : Apple reduces its operations costs by forming a partnership with
manufacturers such as Foxconn in China. Costs of production such as labour and materials are
significantly lower in China than the USA or Australia.
• Cost leadership strategy has been highly adopted by Apple Inc in its endeavors of ensuring
competitiveness and success in the technology industry.
The company's management has been able to draw policies and strategies that are aped at ensuring
that the company is the lowest cost producer and distributor.
• By lowering the cost of production and management, Apple Inc has been given golden opportunities
on determining prices of its products, thus enhancing its competitive edge. -Some of the practices
adopted by the company in executing the cost leadership strategy is through minimization of
operating costs, lowering distribution costs, tight control on labor costs as well as reduction of in put
costs
McDonalds - In differentiation strategy, fast food chains need to be more selective in
which products to offer & more creative in their promotion strategy.

McDonald’s offers specialized (Regionalized) version of its menu. This leads to

differentiate the products from other competitor products as well.

Mc Grilled sandwiches in US & Canada.

Mc Chicken Premiere & Zesty chicken in UK, France, Italy & Belgium.

To overcome their healthy issues Mc Donald’s added salads & other lighter options to its
menu & encourage people to visit more often.

Product adaptation in India- Vegetarian selections, No beef or pork items, McMasala

Wide variety of menu items according to the Indian menu items;
Vegetable & non vegetable products. , Health conscious items. ,Local flavors.
Cost Leadership Strategy of McDonalds

McDonald’s is a household name when it comes to global fast-food chains. McDonald’s hardly hires chefs.
Rather what they do is to develop an optimized food preparation process, recruit people and train them to
become part of their workforce.
That helps them to save the cost they should have spent hiring experts.

The company also own facilities where they produce ingredients mixes that are used in their meals.

That means they are also saving costs in the raw materials value chain.
Walmart has a clear differentiation strategy: pricing. Everything that Walmart does is specifically
selected to keep prices low. Their famous “roll-back” pricing strategy is designed to constantly monitor
competitor pricing and offer a lower price. Through purchasing, shipping, warehousing and retail
marketing, Walmart is standing out by consistently giving customers exactly what they want or need at a
lower cost.

The market for low-cost retail establishments is continually in flux. There are other rivals in the industry,
but few can compete with Walmart's organization. Walmart's distribution networks are one of the most
important aspects in their success. Walmart is a market powerhouse for convenience and pricing, with a
network of warehouses, shipping services, and new stocking systems. Walmart is able to keep their
pricing low by developing its own integrated processes for ordering, shipping, and delivery.

While the number of Walmart sites indicates market saturation, their continual expansion may also
indicate failure. Walmart is frequently not well accepted in smaller communities, as citizens are worried
about the impact on local companies, the environment, and traffic issues in regions where Walmart is
established.
Cost Leadership strategy- Walmart is a multinational retail leader based in the US. The company’s competitive
strategy is based on the sales of branded products at cheaper prices.

How do they do it?

Walmart pays considerably low wages to reduce costs. Only people who can accept such wages are welcome to
work there.

Besides, there’s a lot of automation in their process. They manage their own distribution chain and own fleet of
trucks and trailers in their thousands, cutting costs that would have been spent on third party companies.

Also, the company has a well-coordinated network of stores, distribution centres and suppliers that make it
possible for them to order goods in larger quantities and at reduced prices.
3. Discuss any 3 companies that follow a focus strategy. Explain how these companies pursue this
cost leadership strategy?

COMPANIES USING “FOCUS STRATEGY”-

A few organizations instantly sprang to me when I was asked to list a few that employ the "focus strategy," a
strategy that targets a specialized market through differentiation or cost advantage. TOMS, frog box, and ten
tree apparel are a few examples. All three of these organizations employ the "focus strategy" by, focusing on a
very particular (limited) market- customers that respect and uphold ethics.

TOMS
This shoe firm, founded in 2006, is well-known for its commitment to corporate social and environmental
responsibility. The brand follows the "One for One" policy, which states that "with every product you buy, TOMS
will aid a person in need." TOMS has supplied over 10 million pairs of shoes in more than 60 countries and
restored sight to 200,000 people in more than 5 nations. TOMS has just launched a water initiative to offer clean
water to underserved communities.
FROG BOX
Frog Box is a moving firm that offers a more cost-effective and ecologically friendly alternative to moving with
cardboard boxes. The firm leases out reusable moving boxes and materials and provides competitive moving
services. The firm contributes "1% of gross revenue to frog habitat restoration.“

TEN TREE
Ten Tree is a clothing brand that values stewardship, openness, and community participation. The firm
promises to plant ten trees for every transaction.

Types of Focus Strategies

• Cost focus strategy: The underlying principle of the cost leadership strategy is used in this
method, but with a special concentration on a certain market sector. You may provide a lower
cost than your competitors and leverage this cost advantage to build your market share by
targeting a specific sector and utilizing a smart marketing strategy to pursue this sector.
• Differentiation focus strategy: This strategy targets a specific market sector rather
than the entire field with a specialized product. A luxury electric car would be a form of
differentiation emphasis strategy if it provided significant benefits in quality and
functionality that justified the high pricing.

Focus Strategy Examples

• Musical Instruments- A company that manufactures high-quality classical guitars would almost
certainly have a narrow business plan. Buyers of high-end nylon string classical guitars will value
tone richness, attention to detail, and overall design excellence. In this narrow market, a
concentrated differentiation approach in the product line will have the highest chance of
success.
• Vacation resorts - Some resorts and cruises will appeal to singles, while others will cater to
couples without children. To obtain a competitive advantage, these cruise companies might
compete through pricing offerings or appeals to specific client demands, such as room design
and activity choices.
Jewellery - Because teenage girls are unlikely to have the disposable cash of adult jewellery purchasers, a jewellery
firm that caters primarily to them can employ the cost focus strategy.

Thank you