Professional Documents
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In 1980
In 1980
These are now called as Porter’s three genric strategies which are applicable to all the firms and
businesses irespective of their size. However, it is also necessary that a business only choose
only of the one of the among the three terms otherwise the damage will be irreplaceable and the
firm amy suffer form loss of resources. Porter’s generic strategies focus on market oriented
policies of firms, product differentiation appraches and minimization strategies (Jackson, 2022).
Porter's generic strategies outline how a corporation seeks a competitive edge throughout the
extent of its selected market. There are a few generic strategies: low cost, distinctive, and
focused. A corporation chooses between two sorts of strategic advantage: lower expenses than
its competitors or distinguishing itself across dimensions sought by consumers in order to fetch
a higher price.
In my opinion, cost leader ship is effective for Qatar Airways. Qatar Airlines increased their
worldwide network of destinations and decreased passenger discomfort by acquiring a
sophisticated aircraft collection capable of lengthy and ultra-long-haul flights. Qatar Airlines has
increased profitability by reducing operational expenses by purchasing fuel-efficient aircraft and
hence reducing the expenses as much as possible.
Cost leadership is an approach that focuses on increasing operational efficiency and reducing
expenses wherever feasible. It might be the consequence of scale/scope efficiencies, rigorous
overhead management, cautious customer selection, standardisation, and automation. The goal
of cost leadership is to have the lowest expenses in a market. A cost leadership strategy
involves a company arranging and controlling its value-added operations in order to be the
lowest-cost manufacturer of a commodity in an industry. This puts the firm in the greatest
position to withstand a pricing war and delivers the biggest margins if one does not arise. The
low cost leadership strategy, according to Michael Porter (1980), aims to increase pricing power
by emphasising low cost compared to competitors.
STRENGTHS
Cost leadership exists independently of market structure. Cost leadership is a viable approach
since it shields the company against powerful purchasers. Buyers reduce prices to the standard
of the next highest efficient manufacturer.It secures itself against big suppliers (Birjandi, 2022).
Cost leadership allows for the ability to tolerate increases in input costs, which competitors may
not have.
A cost leadership strategy provides advantages over existing rivals as well as possible new
entrants. The existence of a cost leader in an industry, in particular, tends to prevent new
businesses from joining the market since a new firm would struggle to attract clients by
undercutting the cost leaders' rates. Consequently, a cost leadership strategy aids in the
creation of entry barriers that shield the firm—and its current rivals—from new competition.
In sectors where pricing is an essential issue, rigorous cost control contribute to a competitive
advantage. Profits will be higher if a firm delivers a baisc service or amenity at a price that's
lower than the industry average. If a low cost is necessary, the firm may be able to compete on
price. It can also create earnings that can be spent to increase quality of the product without
charging the sector peers price.
Presenting a company as a low-cost supplier or service provider poses a serious dilemma for
the company. Cost leadership is exposed to hazards, for instance, technical alteration, which
removes previous funds as well as surpasses previous wisdom. The risk of copying by late
arrivals who benefit from low-cost learning. Because of needless cost-cutting worries, there is a
failure to cater to the needs and necessities of the customers (Francis, 2020). Unexpected cost
inflation reduces the firm's capacity to counteract product distinction by cost leadership.
Regardless of these, there are still some demerits of cost leadership, which are stated below:
1. If the customer believes the manufactured goods are inexpensive or of cheap quality, it is
necessary that the firm must sell it at cheaper rates. In such instance, cost leadership cannot
yield increased viability.
2. An overemphasis on cost might cause a company to lose touch with its customers' evolving
needs.
3. Several pathways to a low-cost position are easily replicable. Competition can buy the most
optimum industrial faculties. The knowledge spillover consequence grows into a lesser amount
of benefit as businesses begun to grow. The greatest risk, however, can arise from the
competitors who can offer better bill at marginal cost in the sector because they have other,
more revenue producing goods to compensate the static expenses.
The decision of choosing cost leadership among the three generic strageies highly influences
the choices made the company in future so it is necessary that a firm must give its final verdict
regarding the decsion after going through thorough research and consideraion (Adam, 2019).
Porter expresses the advice of against attempting to "limit your bets" by pursuing several
strategies. One of the main reasons this is a sound advice is because the actions required to
make each sort of plan successful appeal to various types of individuals. However, cost
leadership necessitates a meticulous internal emphasis on procedures. In contrast,
differentiation involves horizontal and highly creative approach.
Hence, in order to choose cost leadership as the best generic startegy for the Qatar AIrways it is
important for the firm to consider its starnegth and weaknesses.
Additionally, in order to frther clarify the results the company can use cost leadership to
eliminate risks of new entry, substitution, supplier power and competitive edge to name a few.
Effectiveness of cost leadership for the Qatar Airways can also be determined by using its role
in managing consumer power.
IMPLEMENTATION
No doubt al the generic strategies can give firms a major benefit of running their
business in a unique and contemplative way and yet again each one is different
from others. In order to retain the competitive edge that Qatar Airways has
gained by using cost leadership it must employ some major beforehand
strategies simoulattaneously. Overall cost leadership is neither very difficult to
pursue nor it is full of potential issue yet there are something whihc Qatar
Airways needs to keep in mind in order to fully adapt itself to cost leadership
such as sustaining physical contribution, R&D(Resaerch and Development),
engineering tasks and production operations.
Sourcing raw material: In order to make maximum profit the prices of raw
material necessary for the propoer functioning of the machines is usually sold at
the marked up rates set by the providers. This not only causes a major
manufacturing cost to Qatar Airways but also cuts its revenues short. In order to
avoid such situations in the future and to maintain the use of cost leadership
Qatar Auiways must control or own the products by using value chain control.
Advancing the modern technology: Increasing efficiency and yet maintaining a lower operational
cost is another issue Qatar Airways must consider when choosing cost leadership. It has to
sustain its state-of-art equipment in order to defend itself from other cost effective competitors
because major modifications in firm’s technology can lead to drastic changes. So, it is
necessary of the airline firm to keep advancing its technology hence upholding its lowered
prices and increased production.