13 what is a low cost leadership strategy a low cost

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13. What is a low cost leadership strategy? A low cost leadership strategy is an action plan the firm develops to produce goods or services at the lowest cost. They have a large competitive scope and they also keep their costs low. An example of a cost leadership strategy would be Wal-Mart. Wal-Mart gained a competitive advantage by selling goods and services at the lowest cost. A driver of a low cost strategy would be buying goods in economies of scale to cut costs. A pitfall of a low cost strategy would be that other companies are always willing to go lower and take a lower level of profit. 14. What is a differentiation strategy? A differentiation strategy is an action plan that a firm develops to produce goods or services that customers perceive as being unique in ways that are important to them. An example of a company that uses a differentiation strategy would be Starbucks. Starbucks is a coffee store that has coffee that is different from something the industry’s average customer would drink. Differentiation strategies have a large competitive scope and large competitive advantage. Differentiation strategies can be based on tangible or intangible aspects of a product. A pitfall of a differentiation strategy would be if the consumer does not like the unique aspect of their product. 15. What is the difference between related and unrelated diversification? Related diversification is when new products are developed in the same industry that the organization operates. An example of related diversification would be when Pepsi started making Gatorade. Both of these products are in the beverage industry. Unrelated diversification is when an organization moves beyond its current value system or industry. An example of unrelated diversification would be when Microsoft began production of the Xbox. Microsoft was in the software industry. When they made the Xbox Microsoft moved into the gaming industry. 16. Programmed and Non Programmed Decisions Decision making is the process of developing and analyzing alternatives and making a choice. There are two types of decisions, programmed and non-programmed decisions. Programmed decisions are routine and repetitive. An example of a programmed decision would be whether to put your pants or your shirt on first. This decision is made every day so the decision is routine and repetitive. A nonprogrammed decision is unique and unstructured. An example of a non programmed decision would be deciding where to go to college. This decision was unique and also unstructured. 17. Application of the Rational Decision Making Process The rational decision making process assumes that human behavior is rational. There are five steps to the rational decision making process. The first step is define the problem. The second step to identify and weigh the criteria. The third step is to develop alternatives. The fourth step is to analyze alternatives. The fifth step is to make and choice then implement and evaluate the decision.
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