How can you use the four Product Attributes to implement a Product Differentiation Strategy?
Why would an organization pursue a Cost Leadership Strategy
Explaion what Economies of Scale is and why it would have an impact on your business.
1.Product attributes:Product attributes are the descriptors we use to define kinds of products.for example we could describe a tshirt by the color and size.These attributes mean that in the real physical world your store may only carry one red shirt but you have three sizes or three variations.
Product attributes to implement a product differentiation strategy:
In a competitive business world,companies should constantly examine their product and services to better serve customers.what worked and yielded profits last year may not work as well this year.product differentiation and positioning are key parts of a company’s marketing strategy and are necessary to keep ahead of competition.they also require an innovative sprite coupled with careful analysis.
2.Firms that compete based on price and target a broad target market are following a cost leadership strategy.several examples of firms pursuing a cost leadership strategy are illustrated below.
- Despite its name,Dunkin Donuts make more money selling inexpensive coffee than it does from selling donut.The coffee is often advertised as costing under a dollar,making Dunkin donuts a low priced alternative to starbuks
- Superchts website makes clear their longstanding cost leadership strategy by nothing,”A supercut is a haircut that has kept people looking their best while keeping money in their pocket,since 1975″.
3.Economies of scale
Economies of scale is the cost advantage that arises with increased output of product.Economies of scale arise because of the inverse relationship between the quantity produced and per-unit fixed costs;i.e.the greater the quantity of a good produced,the lower the per-unit fixed cost because these costs are spread out over a larger number of goods.Economies of scale may also reduce variable costs per unit because of operational efficiencies and synergies.Economies of scale can be classified into two main types:internal-arising from within the company and external-arising from extraneous factors such as industry size.
The downside is the hidden assumption that the firm know what the demand for the product in question will ne.so maybe I “hope” to sell 10000 left hand monkey wrenches per year,and construct a factory to do just that.but then actual demand is only 5000 per year and the factorys unit costs are much higher
The analysis of cost/volume/profit for this sort of problem uses the concept of “degree of operation leverage.together with financial leverage,economic modeling of the firm can be at various levels of output.