Distinguish between cost leadership and differentiation strategies. Is Essay

Distinguish between cost leadership and differentiation strategies. Is it possible for a company or business unit to follow a cost leadership strategy and a differentiation strategy simultaneously - Essay Example Focus put on the cost leadership approach and differentiation strategy; this paper looks at the differences and the simultaneous working together of the two (Porter & Tanner 2012, pp. 12). Cost leadership strategy is the method by which a firm sets out becoming a low-cost producer in the industry. The cost advantages accrue from different sources depending on the structure of the industry. It may comprise the pursuit of economies of scale, preferential mobility to raw materials and the propriety technology. Low-cost producers tend to find and exploit all the sources of cost advantage. A firm that achieves and can sustain the overall cost leadership is above the average performer in the industry. Such company can command the prices near or at the industry standard (Porter & Tanner 2012, pp. 26). On the other hand, differentiation strategy is the method by which a firm seeks uniqueness in the industry. The distinctiveness is along some of the dimensions widely valued by the buyers. The procedure selects one or a number of attributes that majority of the customers in the industry perceive as significant. Companies in this category exceptionally position themselves to meet the identified needs of its clients. The exclusivity of this strategy is where the company rewarded with a premium price for its uniqueness (Porter & Tanner 2012, pp. 76) It is possible for the company to follow a cost leadership while it follows a differentiation strategy at the same time. Though it does not work for every company. A good example of an organization that can embrace the two approaches together is the Toyota corporation. The Toyota produces quality cars at low price accompanied by differentiating strategy. For example, the introduction of luxury brands of BMW cars and the Mercedes-Benz new series (Porter & Tanner 2012, pp. 138). Some scholars such as Porter argue that cost leadership and differentiation approaches are irreconcilable. A