Provide 1 response to each student post. Each response should be 150 words each. Turnitin is being used to check for plagiarism and Please use APA format. These are the instruction.
Sophia Muma
8:38pm Jun 12 at 8:38pm
Low Cost Strategy
The low cost strategy is used when companies sell similar products and cannot be differentiated from the competitors. The A firm seeking low cost strategy will seek to be very lean in administration, production and marketing without compromising the quality of the product produced. These firms ensures that the fixed cost or contribution margin is spread or widen to reduce cost per unit by producing more units, higher utilization of assets and increasing production speed.
These companies use strategies like high utilization of assets to minimize downtime, increased production, low labor cost, low rental costs, low advertising and distribution to keep fixed cost at a lower rate thus, reducing the cost of production per unit. The cost per unit can also be reduced by buying materials and components in bulk to gain a lower cost per unit. These companies would strive to increase the marginal cost (MC) by reducing Average variable cost (AVC) and this would likely reduce its Average Fixed cost (AFC).
Firms like Walmart outsource their labor, parts and services to keep the cost of production low and are able to pass some of this benefits to the consumers by selling low cost products. By buying in bulk Walmart is able to buy goods at very low prices and pass on this benefit to their customers.
Differentiation firm strives to gain superior profits by producing products or services that is different from the rivals firms. These firms seek to have their products recognized by being high quality and thus, able to serve a segment of the population that has the needs for such quality levels. These companies make products that are perceived in the eyes of the target market to be of higher quality thus, willing to pay any amount to get the product. These companies would spend more on product quality raising AVC and possibly AFC to allow the product to be differentiated from the rivals. Apple for example is able to differentiate its services and products to provide best of kind phones and watches that is perceived to be more superior in the eyes of the customers thus, willing to pay any amount to have an IPhone or an Apple watch.
The products tend to have some unique quality that stands out and is different from the rival products therefore, the firm is able to use cost differential strategy to differentiate their products. Selling the aspects of the product the consumers are attracted to and charging the differential cost towards the product.
Reference
Douglas, E XXXXXXXXXXManagerial Economics. Bridgepoint Education, Inc. Retrieved from https://content.ashford.edu/
Nerynielle Canteen
Yesterday Jun 11 at 9:34pm
According to Douglas (2012), low-cost strategy is trying to save by means of administration, production and marketing and without compromising its quality. It is essentially the company’s way to producing products at lower prices so that they can sell it to the consumers for cheaper price as well. A situation where a firm would choose low-cost strategy is when two or more firms have identical products that sell at the same price, the firm that chooses the low-cost strategy will have a higher profit at the end. Walmart is a company that I can think of that uses this strategy. They sell identical products as Target but Target’s prices are higher.
Differentiation strategy refers to companies producing high quality products with high price production. The products are unique enough to where consumers are willing to pay for it with a high price. An example that came to mind are Yeti products, such as the coolers and cups. Those products are not necessarily unique but Yeti produces such high quality coolers and cups that consumers are willing to pay for them. For instance, a regular cooler cost a little less than $100, but Yeti coolers can cost double that price or more for the same size cooler.
Douglas, E XXXXXXXXXXManagerial Economics. Bridgepoint Education, Inc. Retrieved from https://content.ashford.edu/