Question

Research Amazon. How has this firm been able to combine overall cost leadership and differentiation strategies?

Think of another firm that has attained a differentiation focus or cost focus strategy. Are its advantages sustainable? Why? Why not? (Hint: Consider its position vis-à-vis Porter’s five forces.)

Answer 1

Research Amazon. How has this firm been able to combine overall cost leadership and differentiation strategies?

Amazon is not just an e-commerce company but a whole ecosystem. They have divisions that takes care of the website and its maintenance AWS, logistics and products like Alexa and even platforms like Amazon prime that competes with others like Netflix. They have built a brand image of being reliable, fast and economical. Amazon’s strength in processing capability, automatic warehousing, good supplier relations, and efficient logistics helps them to be a cost leader. Apart from that, they differentiate themselves in services being a customer centric company. They promptly act on customers feedback that leads to building loyalty.

Think of another firm that has attained a differentiation focus or cost focus strategy. Are its advantages sustainable? Why? Why not? (Hint: Consider its position vis-à-vis Porter’s five forces.)

Starbucks initially attained a differentiation focus by offering unique coffee products and a trendy environment. However, this has easily imitated at much lower costs which limits their ability for a sustained competitive advantage. New entrants including chains and small businesses have successfully created substitute products and services at significantly lower prices.

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