Question

Martin Ltd has always had a strategy of product differentiation; that is, providing high-quality products and extracting a price premium from the market. During the recent economic downturn, Martin Ltd saw its customer base diminish, and decided to move strategically to a cost leadership strategy, that is, to try to sell more products at a lower price. Required: What are the implications of this strategy change in terms of the usefulness of historic sales data for decision making related to demand predictions?

Answer 1

Answer. Martin ltd selling product mix to sell its products in different market segments in product differentiation strategy. Martin ltd should implications of cost leadership strategy in following manner to sell more products at a lower price-

•             Organization should analysis and evaluates customers and market taste, preface, budget to buy different type of products so that organization can try to produce product as per current and past taste, preface and budget of customers.

•             Organization should study related competitor product manufacturing policy, pricing policy, marketing policy so that organization can know mindset of competitor and market and can produce and sell maximum quantity of products.

•             Organization also study current and past market trends like inflation, deflation, economic downturn and upturn so that organization can decide his production capacity, products price, and product quality, which are very important in increase sell.

•             Organization should use budgetary control, slandered costing and variance analysis for evaluate and analysis each element of cost like Material, labor, overheads etc. These techniques eliminate unnecessary costs and activities of a manufacturing product.