Question

There are three approach of business level strategy : diversification strategy, cost leadership strategy and and focus strategy. Please explain what is diversification strategy and cost leadership strategy and give example in coffee industry in Indonesia. (30 points

Answer 1

Different strategies are employed to built and retain competitive advantage in a market.

Diversification and cost leadership strategy , both, provides effective ways to increase their reach to potential targets

Diversification , simply , means to increase profit by higher sales through new variety of products and entry in new markets. Providing services outside the previous limited area .this is usually done through mergers and acquisition (entering new industry)

Cost leadership strategy is a way to effectively produce and supply products than its competitors, it is achieved by using cost effective technologies, reaching target or potential customers (demand forecasting) and use economies of scale .

Coffee industry in indonesia is a prominent , emerging sector, however, it faces different geographical and technological barriers which can be rejuvenated by proper diversification and cost effective strategy ,

Since , the sector faces weak and stagnant level of production due to primitive techniques and geographical barriers , the quality of coffee beans produced is of lower value

By adopting intensification program , the holes in supply chain structure can be filled. Broader access to finance,commitment to better transport, warehousing and technological improvements in terms of quality are some strategies which can diversify or expand the produce to global markets , rise in exports as well as reaching domestic customer in time with effective technological advances and investment. With cost effective ways like collaborating or supporting small farmers for economies of scale and standardisation.