Question

Provide one example of a company that pursues a niche differentiation strategy and one that pursues a broad cost-leadership strategy. Explain

Answer 1

For a niche differentiation strategy , the company should have a competitive advantage.The unique position of how it differentiates itself from other competitors. A niche differentiation would be based on tighter target market. It could be defined by geography, age, gender, race, nationality, income, families, urban/suburban, empty nesters, young couples, small business, hair solons, accounting firms or any combination of demographics.

An example for a niche differentiation strategy is T- mobiles.They  targets  a smaller niche audience of young, urban dwellers, focuses on the millennial audience and digital natives.

Cost leadership is a strategy that companies uses to achieve competitive advantage by creating a low-cost-position among its competitors. It is done by increasing productivity and efficiency, eliminating waste, or controlling costs.One of the most effective ways for a company to become a cost leader is the economies of scale.

An example for cost leadership is McDonald's . They keep costs low by maintaining a division of labor that allows them to employ and train inexperienced staff instead of skilled cooks. This method allows them to hire a few managers who usually receive higher wages.