Question

Find a company that is an example of low cost leadership or low cost focus. Explain why this company is an example. Does this company or the conditions meet the criteria for being appropriate for low cost leadership or low cost focus? Explain why or why not. Has this company experienced any of the risks or drawbacks of using either low cost leadership or low cost focus? Explain. What has been the impact of this strategy on power? Explain this using the Five Forces Model. Explain the advantages and disadvantages that this company has experienced as a result of following this strategy. Through answering this question, demonstrate your comprehension of and ability to apply the concepts of Generic Strategies and the Five Forces Model.

Answer 1

The company I have chosen is McDonald. Its generic strategy is cost leadership. It minimizes costs and offers food at low prices compared to its competitors like Burger King or Arby’s. The price of a burger comes at Rs.30, vanilla cone ice cream at Rs 25 and happy meal and breakfast meal at Rs 99. The most important factor is quality food, tasty and crispy burger and French fries with such a low cost. The cost of operation is quite low for a company that aims at efficient, speedy delivery, the scale of production and through its experience for decades. It produces standardized products with least customization as standardization of services reduces the cost. It runs with low margin and fast-food services. Their labor is freshers and they train on the job rather than trained chefs which reduce the cost. It has very few managers and uses distinctive hiring strategies. It meets all the criteria of low-cost leadership. It penetrates market through global expansion on franchising or joint ventures. The broad differentiation strategy enables faster penetration and attracting customers. According to Gregory, 2018, the Porter’s Five Force Analysis, the competitive rivalry or competition is a strong force, bargaining power of buyers or customers is a strong force, the bargaining power of suppliers is a weak force, the threat of substitutes or substitution is a strong force and the threat of new entrants or new entry is a moderate force Yes, the company has faced risk due to low-cost strategy as standardized products with less product innovation has saturated the burger industry and retaining customers has been difficult. Again, it concentrates on very few segments due to standardization. It faces tough competition as the market is saturated and the lack of strong regional and global strategic alliances among suppliers, the distribution network remains uncontrolled by McDonald.