Cost focus strategy
Category: Marketing
The B company has chosen the following two strategies:
To obtain cost dominance, i.e. the company which has the lowest production costs in the trade.
The cost dominance is realised in a limited part of the market, i.e. one or more segments which only constitutes a part of the entire market width.
The strategy is more or less the same as for companies leading a cost-leader strategy, but the company’s products/services are tailor-made and adapted to a limited part of the customers who demand limited costs. The company focuses on a limited part of the market which is specifically cost oriented.
To realise this strategy successfully it is necessary for the company to carefully define the special market segments which needs differ from the other buyers.
In addition to the risks mentioned under the ‘cost-leader’ strategy, the B-company would often be tempted to incorporate new segments into the strategy which require alternative products with corresponding individual service needs. The result of such a development could be that the company blurs the original market focus and makes itself vulnerable to competition. The former competition strength can quickly turn to vulnerability if the focus is partly or completely lost.