- Strategic Management Tutorial
- Strategic Management - Home
- Strategic Management - Introduction
- Strategic Management - Types
- Strategic Management - Process
- Strategic Leadership
- Organization Specifics
- Performance Issue
- The Top Leadership
- Entrepreneurial Orientation
- The External Environment
- Organization & Environment
- Analyzing the External Environment
- Judging the Industry
- Mapping Strategic Groups
- Organizational Resources
- The Resource Based Theory
- Intellectual Property
- The Value Chain
- Other Performance Measures
- Company Assets: SWOT Analysis
- Business Level Strategies
- Different Types
- Cost Leadership
- Niche Differentiation
- Focus Strategies
- The Best-Cost Strategy
- Aiding Business Level Strategies
- Competitive Moves
- Competitor's Moves
- Cooperative Moves
- International Marketing Strategies
- Pros & Cons
- Drivers of Success and Failure
- International Strategies - Types
- International Markets - Competition
- Cooperative Level Strategies
- Concentration Strategies
- Vertical Integration Strategies
- Diversification Strategies
- Downsizing Strategies
- Portfolio Planning
- Strategy and Organizational Design
- Organizational Structure
- Creating an Organizational Structure
- Organizational Control Systems
- Legal Forms of Business
- Strategic HR Management
- Growth & Nature
- Organizational & HRM Strategy
- Impact of HRM on Performance
- Strategic Management Resources
- Strategic Management - Quick Guide
- Strategic Management - Resources
- Strategic Management - Discussion
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A best-cost strategy relies on offering customers better value for money by focusing both on low cost and upscale difference. The ultimate goal of the best-cost strategy is to keep costs and prices lower than other providers of similar products with comparable quality and features.
Challenges of Best-cost Strategy
Some organizations compete based on offering either low prices or some unique features. Some organizations want both to be effective in their strategy. Firms that offer products or services in low prices and also offer substantial differentiation are said to be following a best-cost strategy.
This strategy is quite difficult to execute as creating some unique features and then communicating the usefulness of these features generally raises the costs of doing business. Product development and advertising are expensive. However, organizations that are able to manage and implement an effective best-cost strategy attain success beyond the ordinary.
TARGET’S BEST COST STRATEGY
Target follows a best-cost strategy. The firm’s products are relatively cheaper among retailers while they are both attracting trend-conscious customers. Target carries products from famous designers, such as Michael Graves, Isaac Mizrahi, Fiorucci, Liz Lange, and others. This is a lucrative position for Target, but the position is currently under attack from all angles.
Best-cost Strategy and Low Overhead Business Model
A best-cost strategy can let the organization to adopt a business model with very low fixed costs and overhead in comparison to the costs its competitors are incurring. The Internet has made this possible for some organization.
Amazon, for example, charges lower costs as it does not endure the expenses that “brick and mortar” retailers such as Walmart and Target do in operating. Considered alone, this would be a low-cost strategy but Amazon also offers an unmatched portfolio of goods. This combination makes Amazon the unquestioned e-commerce leader in North America.
Adopting a best-cost strategy by significantly reducing the expenses is also possible. Restaurant operations have significant overhead costs, including rent and utilities. Some intelligent chefs avoid such costs by taking their food to the streets. Food trucks serving high-end specialty dishes at cheaper prices are becoming a popular trend.
BEST-COST STRATEGY APPLIED BY FOOD TRUCKS
When permitted, some cities’ food trucks frequently alter position and send out their location for the day (or evening) on Twitter. Apart from keeping costs low, mobile food trucks have another advantage over a traditional restaurant as they can change location to serve more and different clients.
For instance, food trucks sell lunch downtown and afternoon snack near the subway and then move to the nightclub area to sell a late-night snack before the party animals head home.
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As an expert in strategic management and business strategy, I have a deep understanding of the concepts and principles outlined in the provided article. My expertise is grounded in both theoretical knowledge and practical experience, allowing me to discuss and analyze various aspects of strategic management with confidence.
The article covers a broad range of topics related to strategic management, including:
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Strategic Management:
- Definition: The comprehensive analysis and planning of organizational resources and initiatives to achieve specific objectives.
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Strategic Leadership:
- The role of top leadership in guiding the organization towards its strategic goals.
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External Environment:
- The factors outside the organization that can influence its performance and decision-making.
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Organizational Resources:
- The assets, capabilities, and intellectual property that contribute to an organization's competitive advantage.
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SWOT Analysis:
- An analysis of an organization's Strengths, Weaknesses, Opportunities, and Threats to inform strategic planning.
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Business Level Strategies:
- Approaches taken by organizations to compete in specific markets, including Cost Leadership, Niche Differentiation, and Focus Strategies.
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Competitive Moves:
- Strategies employed by organizations to gain a competitive edge, including Competitive, Cooperative, and International Marketing Strategies.
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International Strategies:
- Approaches for competing in international markets and dealing with global competition.
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Organizational Design:
- The structure and arrangement of an organization's components to facilitate the implementation of its strategy.
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Organizational Control Systems:
- Mechanisms put in place to monitor and regulate organizational activities to ensure alignment with strategic goals.
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Legal Forms of Business:
- Different legal structures under which businesses operate, influencing strategic decisions.
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Strategic HR Management:
- The alignment of human resources practices with organizational strategy to enhance performance.
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Best-Cost Strategy:
- A strategy focusing on offering customers better value for money through a combination of low cost and upscale differentiation.
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Challenges of Best-Cost Strategy:
- The difficulties organizations face in executing a best-cost strategy, balancing low prices and unique features.
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Target's Best Cost Strategy:
- An example illustrating how Target implements a best-cost strategy by offering relatively cheaper products with substantial differentiation.
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Low Overhead Business Model:
- A business model with minimal fixed costs and overhead, exemplified by Amazon's success in e-commerce.
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Food Trucks and Best-Cost Strategy:
- An example of applying a best-cost strategy in the food industry, where food trucks reduce overhead costs and adapt to changing customer locations.
These concepts collectively form a comprehensive understanding of strategic management, highlighting the complexities and strategies organizations employ to achieve a competitive advantage in the dynamic business environment.
