The Cost Advantage And Differentiation Advantage Commerce Essay


With the help of company's resources and the full capabilities a company can create these differentiation strategy and cost strategy for achieving the competitive advantage. It is important for the firm to decide on selecting a particular strategy that should the firm focus on differentiating the product or should the firm try to follow the cost strategy, it totally depends on the company and the type of company it is. Achieving both the cost and differentiation advantage helps the company to achieve positional advantage which mean that the company is a leader in its' industry.

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Forming the market strategy

When formulating the actual marketing strategy the company actually formulates its strategy in many different ways but the amazing part is that all of the ways includes dimension.

The level at which the investment should be included or grow a business

Focus on the product or improve the service market where the company has to compete

Improvement of the product line, positioning the product, or focusing on the pricing decision or implementation of the distribution strategies which are needed to achieve competitive advantage.

Skills needed or the assets to implement the strategy and achieve competitive advantage.

The company where situated, in the long term to be a leader in the market the best way to achieve leadership is by creating the core competencies. The improvements in technologies are making the domestic trade and the international trade more competitive. According to Kotlar, 2004 a company can best set up a strategy by understanding globalisation and study it to formulate strategies. All the factors such as globalisation and technologies are all interrelated. It is because of technology that there are vast amount of communication taking place which helps companies to find other companies where they can do business. In these ways competition around the world is increasing and thus the companies need to formulate strategies which will affect the company in positive and help the company to be a leader in their industry.

Economics of scale

Achieving economics of scale is very important for a company because it is related to the cost that is needed to produce a particular product or services. There are two types of strategies that a company can implement and which can be allowed by only economics of scale. These two strategies are low cost strategy and market pricing strategy. In the low cost strategy the company reduces the product or services making cost which helps them ear more profit by giving the product to the customer at a lower cost for which the company enjoys the economics of scale which leads them to achieve competitive advantage. In the low cost strategy all the company have to do is to keep the fixed cost of the product or services unchanged and reduce the variable cost which is possible for the organisation if they have enough assets and good management to control the cost of their services. The other strategy for the company through economics of scale would be to keep the price which is set by the market but reduce the cost of producing the services for which the company will have reduce the variable cost. After reducing the variable cost the company the company can charge the product at the market price but earning more profit than the other companies. This is why economics of scale is needed for a company to achieve.

Value chain

To create more offers for the consumers a company also needs to focus on the value chain which will intern offer customers more efficiently and help to company to utilize the cost more effectively. This will result for the company to provide services in much more cheaper way or at a lower cost which will differentiate the product from that of the competitors. According to Rajnandan (2007) claims that focusing on the value chain does not mean only seeking it or just to add value; it also means adding values such as improvement of the infrastructure of the company, technologies and other vital roles which helps the company to achieve the competitive advantage. When a company needs to decide on outsourcing then value chain is needed. . (Porter, 1999)

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According to Lancaster, 2002, it is necessary for a company to focus on the competitor's strategy, how the other companies in the same industry are conducting or implementing their strategy. This allows the company to collect information which will lead to communicate the competitive variables. All the variables may include how the other company works in terms of competing with their rivals and it will help the company who is conveying the survey will have the knowledge of how the other company is working. After having the information on the other company, the company can analyse and implement a much more different strategy which will help them to achieve competitive advantage via communication effectiveness.

Both the upstream and the downstream suppliers are connected to the value chain which results in an increase in the value chain and it is known as value system. Focusing on value system is very important and a company should not only focus on the value chain which will make company achieve more competitive advantage. This is necessary because for the result of globalisation and the advancement in the technologies, deregulation led to the increase in competition. In this result the organisation had to cut cost but first of all the best way to compete is to focus on the value stream. (Kiichiro Fukasaku, 2007)

Focus on the market

For the organisations that are totally marketing oriented, who can be product or service based or profit or non profit based has to focus on the customer satisfaction and satisfy their needs and wants. According to Lancaster, 2002 the main key to focus and achieve the organisation goal efficiently and effectively in the case of the marketing concept the best way is by totally being customer oriented, being focused on the profitability and also co-ordinate marketing. To convey this market strategy it is important for the company to implement a market research through which the company will get to know the best way to be competitive and increase profit. Market research is simple an analysis of the total market of a particular industry where there are model-building and facts which will help the company to make particular decision which will intern help the company to achieve organisation goals effectively (Kotler, 1999).

To support the strategies that are implemented by the companies, the strategy capabilities are needed. To sustain the competitive advantage the strategic capabilities are also needed, some of the links that are needed as a tool and practices of achieving competitive strategy are given below. (Susman, 1992)

Fig: The link between design tools and practices and competitive strategy

The company needs to learn both its' external and internal environment and this is the way how the company will have the ability to access and capture the information. All this processes can be easily simplified which may be only done minimizing the complexity of information while collecting and processing them. Through this the company will be able to learn the buying behaviour of the marketer and the customer and how the customers behave while purchasing a particular product or services. Both the customers and the marketers get full satisfaction after implementing the survey and access the information, because now the customer will be provided with better services and products and at the same the the marketer will able to earn more profits. (Lancaster, 2002)







Fig: The Innovation/Adoption model (Lancaster 2002)

The strategies which are implemented by the companies can be looked at as broad visions which may consist of consistent configuration of activities are taken by the competitive advantage. The framework of competitive advantage may help the company to provide with some of the tools that may be used to fine and look at the drivers of the cost and the position of the cost that the company is in. The framework also helps the company to get the strategically segment the market in an industry. (Porter, 1998)


These days almost everyone in the developed and the developing countries trusts and have full access to computers for which E-Trading has increased. It is not only doing business with the customers only but it also involves doing business with the other business. It may be doing business with the suppliers or doing business with the direct sellers or the retail outlet via internet. This occurred because of the technology advancement, globalisation and the vast use of internet. The trend is always of latest fashion when the company have to go with the trends and the latest way for the company to deal with certain changes then the company must not hold back. For a company the best option would be to follow up the trend and bring in changes for which the companies have to install all the recent technologies and develop the company's technical infrastructure. This will allow the company to deal with the customer online and do business online and there are many advantages when companies get involved in E trading. It is said that E trading is the fastest and the quickest way to purchase goods from the suppliers and sell the goods to the customers. These day all the established banks have the option for making transaction through internet therefore if a company have E trading option then the company can make easy and safe transactions with the banks with very little errors because the security of online banking is very strict but quicker. (Balthasar, 2010)

Changing Nature of Consumer Behaviour

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The customers are the ones who want to take control of accepting the service that are given by any financial institution. This is because all the customers are smart and the get all the information about which bank or institution is giving the best offers to the customer through the advancement of media and other news papers. Therefore the customers will only be interested in those banks and institutions from which customers will get the best services and individual needs and satisfaction. (CMA Management, 2006)

All the banks who want to become famous and achieve market leadership then the banks have to focus on the customer's wants and needs. By focusing on the customer needs the banks should design and create strategies which will help the bank to control the customers. For further future success of the bank, the bank needs to take innovative approaches which will change the business design, workforce management and IT. (Sunny Banerjea, 2009)

The services customers look for mostly is how secure is the security of their money, the demand of advocacy, and stabilisation of the control of banking relationships. In this decade for the advancement in innovation and technologies there are great numbers of diversifications in the business. In this era the banks are the ones who are engaging more into the investment, underwriting of securities, engaging in insurance business and portfolio management. For this the banks have to always stay equipped and when the customer looks in to banks side business they start feeling more safer and save tier money into the that bank.

Data Management

Since this is the era of technology and latest innovation the banks has to be updated continuously and all the data should be stored carefully when shifted from one technology to the other. All the data should always be incorporated correctly through vendors which allows the bank to keep the correct information and the data related to the customer, their accounts, customer balance, daily transaction of many customers and the bank's personal data which are related to bank's business. According to Wall Street Arrow Market Insights, 2009 claimed that the more sophisticated the data management infrastructure is there the more difficult it is for the bank to control them. Therefore the banks have to make sure that their system which manages that data are not too sophisticated or too simple, it has to be a standard one.

Economic Turmoil

Due to the economic disaster the confidence of the bank was lost because the threats the entire bank faced because of the recession was still getting deeper rather than showing any improvement. Some the banks were backed by the governments but the others had to leave the baking business or sell the business to some other party who had the power to save certain banks. The effect of crisis is slowly decreasing but the companies who survived are trying their best to recover as fast as possible for which the banks are became more competitive and rivalry between banks has increased.

There are massive competitions in the market and the company has to think first analyse the market and the competitors then apply a suitable strategy. In this way the banks that are in debt can get out off debt and earn profit. All the strategies that were discussed above are very important for the banks to follow so that the banks can come out of the problem that was caused by the economic disaster.