Discuss the specific risks associated with using each business level strategy
Answers
Cost Leadership Minimal investment in technology could result in processobsolescence; firm misses change in customers’ needs due to cost-only focus; competitors imitate strategy.
Differentiation Customers decide price differential between low cost producer anddifferentiator is too large; too many features offered; product’smeans of differentiation no longer provides value to customers;customer learning (experience) may change their perception of thevalue of differentiation; counterfeit products displace the firm’sofferings
Focused Cost Leadership &Focused Differentiation Beyond the general risks noted for the low-cost leader and thedifferentiator, focus strategies have the following risks:Competitor “outfocuses” the focuser by defining a narrowersegment; a firm competing on an industry-wide basis may decidethat the segment served by the focus strategy firm is attractive anddecides to pursue that segment; the needs of customers within thenarrow segment may become more similar to all customers in themarket, reducing or eliminating the advantages of a focus strategy.
Integrated Cost Leadership/Differentiation Product features not sufficiently valued by customers; product isnot sufficiently differentiated; product is too expensive to competewith low-cost leader’s products.