Low Cost Strategy Essay

Low-cost strategy allows a company to gain a competitive advantage against their competitors in the commodity markets. It also undercuts its rivals on price. Oftentimes, companies are able to gain a high market share due to low cost. Usually cost is a key driving factor for a particular product or business success. Lower cost allows to maintain or increase the profit margins and sustain in a highly competitive markets.
Differentiation helps to distinguish a company from its competitors by being able to offer superior reliability, functions, features, higher performance, point of sale service, customer care and support, and branding. This competitive advantage allows the company to offer a premium price and leverage its feature for the asking

Describe how businesses approach segmenting the market, and why market segmentation could be an attractive business strategy. Why do businesses segment the market? What approaches can be used to segment the market? How can this lead to competitive advantage?
Market segmentation is attractive to businesses as they can group customers based on their needs to be able to serve them better and add more value than their competitors. There are a few ways business approach segmentation which include standardization, segmentation and focus strategy. Standardizing strategy involves making one product that serves all, it is usually a mass market product. It is usually associated with low cost products and services. It follows the strategy of low cost – high volume. It attempts to attain economies of scale through high volume demands. Segmentation strategy involves making a different product for every market segment, for instance in HVAC industry there could be different variations of the products to serve cold, hot regions, industrial markets, light commercial and residential markets. It involves custom features and functions and leverage this value to drive a premium price. With this approach and strategy it is difficult to achieve economies of scale and keep the production and delivery cost low. Focus strategy involves making niche products serving one particular application or one specific market segment. This strategy has higher cost structure as it involves new technologies, innovation and R&D. It is difficult to attain economies of scale with this strategy as