Combined with the five forces model

1. Create barriers to entry. Low cost® Low price to deal with the threat of potential entrants

2. Enhance bargaining power. Buyer's perspective: low cost, large output, large purchase volume® can be bargained with suppliers Seller’s perspective: low cost, large profit margin, large room for bargaining

3. Reduce the threat of substitutes. Low cost and high performance-price ratio

4. Stay ahead of the competition. In a price war with competitors in the industry, low costs provide a price advantage.

Very important

need to remember

market outlook (Talk from the outside)

resources and capabilities (Talk from the inside)

1. Changes in technology may wipe out past investments and accumulated experience to reduce costs® Producer Perspective

2. New entrants or followers in the industry either imitate or invest in higher-tech facilities, Achieve the same or even lower production costs® Competitor Perspective

3. Market demand has shifted from focusing on price to focusing on the brand image of products, turning the original advantages into disadvantages® Consumer Perspective

Combined with the five forces model

1. Create barriers to entry. The product has distinctive features, and potential entrants must overcome the uniqueness of this product.

2. Enhance bargaining power. Differentiation ® Large market share ® Large output and large purchasing volume ® Can bargain with suppliers Differentiation® Buyers have no choice® with which to bargain

3. Resist the threat of substitutes. Differentiation helps protect against the threat of substitutes by improving the price-performance ratio of the product

4. Reduce customer sensitivity. Differentiation®Customers are loyal to products®Customers are less price sensitive® Enterprises form an isolation zone in industrial competition to avoid competition.

Very important

need to remember

market outlook (Talk from the outside)

resources and capabilities (Talk from the inside)

1. The cost for enterprises to form product differentiation is too high® Producer’s perspective

2. Market demand has changed® From a consumer perspective, buyers require less product differentiation and pay more attention to price

3. Competitors imitate and attack established differences to narrow or even shift to a competitor perspective

The same advantages of cost leadership and differentiation strategies against the five competitive forces of the industry apply; Avoid direct competition with competitors on a large scale and enhance the company's competitive advantage; Able to avoid direct conflicts with competitors and put the company in a competitive buffer zone

1. Multiple market segments will be formed only if there are differences in needs among buyer groups.

2. The target market is relatively attractive

3. No other competitor in the target market adopts a similar strategy

Talking about the market situation from the outside

4. Enterprises have limited resources and capabilities and can only select individual market segments to achieve cost leadership or differentiation.

1. Risks caused by narrow target market

2. Differences in demand among buyer groups become smaller

3. Entry and competition of competitors

Low price and low value strategy (concentrated cost leadership)

Low price strategy (cost leadership)

They are all low-priced, the difference depends on "value"

Cost leadership Differentiation, focusing on the middle range of price and quality

low price high value

High value strategy (differentiation)

High value and high price strategy (focused differentiation)

They are all high value, the difference depends on the "price" Case keywords: "Take the lead"® high value related

Value remains unchanged, price increases

Value falls, price rises

Price remains unchanged, value decreases