ASSIGNMENT 5

1. Research Amazon. How has this firm been able to combine overall cost
leadership and differentiation strategies?

Amazon “uses advanced computing and networking technologies for

maximum operational efficiency, which translate to minimizing costs”. They
have automated their process for purchases, scheduling and other operational
processes. This has allowed them to minimize the cost of its retail and
services. They have also invested a lot of time and resources to research and
development to help optimize the performance of their IT resources. Due to
this cost leadership strategy, they have been able to minimize price levels
which has given them a competitive advantage against their competitors.
Amazon is the world’s largest online retailer and is indeed a pioneer in
the online retailing space. Though it started as an online bookstore, its
success in its venture spurred it to diversify into selling anything that can be
sold online. Further, Amazon has also expanded globally and now operates
around the world through a combination of localized portals and globalized
delivery and logistics platforms. 
Amazon uses cost leadership for competitive advantage where
minimization of operational costs is the objective. For example, Amazon uses
advanced computing and networking technologies for maximum operational
efficiency, which translates to minimized costs. Considering the nature of e-
commerce, the company benefits from process automation, which is generally
used in purchase processing, scheduling, and other operational processes.
These benefits enable Amazon to minimize the cost of its online retail and
other services. The cost leadership pushes Amazon to minimize its price
levels in which the low prices are significant in attracting consumers. Thus,
through the cost leadership, competitive advantage is gained to support the
fulfillment of Amazon’s mission statement and vision statement, especially
with regard to online retail global growth and leadership.  
Also, Amazon uses differentiation strategy by differentiating its
product functions, product design, packaging of products, brand image and
operation (listing optimization and data analysis). It has differentiated its
business models with the use of technology and skilled human resources.  It
serves its customers through its website and apps. The online model does not
require the use of physical retail space. The only space utilized is that for
office work. Amazon has developed a lot from being a book seller to being the
largest retailer online. Not just this Amazon used best in class technology to
serve its customers and enable its employees to perform. It has software and
algorithms for various things including box sizing to delivery. It also has a rich
history of developing and introducing cutting edge technology at its fulfillment
centers that help its employees deliver efficiently. 
To sum up, the Amazon differentiation strategy is essentially a
combined operation strategy. The  more differentiated strategy is
implemented, the more it can improve the market competitiveness. 
Both the cost leadership and differentiation strategies have assisted
Amazon to get to the next level. These are tremendous competitive
advantages that many rivals can't compete. Amazon is on the right track with
this hybrid of cost leadership and differentiation strategy and it should
 continue to create innovative products to gain additional advantages over
competitors.  

2. Choose a firm with which you are familiar in your local business community. Is
the firm successful in following one (or more) generic strategies? Why or why
not? What do you think are some of the challenges it faces in implementing
these strategies in an effective manner?

Dunkin' Donuts has become successful in implementing the generics strategies in

an effective manner.
A detailed information is given below to show how they applied and use these
strategies:
Dunkin Donuts uses cost leadership to expand the market share by targeting the
middle class, which makes the largest proportion of overall consumer market mix in
most of the countries. Middle class consumers generally place high importance to
the pricing factor and cost leadership is the best strategy to cater the needs of this
consumer segment.
It focuses on affordability and easy accessibility of its produce across the globe,
which leads towards high brand awareness and high sales growth and provides a
strong competitive advantage basis.
Other than charging low prices by lowering production cost and maximizing supply
chain efficiency, Dunkin Donuts frequently offers discounts and coupons to achieve
sales targets and handle the competitive pressure by its closest rival. The intended
outcome of these discount and promotional campaigns is to increase brand
popularity and encourage consumption.
Dunkin Donuts cost leadership strategy has outlined many benefits offered by this
generic strategy, such as- gaining quick brand recognition, expanding the customer
base, encouraging consumption and achieving sales targets by emphasizing over
product’s affordability and accessibility.
Although, the analysis of Dunkin Donuts competitive advantage strategies highlight
cost leadership as the main strategy, the company also uses the differentiation
strategy along with cost leadership to set the basis for sustainable competitive
advantage in the intensely competitive global consumer market. The adoption of
differentiation strategy allows Dunkin Donuts to expand the customer base by
emphasizing over the unique product features.
Dunkin Donuts use this strategy to differentiate by embedding the innovation and
address the consumers’ growing health concerns. For example, Dunkin Donuts has
extended its product line after studying the consumers’ changing interests to
differentiate itself from competitors and expand the scope of opportunities within the
industry. The combination of the differentiation and cost leadership has helped
Dunkin Donuts build a strong and loyal customer base.
Through differentiation generic strategy, Dunkin Donuts positions its product
offerings in a way to stand out and be different from the available alternatives. Being
the experienced brand with strong foothold, the company uses differentiation as a
tool to reduce the pressure by other brands. Heavy investment in marketing,
advertisement and celebrity endorsement is made just to differentiate the Dunkin
Donuts from other brands.
Extensive experience, the oldest brand and strong presence in all over the world are
some differentiation factors that are highlighted in the company’s marketing and
communication strategies. Other than these, the brand logo is also used to set the
differentiation basis. The unique and distinctive brand logo has established a strong
brand image in consumers’ mind. Although the brand has undergone many
revisions, the essence has remained the same, which also serves as a strong
differentiating factor.
Moreover, the company offers a wide variety of flavors to match the unique taste
needs of consumers. It uses innovation as a tool to offer differentiated augmented
services that may delight the customers and increase their preference of Dunkin
Donuts over other brands.
Over this, although Dunkin' Donuts has a strong presence in Northeastern U.S., they
face a challenge of having a weak presence in other areas of the country. So, up to
this year, they have planned to have a total of 15,000 stores in the United States
which would almost double their current U.S. presence. In addition to the United
States, Dunkin' Donuts has been serving customers internationally for over 40 years
and currently operates over 3,100 stores in 32 countries.  Their growth is successful
due to their store consistency and strong franchises; out of their approximately
10,000 stores worldwide, about 7,000 of them are franchises. Therefore, consistency
between these stores is of great importance.

3. Think of a firm that has attained a differentiation focus or cost focus strategy.
Are theiradvantages sustainable? Why? Why not? (Hint:Consider its position
vis-à-vis Porter's fiveforces.)
Starbucks initially attained a differentiation focus by offering unique coffee
products and atrendy environment. However, this has easily imitated at much lower
costs which limits theirability for a sustained competitive advantage. New entrants
including chains and smallbusinesses have successfully created substitute products
and services at significantly lowerprices.

4. Think of a firm that successfully achieved a combination overall cost

leadership and differentiation strategy. What can be learned from this
example? Are the advantages sustainable? Why? Why not?

Walmart.com as mentioned above, has achieved a combination overall cost

leadership anddifferentiation strategy. What we have learned from this example is that
consumers prefer tohave variety and ease of access from a firm. These advantages
have proven to be sustainable byeither absorbing new entrants or outpricing them.
They have also eliminated the bargainingpower of buyers by offering a price match
guarantee which sustains profitability. Walmart has awide global base of suppliers
which frustrates abilities to bargain. They eliminate the threat ofsubstitute products
and services by offering a wide variety and allowing customers to purchaseproducts
they do not carry in store through their online site.