When The company is able to charge premium
When a company picks which activities is involve in where, it is known as strategy and also about where and how management decides to interact with these activities. When that strategy generates a sustainable, above industry average profit, it become success. Porter identifies three generic strategies for competitive advantage.
The Cost Leadership Strategy
In cost leadership, a firm sets out to become the low cost producer in its industry. Gaining competitive advantage due to the lowest cost of production of a product or service advocates by the cost leadership strategy. Lowest cost need not mean lowest price. Every link of the value chain- including production, marketing, and wastages are removed from cost. But because of the lower cost of production the product could still be priced at competitive parity (same prices as others) and even through lean times and invest more into the business all throughout, the company would be able to sustain itself. https://economictimes.indiatimes.com/definition/generic-strategies
For Examples, the Toyota Production System (TPS) was developed by the Toyota Motor Company. The TPS system aims was to cut costs throughout the company, but Toyota cars are still priced at almost the same levels as American or other Japanese cars.
In Order to achieve a Differentiation strategy, organizations need:
Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings. The ability to deliver high-quality products or services.Good research, development and innovation.
The Differentiation Strategy
Making your service or product differ and attractive from other competitors is involve in differentiation strategy. Customers will pay more for an item if they perceive that the produce is different, so the differentiation strategy was relies on the concept and basic for the difference valued by the customer. To meet those demands betters than the competition, pinpointing product or service attributes that customers perceive as valuable and positioning the firm as differentiation strategy involves achieving competitive advantage. http://www.strategy-formulation.24xls.com/en508
Apple is the perfect example of company successful by using differentiation strategy. The company is able to charge premium price for its superior quality, performance and design because of designing and producing in house software and physical product. Apple has always been successful in using their differentiation strategy as they are able to create huge demand for their product over their competitors like Samsung by giving power over price to the company.
There are two main ways of achieving this within a Cost Leadership strategy:
Increasing market share through charging lower prices, while still making a reasonable profit on each sale because of reduced costs.Increasing profits by reducing costs, while charging industry-average prices.
The Focus Strategy
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The idea behind focus strategy is developing, marketing and selling products or services to a niche market, such as a particular type of consumer, a specific product line or a targeted geographical area. The goal of the focus strategy is to become the leader in the determined niche by serving the designated group better than anyone else out there. https://study.com/academy/lesson/focus-strategy-definition-examples.html
For examples Bentley and Bugatti from Volkswagen are the great examples of differentiation focus strategies. These two company aim to create a Unique selling Proposition (UPS) which cannot be imitated by larger competitors and also aim to provide a product and service which satisfies the customer’s need by narrowing their market focus.
The focus strategy has two variants.
In cost focus a firm seeks a cost advantage in its target segment, while in differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser’s target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments.
Higher profit margins is one of the advantages in low- cost industry. Company margins will be greater than other companies that invest more to produce products of a similar quality, if the company can sell products and services with a lower cost basis and competitive pricing. Increasing customer demand and market share by earning higher profits is an alternative way to leveraging cost-leadership. Companies that have low-cost leadership are also typically in a more sustainable business position. Another major benefit of low-cost leadership is to fund growth or further investments if u have more capital resource available.
As your company increases in size, it also increases in complexity. Making it more difficult for management personnel to control and unchecked growth increases business size may actually be its own worst enemy in keeping costs below the level of the competition as the success of business. Actually spending more money in the short term in purchasing more-efficient production equipment and training employees to use the new equipment if company lacks the capital or trained employees to lower costs.
Company may charge a premium for its product or service is one of the positive of a successful differentiation strategy. Because of the lack of substitute or alternative products on the market the company can readily pass along higher supplier costs to its customers. The impact of market downturns because of customer loyalty in good times and bad by having a loyal customer following helps stabilize the company’s revenue and lessens.
A company that succeeds in Implementing a differentiation strategy must worry about competitors’ copying business methods and stealing customers for a company that succeed in the strategy. In addition, implementing a differentiation strategy is costly. It may take years before a company achieves a strong brand image that sets it apart. During that time, the company faces the risk of changing consumer tastes or preferences. In such a case, the company may not have sufficient customer demand to offset its higher costs, which may lead to a loss.
Firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. One advantage is that very high prices can be charged in the case of focus differentiation. By firms following a differentiation strategy these firms often price their wares far above what is charged. Firms often develop tremendous expertise about the goods and services that they offer is a second advantage of using a focus strategy.
In terms of disadvantages, the limited demand available within a niche can cause problems. First, a firm could find its growth ambitions stymied. Once its target market is being well served, expansion to other markets might be the only way to expand, and this often requires developing a new set of skills.
Aggressive competition, considering other firms is the threat that burger king face. One of its weaknesses is that its business model and products are easily imitated even though Burger King has moderate differentiation. It prevents the company from attracting customers looking for more options because of Burger King’s limited product mix is a weakness. The healthy lifestyles trend is a threat because Burger King’s products are criticized as unhealthy as the healthy lifestyle is a trend. Even though it limits corporate control on franchisees’ Burger King grew internationally through franchising approaches to management, the franchising model is a weakness.
Burger King is one of the strongest brands in the fast food industry. This condition makes it easier for the company to introduce new products and open new restaurants. Based on the large number of Burger King Restaurants across the globe higher market penetration is a strength. A strength that allows the company to ensure uniqueness of some of its products of burger King’s moderate differentiation (e.g., grilled burgers). By adding new product lines to attract more customers, Burger King has the opportunity to widen its product mix and has as a way of differentiating its business from competitors as the opportunity to increase service quality. By adding new product lines to attract more customers, Burger King has the opportunity to widen its product mix. As a way of differentiating Burger King Business from competitors, it has the opportunity to increase service quality.
So, Burger King has currently many problems within the environment in company and surrounding, however one of the prime concern is healthy food. The company needs to produce fast food with less saturated fats and salt content. The problem of obesity in UK is high as well and addressing to this concern is the need of demand to survive over the competitors.
By serving at prime hot spots as well as at travel destinations in Myanmar, Burger King needs to increase its influence and market share. The presence of Burger King on high way streets and at various shopping mall and airport is reasonable, however it needs to be accessible at hot tourist spots and business oriented commercial areas.
Burger King will needs to increase its speed of delivering products and services to customers, as it has been competing with McDonalds over more than 50 years and still lacks speed during peak periods. Speed in operations helps to generate revenue in coping zone.
More customers can enjoy the Burger King product everywhere and every time by using low cost delivery system in Yangon. Burger King can earn more profit from the transaction and increase the market share of Myanmar. Burger King should put more attention to keep the reputation maintain and increase the profit in the same time in the franchisee system in Myanmar The franchisee training is very important on it .For the franchisee system. Reducing the competition of all franchisee and market inefficient, Burger King should also control the location of the branch to avoid too many branches in the same certain place.
With a good distribution network will hit the corporate low cost strategic, low cost strategic is a good strategic to reach the higher profit. Quality and production cost should be move in the same direction to maintain the quality and lower the production cost is the good way to increase the profit.