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At its most elementary level an organization can differentiate its offering or compete on cost. Strategies that blend the two create earnings headwinds. Resources are channeled inefficiently. The productivity from the strategy is maximized each time a company is solely a differentiator or even a
how to write a business plan. This is referred to Michael Porter as competitive positioning.

The synchronization of the various value chain activities creates good strategy. These activities should be consistent and reinforce each other. The whole of the activities must be greater than the sum of the activities. A company’s resources, capabilities, and systems are the main factors along the value chain. Prashant Kale provides comprehensive research about this topic. How these 4 elements work together determines the strength of a firm’s chosen competitive positioning.

For a company to lead with costing, the entire system of moving parts must be engineered to remove waste. Failure to do so will result in operating margin pressure. Walmart and Southwest are a couple of good examples of cost leaders. Both offer low costing making money as their entire ecosystem exists to lessen costs, inefficiencies, and poor throughput.

Differentiators develop a unique solution to a consumer problem. Consumers recognize, appreciate, and expect the value-added elements and therefore are willing to pay a premium price point. Tiffany’s and Apple tend to be examples. These products they offer are aesthetically and/or technologically advanced. All the chain adds additional value and differentiation, from sourcing, marketing, retail operations, to customer support.

In conclusion, there are just two legitimate strategies. Starting a business from scratch provides the flexibility to select the path. For existing businesses, swinging from differentiation to low cost is extremely difficult. Oftentimes, these companies need to strengthen their dedication to either model. Profit maximization is the place a company executes one of many two strategies.