capsess7 Focused CL & Diff

In the case of FOCUSED DIFFERENTIATION STRATEGY, one ADVANTAGE is that:

-*very high prices can be charged.* Indeed, these firms often price their items far above what is charged by firms following a differentiation strategy. REI (Recreational Equipment Inc.), for example, commands a hefty premium for its outdoor sporting goods and clothes that feature name brands, such as The North Face and Marmot. Nat Nast's focus differentiation strategy centers on selling men's silk camp shirts with a 1950s retro flair. These shirts retail for more than $100. Focused cost leaders such as Checkers Drive In do not charge high prices like REI and Nat Nast do, but their low cost structures enable them to enjoy healthy profit margins.

Firms that compete based on PRICE & target a NARROW MARKET are following a:

-FOCUSED COST LEADERSHIP STRATEGY

Firms that compete based on Uniqueness & target a Narrow Market are following a:

-FOCUSED DIFFERENTIATION STRATEGY

-FOCUSED COST LEADERSHIP STRATEGY examples:

-Redbox (rents DVDs through vending machines for only $1) -Papa Murphy's Pizza (inexpensive take-and-bake at home) -Claire's (inexpensive jewelry) -Checkers (no indoor seating)

FOCUSED DIFFERENTIATION STRATEGY examples:

-WholeFoods (focuses on selling natural & organic products) -Build-A-Bear Workshop (customers are willing to pay a premium price b/c it is unique, hands-on experience) -Mercedez (stylish, safety innovations)

Some firms using a FOCUSED DIFFERENTIATION STRATEGY concentrate their efforts on:

-a particular sales channel, such as selling over the Internet only. Others target particular demographic groups. One example is Breezes Resorts, a company that caters to couples without children. The firm operates seven tropical resorts where vacationers are guaranteed that they will not be annoyed by loud and disruptive children.

Companies that use a Cost Leadership strategy and those that use a Differentiation Strategy share one important characteristic:

-both groups try to be attractive to customers in general. These efforts to appeal to broad markets can be contrasted with strategies that involve targeting a relatively narrow niche of potential customers. These latter strategies are known as focus strategies.

A FOCUSED COST LEADERSHIP STRATEGY requires:

-competing based on price to target a narrow market.

*A FOCUSED DIFFERENTIATION STRATEGY* As with a focused low-cost strategy, narrow markets are:

-defined in different ways in different setting

A firm that follows A FOCUSED COST LEADERSHIP STRATEGY:

-does not necessarily charge the lowest prices in the industry. Instead, there cost's are lower than their average competitor. Often times though, they charges low prices relative to other firms that compete within the target market. Redbox, for example, uses vending machines placed outside grocery stores and other retail outlets to rent DVDs of movies for $1. There are ways to view movies even cheaper, such as through the flat-fee streaming video subscriptions offered by Netflix. But among firms that rent actual DVDs, Redbox offers unparalleled levels of low price and high convenience.

FOCUSED DIFFERENTIATION STRATEGY DISADVANTAGE 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. Also, the niche could disappear or be taken over by larger competitors. Many gun stores have struggled and even gone out of business since Walmart and sporting goods stores such as Academy Sports and Bass Pro Shops have started carrying an impressive array of firearms. Finally, damaging attacks may come not only from larger firms but also from smaller ones that adopt an even narrower focus. A sporting goods store that sells camping, hiking, kayaking, and skiing goods, for example, might lose business to a store that focuses solely on ski apparel because the latter can provide more guidance about how skiers can stay warm and avoid broken bones.

A FOCUSED DIFFERENTIATION STRATEGY requires:

-offering unique features that fulfill the demands of a narrow market.

A second FOCUSED DIFFERENTIATION STRATEGY ADVANTAGE is that firms:

-often develop tremendous expertise about the goods and services that they offer. In markets such as camping equipment where product knowledge is important, rivals and new entrants may find it difficult to compete with firms following a focus strategy.

FOCUSED DIFFERENTIATION STRATEGY—effectively serving the:

-specialized needs of a niche market can create great riches.

While a DIFFERENTIATION STRATEGY involves offering unique features that appeal to a variety of customers, the need to satisfy the desires of a narrow market means that:

-the pursuit of uniqueness is often taken to the proverbial "next level" by firms using a focused differentiation strategy. Thus the unique features provided by firms following a focused differentiation strategy are often specialized.

*FOCUSED DIFFERENTIATION STRATEGY* When it comes to uniqueness, few offerings can top Kopi Luwak coffee beans. High-quality coffee beans often sell for $10 to $15 a pound. In contrast, Kopi Luwak coffee beans sell for hundreds of dollars per pound. This price is driven by:

-the rarity of the beans and their rather bizarre nature. These beans are found in the droppings of the civet (Links to an external site.), a nocturnal, furry, long-tailed catlike animal that prowls Southeast Asia's coffee-growing lands for the tastiest, ripest coffee cherries. The civet eventually excretes the hard, indigestible innards of the fruit—essentially, incipient coffee beans—though only after they have been fermented in the animal's stomach acids and enzymes to produce a brew described as smooth, chocolaty and devoid of any bitter after taste. -Although many consumers consider Kopi Luwak to be disgusting, a relatively small group of coffee enthusiasts has embraced the coffee and made it a profitable product. This illustrates the essence of a FOCUSED DIFFERENTIATION STRATEGY—effectively serving the specialized needs of a niche market can create great riches.

*FOCUSED COST LEADERSHIP STRATEGY* the Target Market is defined by:

-the sales channel used to reach customers.

-Another important point is that the nature of the narrow target market _______ _______ ______ that use a FOCUSED COST LEADERSHIP STRATEGY. --In some cases, the target market is defined by _____________. Claire's, for example, seeks to appeal to young women by selling inexpensive jewelry, accessories, and ear piercings. Claire's use of a focused cost leadership strategy has been very successful; the firm has more than three thousand locations and has stores in 95 percent of US shopping malls.

-varies across firms --demographics