Low Cost or Differentiation?
Form groups of three or four people, and appoint onemember as the spokesperson who will communicate your findings tothe class when called on by the instructor. Then discuss thefollowing scenario:
You are a team of managers of a major nationalclothing chain, and you have been charged with finding a way torestore your organization’s competitive advantage. Recently, yourorganization has been experiencing increasing competition from twosources. First, discount stores such as Walmart and Target havebeen undercutting your prices because they buy their clothes fromlow-cost foreign manufacturers while you buy most of yours fromhigh-quality domestic suppliers. Discount stores have beenattracting your customers who buy at the low end of the pricerange. Second, online retailers provide trendy, high-price designerclothing and are attracting your customers at the high end of themarket. Your company has become stuck in the middle, and you haveto decide what to do: Should you start to buy abroad so that youcan lower your prices and begin to pursue a low-cost strategy?Should you focus on the high end of the market and become more of adifferentiator? Or should you try to pursue both a low-coststrategy and a differentiation strategy?
- Using SWOT analysis, analyze the pros and cons of eachalternative.
- Think about the various clothing retailers in your local areaand the ones you shop regularly online. Analyze the choices theyhave made about how to compete with one another along the low-costand differentiation dimensions.
