One store that immediately comes to mind when thinking about cost leadership is Walmart! The only way they can keep their prices so low is to keep their costs to a minimum. A good example of them doing so is the lack of a Walmart in NYC. I would think that the reason for that would be higher taxes, costs associated with zoning problems and higher property costs.
I believe Nike is a company that uses a differentiation strategy. If you are asked what the best sports brand is, it is very likely that you will answer Nike, even though the quality of Reebok or Adidas may not be worse. However there is only one official Nike retail store and that is Nike Town where the prices on sporting goods and apparel are much higher than other retail stores. People still shop there because they consider Nike to be a higher quality product than all other competition.
Paragon Sports, a sporting goods store that I used to work in uses a focus strategy. They only have one retail store nationwide that is located in Manhattan so they apply to a very small geographic area. That is what I saw in the story. Only New Yorkers shopped there, Manhattan residents for the most part including actors and famous athletes that live in NY. I personally saw Walt Frazier, Spike Lee and James Gandolfini there. I think if there were a 100 other chains of this store nationwide, it would not attract shoppers of that caliber. I only say they're high caliber shoppers because they bought a lot of merchandise and we earned extra commission on sales =]
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3 comments:
I totally agree with you about Walmart and how their business strategy is focus on cost leadership. Paragon Sports is a good example for a focus strategy, but I think that when it comes to Nike, I have to disagree with the fact that they used differentiation as a strategy. Although there is only one Nike Town in NYC, you have to remember that Nike is advertised heavily in other stores such as Footlocker, Footaction, Modells, and local urban stores. You can go to anyone of these stores and get the same sneakers for the same price.
Yes thats true, but nike products usually cost more than the rest of the competition.
For the Nike, I do agree with you that people would pay more for its product since people perceive Nike as being not just a brand name but with high quality. Nike's success comes from the fact that they were able to differential themselves from the other competitors through their marketing strategy. Even thought I don't believe Nike produces higher quality product as compare to Adidas but again customers tend to relate brand name as equal to high quality.
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