SGMT 3000 Lecture Notes - Lecture 5: Walmart, Nordstrom, Diminishing Returns
12 Dec 2017
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Document Summary
Low cost and differentiation: a company has competitive advantage if it can lower costs relative to rivals and/or differentiate product offering from those rivals. Apple: differentiation raises the cost structure of the firm, costs virgin america more to offer more premium flight experiences. Firms have two options: raise the price to reflect the differentiated nature of the product and cover any increases in costs. Four season hotels: enjoy increased demand from differentiation which enables the firm to use assets more efficiently and have lower costs from economies of scale. Starbucks has differentiated itself from competitors which creates more traffic in the stores leads to lower costs per unit (plus spread over 12,000 stores) makes the firm very profitable. Market segmentation: customers in a market are not homogenous different demographics and psychographics, market segmentation: the way a company decides to group customers, based on important differences in their needs, in order to gain competitive advantage.
