SGMT 3000 Chapter Notes - Chapter 5: Nordstrom, Mass Customization, Blue Ocean Strategy
18 Oct 2015
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2 options: lower cost or differentiate to create more value. In commodity markets, product offerings are similar; need to compete on price (oil wheat, steel) Low cost allows you to earn profit at points where rivals are losing money. Offer something that the rivals find hard to match. Products can be made more reliable, better design, superior features, better point of sale and after sales services, branding. Advantages: companies can charge premium price and overall demand will grow to capture market share from rivals. Disadvantages: higher costs, turn-over rate for inventory is less at times, employee training and compensation, location costs. When you sell enough units, you can enjoy economies of scale. Profitability can come from increased demand to get economies of scale and lower cost or increased price. Lower cost: need to be as productive and efficient as possible. Differentiation: bear a bit higher cost to create more value.
