There are a number of offensive strategy options for improving market positions using cost-based and blue-ocean type strategies. Define the terms and suggest ways in which the strategies could be operationalized.

Question

What will be an ideal response?

Answer 1

Cost-based strategies involve lowering prices to gain market share. Lower prices can produce market share gains if competitors don't respond with price cuts of their own and if the challenger convinces buyers that its product is just as good or better. Price-cutting offensives should be initiated only by companies that have first achieved a cost advantage. A blue-ocean strategy seeks to gain a dramatic and durable competitive advantage by abandoning efforts to beat out competitors in existing markets and, instead, inventing a new market segment that renders existing competitors irrelevant and allows a company to create and capture altogether new demand. A "blue ocean" is a market space where the industry does not really exist yet, is untainted by competition, and offers wide-open opportunity for profitable and rapid growth if a company can create new demand with a new type of product offering. A terrific example of such blue-ocean market space is the online auction industry that eBay created and now dominates.