Figure 73.

The Five Generic Competitive Strategies

-compromise of the four other competitive strategies

Best-cost provider strategy imbibes certain characteristics of the other types of competitive strategies.
More dominantly, however, best-cost provider strategy combines strategic emphasis on low-cost and
differentiation strategies. Its basic characteristics are as follows:

 make an upscale product at a lower cost; and

 give customers more value for their money.

Objectives of best-cost provider strategies

By its nature, best-cost provider strategy is designed to attract a broader market traditionally served by
the low-cost provider and differentiator. Since the strategy of a best-cost provider has all the elements
of other types of competitive strategies, it has some advantage in that it can hit a broader market.

Generally, the specific objectives of a best-cost provider are as follows:

 deliver superior value by meeting or exceeding buyer expectations on product attributes and
beating their prices expectations; and
 be the low-cost provider of a product with good-to-excellent product attributes, then use cost
advantage to underprice comparable brands.

What makes best-cost strategy different?

While best-cost strategy imbibes the character of a low-cost strategy, it is different in that the aim of a
low-cost strategy is to achieve lower costs than any other competitor in the industry; the intent of best-
cost provider is to make a more upscale product at lower costs than the makers of other brands with
comparable features and attributes.

A best-cost provider cannot be the industry’s absolute low-cost leader because of the added costs of
incorporating the additional upscale features and attributes that the low-cost leader’s product doesn’t
have.

Competitive strength of best-cost provider

The best-cost provider strategy has the following competitive strengths compared to the other
strategies:

 its competitive advantage comes from matching close rivals on key product attributes and
beating them on price;
 success depends on having the skills and capabilities to provide attractive performance and
features at a lower cost than rivals;
 best-cost producer can often out-compete both a low-cost provider and a differentiator when
buyers belong to the lower strata;
  standardized features/attributes will not meet the diverse needs of buyers; and
 many buyers are price and value sensitive.

Risk of a best-cost provider strategy

Just like any other form of strategies, there are risks and disadvantages involved, some of which are as
follows:

 Risk – A best-cost provider may get squeezed between strategies of firms using low-cost and
differentiation strategies;
 Low-cost providers may be able to siphon customers away with a lower price; and
 High-end differentiators may be able to steal customers away with better product attributes