Strategic Management: Formulation and Implementation

Differentiation Versus Low-cost Strategies

William K. Hall conducted an in-depth study of 64 companies from eight major domestic industries. These industries were mature, faced relatively hostile environments, had below-average profitability and growth. Yet within each of these industries were several very profitable firms.

Hall concluded that the two (nondiversified) top performing companies in each of the eight industries had pursued either a differentiation strategy involving a high product/service/quality position or a low-cost strategy or both.

Although Hall identified two strategic thrusts, there are obviously a wide variety of ways to pursue each of them. In particular, whereas General Motors and Goodyear achieved their low-cost position with high market share and considerable vertical integration, Inland Steel, Whirlpool. Miller, and Philip Morris all relied upon modern, automated process technologies and efficient distribution systems.

Similarly, the "meaningful differentiation" strategies were based upon a variety of approaches. Promiment were such positioning elements as brand prestige, product quality, product reliability, service, and distribution.