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The given condition is ideal in case of monopoly when a company is the only producer and therefore, the cost is considered to be the lowest and the output is valued the most. However, business organizations operating in any other industry and competition can also be the lowest cost producer while attaining the position of the most valued producer by attaining distinctive competencies. Organizational distinctive competencies stem from its assets and resources and when effectively aligned with the industrial characteristics produce competitive advantage. Moreover, in order to create superior market value, organizations must maintain lowest possible cost while keeping their intense focus on differentiation to produce greater value in exchange for the lowest possible price. In other words, it is very much possible to be the lowest cost producer in the industry and simultaneously having an output that is most valued by customers (Hill et. al 108).
The two brightest example of being the lowest cost producer and most valued customers choices are Wal-Mart and Southwest Airlines. Wal-Mart pricing model is ultimately famous for its cheapest everyday prices. It maintains EDLP i.e. Everyday Low Price by upholding an aggressive approach for pricing its products. Usually, the prices offered by Wal-Mart are 15% cheaper than the average market leader. Wal-Mart has utilized differentiation as its pricing strategy. The business actually does not need to differentiate its products anymore, because it achieves everything it wants just by keeping the lowest prices. This has made it the most valued retailer in the world along with the lowest cost producer as well. In order to keep its cost low, Wal-Mart uses its most effective low-cost transportation system, which integrates a cross-docking system of distribution. Additionally, it also uses its low-cost transportation systems to get the products at the cheapest price from its suppliers. This works as the principal driver for the Wal-Mart’s most successful low price strategy enabling it to be the most preferred retailer across the globe.
The second example is of Southwest Airline, which is undoubtedly one of the most well-known airlines in the U.S. While having cheapest airfares, most efficient operations, and unmatchable traveler benefits, it has won the heart of millions of customers. As compared to other airlines that majorly put their emphasis upon comfort and flight amenities, Southwest put its entire weight upon offering the best benefits to its traveler, and focus on offering a painless and cheaper flight. Moreover, Southwest rely on only one type of aircraft; however, other airlines that offer variety of airplanes although diversifies them but also increases their cost. Therefore, by having only one type of plane in its fleet, Southwest achieves a greater level of synergy, which in return produce low-cost and enable it to use that saved amount in offering additional traveling benefit at a lower cost (Hill et. al 112).
Work Cited
Hill, Charles, Gareth Jones, and Melissa Schilling. Strategic management: theory: an integrated approach. Cengage Learning, 2014. Web. June 8, 2016
