Managerial Accounting Essay Example | Topics and Well Written Essays - 1750 words

Managerial Accounting - Essay Example Anything in which a firm excels than its competitors is considered as its competitive advantage. Michael Porter has mentioned three main strategies in order to gain the market share by acquiring competitive advantage. They include: Cost Leadership Differentiation Focus Differentiation Cost Leadership Parts Limited is that company which doesn’t earn through number of units sold, but it maximizes its profits through the price of units. Parts Limited charges higher prices to its customer which means that they sell their products on relatively premium prices. When it comes to cost differentiation, this strategy is an option for Parts Limited. There is a possibility that the company start focusing on generating revenue not through premium prices but through number of units sold. ... In my opinion, this strategy is currently availed by Parts Limited because it is selling its unique products and charging premium prices for them. These products are perceived as unique and important in the eyes of the customers and the firm utilizing this strategy, usually is aware of the needs and unique demands of its customers. Focus Differentiation This strategy usually consists of two variants. In focus strategy a firm can either go for: a) Focus differentiation in its own target market b) Cost focus to seek cost advantage within its target market In this regard, usually targeted customers have unusual needs or the delivery of production system. Cost focus assist in acquiring cost advantage of a particular segment whereas focus differentiation fulfills the special and unique needs of the customers. As far as Parts Limited is concerned, this type of strategy cannot be applicable for a company dealing in machines industry. The reason is hardly customers are concerned about using unique and high priced parts for their machines. In fact, the emphasis is basically on sustainable and good quality products. This type of strategy mostly applies in the apparel & garment industry, cellular industry, electronics industry (including personal computers, T.Vs etc.), cosmetic industry etc. Implications of Porter’s Generic Strategy In the above section, a brief analysis has been done of each of the three porter’s strategy. Coming to back to Parts Limited and before analyzing which strategy can prove to be productive for Parts Limited; all the three strategies need to be analyzed in respect of Parts Limited. a) Product Differentiation Parts Limited has been utilizing product differentiation strategy. It