A company’s strategy should be based on its resources and the environment in which it operates. By focusing on cost leadership or differentiation, a company can decide how it will compete in its industry. For example, a restaurant might focus on cost leadership by offering the lowest-priced meals. A construction company, on the other hand, might focus on being the most reliable firm in the area, providing the best service when it’s needed most.
Focused cost leadership and focused differentiation strategies represent two very different ways to compete in an industry. A focused cost leader focuses on keeping costs low, while a focused differentiation firm seeks to distinguish itself from its competitors. Focused cost leaders and focused differentiation firms can coexist in the same market, but they will often compete head-to-head for customers.
