Analysis of Cost-advantage Strategy of Morrisons Company - Essay Example

The chain supermarket faces a lot of competition from other core competitive players like Tesco, Sainsbury, and Asda. However, the company has opted for a cost-advantage strategy as a way of keeping bay some of the new players in the market such as Lidl and Aldi. Currently, the company runs over 500 superstores and over 100 Morrisons M local stores mainly in England.

Using SWOT analysis, Morrisons can use cost advantage strategies as a way of keeping away new entrants (Powell, 2010). Morrisons has its strengths lying in the huge number of superstores that it owns. With this, it is possible to have a large market share with low prices due to competitive advantage and mass production of goods at low prices (Mintzberg, 2010).

The other strength lies with the brand and the already huge market share that the company owns. The company enjoys the fourth largest market share in the UK and also enjoys a good brand name that is recognized within the UK. In addition to this, the company has low prices compared to Aldi and Lidl and maintains customer loyalty by awarding points on their credit cards that are redeemable. The company also uses online trading which will also cause competition to new entrants like Lidl and Aldi.

The weakness of a cost reduction strategy is that it may lead to huge losses if the marketing and branding of the organization are not well done. The company has opportunities, especially with the acquisition of co-op and Somerfield stores. The company is threatened by stiff competition from new entrants that are offering the same services at relatively low costs. ConclusionDifferentiation strategy is a factor of competitive advantage in that the firm provides goods and services that other competitors have not started offering.

The most important strategy is the cost leadership strategy in which the firm offers the lowest prices and services to its consumers compared to its competitors within the same industry (Rijamampianina & Rasoava, 2013). Firms that enjoy competitive advantages are firms that enjoy some of the resources that their competitors do not possess. Some of the competitive advantages that firms may enjoy include brand name, large market share, customer loyalty, and access to resources at cheaper prices compared to stiff competitors (Warf, 2011).

The cost-benefit advantage that Morrisons aspire to use should be the one that cannot be imitated by other players in the industry. Using Porter's analysis of 3 generic strategies to gain competitive advantage, Morrisons will adopt cost leadership, differentiation, and focus as means of keeping away competitors (Porter, 1985). Cost leadership will involve using low prices than Lidl and Aldi. At the same time through differentiation, Morrisons will have to acquire non-price attribute that makes it superior to Lidl and Aldi (Rijamampianina & Rasoava, 2013).