Essay About Introduction Of Japanese Cost Control Methods And Japanese Companies

Competitive Strategy – Cost Leadership and Differentiation Strategies
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Cost leadership and differentiation strategies are popular research topics within the field of
strategy and have been widely discussed, in particular since Michael Porter presented his model
of generic strategies in 1980. Some rearchers, in fact, refer to this model as being among the
most significant contributions to the strategic management literature. Whether cost leadership
and differentiation strategies are mutually exclusive is a far less discussed issue however, as
evidenced by the relatively scarce literature on the topic. During the end of the 1980s and the
beginning of the 1990s there was a debate going on regarding the existence of a trade-off but it
seem to have faded with the introduction of Japanese cost control methods, i.e. Total quality
management (TQM) and Just in time (JIT). Grant (2005) argues: “Common to the success of
Japanese companies in consumer goods industries such as cars, motorcycles, consumer
electronics, and musical instruments has been the ability to reconcile low cost with high quality
and technological progressiveness. The total quality managements methods that they adopted
exploded the myth that there is a trade-off between high quality and low cost.”1 Thus while
adherents of Porters theory argue that cost leadership and differentiation strategies are
irreconcilable, opponents advocate that a trade-off does not necessarily need to be, and refer to
companies i.e. IKEA, Southwest Airlines, Toyota, IBM, Caterpillar, Wal-Mart and McDonalds
as examples of firms that have successfully reconciled both strategies and thus enjoy “dual
competitive advantages”.
1.1. Why is this topic of interest?
Considering the impact of Porters theories, in particular on managers, it is of interest to make a
critical examination. Traditionally the belief that low cost and differentiation are mutually
exclusive has been strongly embraced by practitioners. As some researchers start to question the
inevitable trade-off, augmented attention and renewed debate on the topic is necessary.