helen mba _2 - Nelson Mandela Metropolitan University

eduction is regarded as essential to survival. One driver of a low coststrategy is an optimal facility that is effectively utilized (Markides, 1997: 20).Identifying the optimum size can allow firms to spread overhead cost overenough units, to drive down costs and provide a cost advantage. Low costleadership entails achieving maximum value defined by the customer (Heizer& Render, 1999:37).• For a differentiation strategy, understanding the needs of the customer iscrucial. The business must also have the ability to transform the customer’sneed into appropriate products or services. The value chain is of importancehere, as differentiation is likely to be achieved through multiple linkages withinthe value chain. This stresses the importance of creativity and themanagement of products and process innovations throughout the value chain.According to Strickland and Thompson (1999:106), some of the competitivecapabilities for a differentiation strategy are: short development times inbringing new products to the market; organisational agility in responding toshifting market conditions; research and development of organisations with theability to keep the company’s pipeline full of innovative new products. David(2001:180) adds that differentiation is a strategy aimed at producing productsor services which are considered unique industry-wide, and directed atcustomers who are relatively price-insensitive. An example of this isFreightdynamics, an intermodal service provider in the Nelson MandelaMetropolitan Municipality, that acquired side-loader equipment to add value tothe Eastern Cape intermodal operation. The side loaders were bought todistinguish Freightdynamics from other intermodal service providers (Le Roux,Regional commercial manager, Freightdynamics, Port Elizabeth 31 January2003, Personal Communication).• Switching costs may be built into products or services. This will improve thebusiness’s competitive standing as the actual or perceived cost to a buyer ofchanging source of supply may be high, thus allowing the business to achieve62