Different Types of Production Strategies
The different types of production strategies are grouped, listed and explained under following three categories, viz.,
The types of production strategies under Business Strategies are as follows:
- Differentiation strategy
- Cost leadership strategy
- Market segmentation strategy
The production strategies under Competitive Priorities are as follows:
- Price or cost strategy
- Quality strategy
- Delivery strategy
- Product mix or flexibility strategy
- Service strategy
- Eco-friendly products
The production strategies under Competitive Advantages are as follows
- Flexible response strategy
- Low cost strategy
The types of production strategies listed above are discussed as follows:
1. Differentiation strategy
Under a differentiation strategy, the company tries to be different and unique from its competitors. It may offer better quality, quantity, pricing, appearance, and after sales-service, when compared to its competitors. It may offer more features and facilities in its product. It may be more flexible while dealing with its customers. It may also offer quick and better delivery of its products. So, there are many ways, in which a company can remain different from its competitors. If it maintains this uniqueness and difference in its product quality and customer service, then it can charge higher prices.
2. Cost leadership strategy
Under a cost leadership strategy, the company tries to reduce its cost of production. This is done by producing goods on a very huge scale. By doing so, the company will get the benefits of economies of large scale. Higher the scale of production, lower will be the cost of production. This is because per unit cost of raw materials, labour, advertising, sales promotion, R & D, etc. will decrease.
3. Market segmentation strategy
In market segmentation strategy, the company divides the market according to the type of customers it has to focus and target. It sells different products and services to different types of customers. To achieve this goal, it produces and sells goods and services as per the needs of the customers. Therefore, market segmentation strategy is also called Focus Strategy.
4. Price or cost strategy
Under price or cost strategy, the company sells its product at a very low price. This strategy is used when the products are homogeneous (same) in nature. That is, when the customers cannot distinguish the company's product from the competitors' products. In this case, the company will fix a low price. So, the customers will purchase the company's product and not the competitors' products.
5. Quality strategy
Under quality strategy, the company produces and sells high-quality goods and services. The prices of such goods and services are naturally very high. However, this strategy attracts those customers who prefer top quality products and are ready to pay necessary appropriate prices. The company must pay special attention to the design of its products. It must upgrade product design and add new product features to satisfy the current needs and demands of its customers. Products which are designed badly will naturally fail in the market. To gain success in the market, the company must smartly invest to make quality innovative products that are free from any defects.
6. Delivery strategy
Here under delivery strategy, the company delivers its product and services to their customers as early as possible that too within a fixed time period. The company gives top priority to fast delivery of products and providing quickest accessibility of services. Speed delivery of products and fastest accessibility of services removes the problem of scarcity and unnecessary delays in the market. Delivery strategy is used as a selling tactic to fight cut-throat competition.
7. Product mix or flexibility strategy
Under this strategy, the company produces and sells a product mix. A product mix is a group of products, which are sold by the same company. Here, the company does not depend only on one product for its survival and growth. It uses a product mix because it offers many advantages to the company. However, only large companies with huge production capacity can use this strategy.
8. Service strategy
Under this strategy, the company uses a service to attract the customers. It gives quicker and better after-sales service. It gives around the clock, i.e. 24-hour customer service. It may render this service directly via the company or through the network of call centres. Service is required for both consumer goods as well as industrial goods.
9. Eco-friendly products
Under eco-friendly strategy, the company produces and sells environment-friendly products also called as Green Products. For e.g. producing and selling lead-free petrol to reduce pollution, manufacturing mercury-free television panels, etc., are some good steps to preserve nature. This is a new type of production strategy. It is used to reduce pollution and protect the biosphere. Companies may also recycle certain materials like plastic, metals and papers. The properly recycled products are later used for manufacturing new products and in packaging. Companies use biodegradable packing material to reduce the problem of waste disposal. Recycling reduces continuous demand cycle of natural resources and hence somewhat minimize the exploitation of environment. The company informs the public about their environment-friendly manufacturing approach through advertisements.
10. Flexible response strategy
Flexible response strategy is said to be used when a company makes necessary changes in its production plans that too in accordance with the emerging changes in the market. Here, importance is given to speed and reliability. That is, the company must make quick changes as per the arising changes in the market demand. It must also be reliable. That is, it must give a regular supply of goods to its customers. There must not be any shortage of goods in the market. To achieve this, the company must follow a strict production schedule.
11. Low cost strategy
Under low cost strategy, the company fights massive market competition by selling its products at very lower prices. Simultaneously, it must also maintain the quality of its products. A company can only sell its goods at minimum prices if it maintains a low cost of production and distribution. This can be done by producing and distributing goods on a large scale. That is, company must take advantage of economies of large-scale production.