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ACCA Strategic Professional · Strategic Business Leader · Strategic choices

Harlow Components makes standard steel fasteners sold mainly on price. It has the lowest unit cost in its industry through large-scale production and tight overhead control, and it sells at around the industry average price to a broad market of buyers. Which of Porter's generic strategies is Harlow pursuing, and what does its advantage rest on?

Harlow is pursuing cost leadership. It targets a broad market and holds the lowest unit cost through scale and overhead control, so selling at the average price gives it superior margins. It is not a focus strategy because its market scope is broad rather than a narrow segment.

  1. ACost leadership, with the advantage resting on lower costs that produce higher margins at average pricesCorrect
  2. BDifferentiation, with the advantage resting on a premium price accepted by customers
  3. CCost focus, with the advantage resting on serving a narrow segment at lower cost
  4. DDifferentiation focus, with the advantage resting on specialised needs of a small segment

Explanation

Harlow serves a broad market and competes through the lowest cost position. Selling at the industry average price while having lower costs gives above-average margins, which is the logic of cost leadership. Cost focus is wrong because the market scope is broad, not a narrow segment.

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