Authors
Dr. Marlene Smith
University of Colorado Denver
Objective
Assess the effectiveness of a cost leadership strategy in increasing market share, and assess the potential for additional gains in market share under the current strategy.
Background
Sit Well owns several retail furniture stores in a moderate-sized city. After years of disappointing performance, Sit Well hired a new top management team to oversee the firm’s business practices. As its first strategic initiative, the management team decided to engage in cost leadership—a strategy of providing affordable high quality products at a lower cost of operation than competitors. To accomplish this goal, a strong advertising campaign was launched, several smaller furniture stores were gradually acquired to increase capacity, and deeply discounted sale prices were promoted.
Sit Well’s accounting department calculated monthly market share, defined as the percentage of revenue captured by Sit Well relative to estimates of all competing furniture stores in the local market.
The Task
Assess the effectiveness of this business strategy.
- Was the strategy successful in increasing market share?
- Is there room for further growth in market share under the current business strategy?
- Can you forecast market shares for the next three months?