Strategy

Bossam Company has successfully adopted the cost leadership strategy to maintain competitive advantage in the electronic calculator industry. The company is able to keep cost of production at the lowest through exploiting economic of scale in production, highly standardized products and constantly improving on its productivity and efficiency. By achieving cost leadership, Bossam Company will still be profitable even if the competition from Porter's five forces is strong. The five forces are namely rivalry with existing competitors, bargaining power of customers, bargaining power of suppliers, threats of new entrants and threats of substitute products. Rivalry with existing competitors The company would still be in an advantageous position even there is a price war, as its cost is the lowest among industry competitors, hence yielding a higher profit than its competitors, while some competitors may not even earn any profits. Bargaining power of customers In the event where the bargaining power of the customer is strong, customers are able to push the price lower, competitors who are not able to earn profit out of that price might choose to leave the industry, only leaving those cost efficient companies. When it is an oligopoly or even monopoly industry, company will have greater control over the price, thus greatly reduced the bargaining power of customer. Having cost leadership advantages and being the dominant player in the industry, the threat of customer for Bossam is greatly reduced. Bargaining power of suppliers Likewise, if the bargaining power of suppliers is strong, company with lowest cost will have a lower impact if the supplier increases the prices. In this case, as Bossam Company is the largest player in the industry, the company will have a bargaining power over its suppliers, thus able to force its suppliers to lower their prices. Threats of new entrants The threat of new entrants is low as new competitor must have at least the same economic of scale in order to compete with Bossam Company. Threats of substitute products Lastly, Bossam Company would be in a more advantageous position than other company should there be a threat of substitute products, as the company could reduce price further to maintain customer value and retain customer. Porter, ME 2008, 'The Five Competitive Forces that Shape Strategy', Harvard Business Review, viewed 20 Feb 2013, http://www.asec-sldi.org/dotAsset/292822.pdf.