Chapter 4: Business-Level Strategy 131Ultimately its technologically-oriented mainstay customers
were offended and found other sources for their product pur-
chases, mostly through online sources. In the end, RadioShack
just wasn’t getting the traffic needed to drive revenues, and its
differentiation strategy failed.
Sources: J. Brustein, 2015, Inside RadioShack’s collapse: How did the elec-
tronics retailer go broke? Gradually, then all at once, Bloomberg BusinessWeek, Feb 9–15, 54–59; L. Chen, 2015, Next RadioShack? Here are the most
troubled retail stores. Forbes, February 10, 13; D. Fitzgerald & M. Jarzemsky,
2015, Beseiged RadioShack spirals into bankruptcy, Wall Street Journal,
Feb 6, A1–A2; S. Grossman, 2015, John Oliver wants you to remember that
one day we’ll all be like RadioShack, Time, http://www.time.com, February 12;
C. Mims, 2015, RadioShack suffers as free time evaporated, Wall Street
Journal, Feb 9, B1, B6; P. Wahba, 2015, RadioShack pulls the plug and files
for bankruptcy, Fortune, http://www.fortune.com, February 9.Concentrating on the needs of its core customer group (e.g., higher-income, fashion-
conscious discount shoppers), Target stores uses an integrated cost leadership/differentiation
strategy as shown by its “Expect More. Pay Less.” brand promise in its mission statement.
It does this by seeking to provide convenience by a faster checkout, increased savings for
quality products, and a dedicated team providing more personalized service.^101
Often firms are “caught in the middle” because they do not differentiate effectively or
provide the lowest-cost goods. JCPenney is a prime example of this failure. It attempted
to integrate low cost (reducing pricing on most goods in the store) with differentiation
(creating specialized stores for name-brand goods within each store). This strategy is
very difficult to implement effectively. It could not compete with the low-cost leaders
such as Walmart and Family Dollar stores, nor could it compete effectively with the more
upscale and differentiated department stores, such as Target and Macy’s. RadioShack (see
the Strategic Focus) provides another example of a firm “caught in the middle” between
maintain differentiation on electronic dabblers and seeking new growth trends such as
selling cellphones to achieve low cost through volume.
Interestingly, most emerging market firms have competed using the cost leadership
strategy. Their labor and other supply costs tend to be considerably lower than multina-
tional firms based in developed countries. However, in recent years some of the emerging
market firms are building their capabilities to produce innovation. Coupled with their
capabilities to produce lower cost goods, they may be able to gain an advantage on large
multinational firms. As such, some of the emerging market firms are beginning to use an
integrated low cost and differentiation strategy.^102
Flexibility is required for firms to complete primary value-chain activities and sup-
port functions in ways that allow them to use the integrated cost leadership/differentiation
strategy in order to produce somewhat differentiated products at relatively low costs.
Chinese auto manufacturers have developed a means of product design that provides a
flexible architecture that allows low-cost manufacturing but also car designs that are differ-
entiated from competitors.^103 Flexible manufacturing systems, information networks, and
total quality management systems are three sources of flexibility that are particularly useful
for firms trying to balance the objectives of continuous cost reductions and continuous
enhancements to sources of differentiation as called for by the integrated strategy.Flexible Manufacturing Systems
Using a flexible manufacturing system (FMS), the firm integrates human, physical, and
information resources to create relatively differentiated products at relatively low costs.
A significant technological advance, the FMS is a computer-controlled process used to
produce a variety of products in moderate, flexible quantities with a minimum of manual
intervention.^104 Automobile manufacturing in the Ford-Changan alliance in Chongqing