Ans

cost leadership is based on:

Creating a low-cost position relative to a firms peers

Managing relationships throughout the entire value chain to lower costs .

Differentiation implies:

Products and/or services that are unique & valued

Emphasis on nonprice attributes for which customers will gladly pay a premium

Chaye khana is best example which follows the combination of both cost leadership and
Differentiation strategy. Chaye khana is using various strategies to provide multiple types of value to
customers. A combination low-cost and differentiation strategy enables a firm to provide two types of
value to customers: differentiated abilities ( e.g., high quality, brand identification, reputation) and
lower prices (because of the firms lower costs in value creating activities). Chaye khana is pursuing cost
leadership by achieving economies of scale and by cutting back the overhead costs along with unit
costs. Along with cost leadership chaye khana is also pursuing Differentiation strategy by providing
quality and valuable products to its customers.

(a) Both of these advantages are sustainable as long as they serve the demand efficiently more than its
competitors. As soon as they failed in serving demand more efficiently , the competitors with sufficient
resources will take it out of the market .