Analysis of Cost Leadership Strategy and Differentiation Strategy in Creating Competitive Advantages and their Impact on Performance

One of the determinants of business success that must be considered by business owners or managers, especially in facing business competition is to create competitive advantage. The competitive advantage of a company is determined by the company& #039, s ability to create value or benefit from the product or service felt by the buyer in excess of the cost incurred by the company to create it. There are two main strategies that can create competitive advantage is the strategy of Cost Leadership and Differentiation strategy. This study aims to analyze the role of Cost Leadership strategy and Differentiation strategy to create competitive advantage in facing business competition and with competitive advantage possessed able to improve business performance. The research object is Micro, Small, Medium Enterprises (MSMEs) of woven ikat handicraft in West Southeast Maluku Regency, Maluku Province. The samples were taken from 74 respondents, owners and managers spread in 91 units of woven ikat handicrafts business in 3 (three) subdistricts of South Tanimbar Subdistrict, Wertamrian Subdistrict, and Wermaktian Subdistrict, as an affordable population in this research. Data collection is done by direct survey method with questionnaire instrument. The analysis was done by using PLS-SEM method with SmartPLS 2.0 software. The result of the research confirms that small-scale woven ikat handicraft business in West Southeast Maluku district build their competitive advantage by using Differentiation strategy more than the Cost Leadership strategy. The result of the research shows the performance resulted from the effort to build the competitive advantage in the Differentiation strategy has increased for the last 3 years.