1. At first, Chelsea Milling Company started as a market leader, Mabel Holmes introduced the concept of Jiffy: the ready-made biscuit mix that is so simple to do. Later on and as the business grew and competition became harsh, Chelsea Milling Company maintained its competitive advantage and its status as the market leader in the muffin and biscuit mix category through price versus quality leadership.
In other words, Jiffy adopt the strategy of a full market coverage through price leadership (“Jiffy prices are one-third to one-half less than its competitors…”) while at the same time offering high quality products: “Our approach is to give people the best value, which is a combination of two things,” says Holmes, “that’s the highest-quality ingredients with the best price”.
In fact, Chelsea Milling Company was able to be a price leader in the market without adopting the cost leadership strategy that is the bases for a price leadership in most of the cases in business. Chelsea Milling Company probably doesn’t have the highest the highest technology in its market nor the lowest cost of production. It doesn’t also compromise on quality to offer competitive prices.
But the only way Chelsea Milling Company was able to do that is through cutting some expenses, like advertising and merchandising expenses. And in this company’s case this strategy turned to be quite effective, and as we can see, Jiffy commands about 55% of the market in the muffin mix category, and based on the statement of Kroger, the USA’s largest grocery chain, spokesman “In our stores, Jiffy does three times the sales of the next closest item”.
As for the reasons the strategy of cutting important expenses like advertising and merchandising was effective in Chelsea Milling Company’s case while it may seem an unsuccessful strategy in most of the cases, that will be discussed in our second question’s