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Globalization has had tremendous effect on how companies operate around the world and how customers make purchase decisions. While the addition of more than two billion customers into the global economy has created a massive, untapped market for corporations to explore, the growth of companies in the emerging economies has ushered in new ways of doing business.

The most common advice given to companies around the world is to invest in building brands.

But while some global corporations are increasing their investment in creating resonating brands, others choose not to do so. Instead, some companies highlight their focus on offering customers a wide variety of products at highly competitive prices. By focusing exclusively on competitive prices, they streamline every stage of their value and supply chain.

This contrast is evident in every industry. For every Singapore Airlines, there is a Jetstar Airlines; for every Bon-Ton or Macy’s there is a Kmart; and the list goes on.

While the leading brands in any given industry invest millions of dollars to create experiences, procedures and unique cultures to attract customers, the me-too competitors focus on the minimum to bring in customers by offering low prices. The former are usually referred to as the differentiators and the latter are called cost leaders.

While the cost leaders have always existed as second-tier products, the current economic scenario is shaking things up. Global economic recession has been persistent, unemployment has been on the rise and consumption has been dropping as customers look to save. Even when they spend, customers are cautious about their brand splurges.

While the recession has had barely any effect on the affluent class that patronizes luxury brands, the majority of customers have questioned their loyalty to higher-priced brands.

Many of the major companies in the retail sector are investing in building store brands, and many of the companies that once solely competed on low price are gradually broadening their range of brand-related investments to gradually climb up the scale of differentiation. Given this, differentiation and cost leadership are no longer mutually exclusive strategies for companies.

In this context, should companies follow a cost leadership strategy or should they gradually chip away at the traditional brands by incrementally enhancing their investments in creating differentiation? Firms that offer commodity products should consider two main factors in deciding their ideal strategies.

Nature of the product: The most important factor is to consider nature of the product the company sells. Different types of products offer customers different types of value. Some are consumed for their functional value while others are used for their symbolic value. Investing in gradually shifting from a cost focus to a level of value addition would benefit those products that offer a combination of these values.

Reputation of the overall company: Given the increasing popularity of store brands, many retail stores are increasingly interested in launching their own. This is a complex decision. Retail stores sell a wide array of products from well-known brands, so they should strike a balance between selling other brands while aggressively promoting their own brands. The big factor in making this decision is the store’s reputation: if its reputation isn’t strong, the store should resist launching its own brand.

Martin Roll is a global business and brand strategist. His Web site is at http://www.martinroll.com.