The Importance Of Cost Leadership Strategy

Introduction
Over all Cost Leadership is employed when a firm sets out to become the low cost producer in its industry for a given level of quality and entails a great attention to cost control. Above average returns are attainable because cost leaders can match their prices of their most efficient competitors, while fending off both powerful customers and suppliers.
A company that focuses on there cost leadership strategy does not indicate that they will offer low prices than its rival but on the contrary profit can be made by selling the same products as others and earning bigger margin per unit or by undercutting rival’s pricing for a lower margin on a larger volume. In addition a cost leadership strategy is effectively implemented when a business designs, produces and markets comparable product more efficiently than its competitors. The firm may have access to raw materials or superior proprietary technology to lower costs.
There …show more content…
Adding on a cost leadership strategy is put into use when a business designs and produces its products effectively. The company can also have access to different technologies, raw materials to lower costs.
A number of ways are inculcated today to achieve cost leadership like construction of efficient scale facilities, mass production, mass distribution and rigorous cost reduction from experience overhead control.
A cost leadership strategy is extremely effective in stable and predictable ones. Hence companies which operate from unpredictable environment or undergo regular changes will create severe diseconomies for those who pursue low cost strategy which results to threaten a cost leader’s effort at efficiency and cost