Benefits and drawbacks of a Cost Leadership Approach

A company seeking a Cost Leadership Strategy can offer a minimal price while still maintaining profits. This kind of strategy provides its advantages, but it doesn’t work in every industry. For example , high end goods customers aren’t mainly because price delicate as individuals who buy food staples, therefore small businesses will not be able to compete on price. In these cases, a small business can advertise that it makes its pastries from scratch, which makes it more competitive.

While this plan isn’t simple to implement, it’s a great idea for a lot of businesses that want to find a competitive advantage and lower creation costs. Among the features of this strategy is the fact firms may reduce their very own fixed costs as they increase their production volumes. These costs stay continual no matter how a large number of units on the product they will produce. When these set costs will be reduced, the general production value is lower. A firm that routines cost command should consider marketing as a way to reach a wider audience.

One of many challenges of cost command strategy is usually its low amount. While a general Cost Leadership strategy usually is applicable to all or any businesses, a focused Cost Leadership approach will be harder to implement. A business that uses this strategy could have less quantity than a common company, but will focus on a certain niche market. A local Hispanic food market, for example , uses this strategy to focus on a niche marketplace of Latinos living in Northern Virginia.

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