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Cost Leadership

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12 views1 page

Cost Leadership

Uploaded by

murtasimkabi2024
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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11.

Cost Leadership – Definition, Examples, & Strategies


Cost Leadership is the mechanism of establishing a competitive advantage by having the lowest cost
of operation in the industry. Achieving cost leadership isn’t a tough deal if you have a unique,
competitive strategy. Here are a few key strategies to establish and maintain an advantage.

Economies of scale: Efficient production decreases the costs of production. Size of the company
matters a lot when we talk about economies of scale.

Advantages of size: Increased purchasing power is a major outcome of the advantages of size. In short,
more the money given to the suppliers, more the likeliness of extracting unique deals that become
advantages.

Technology: Better and innovative technologies and methods of production are a major deal in cutting
costs.

Focus: A company needs not to be huge to be a cost leader in the market. Even if a company manages
to produce just one product, but with full focus and efficiency, it can manage to become the cost leader
in that field of the market.

Raw materials: Costs can be greatly reduced depending upon the amount of access a company has
over the basic raw materials required for production. A company might pay huge sums for a particular
resource, while another may not have to do so.

Operating efficiency: Getting more tasks done in comparatively lesser time and costs emerge as a
golden way of increasing efficiency and also, cutting costs.

Cost Leadership Examples


Amazon: Amazon provides customers with great value at low prices, making it a trusted and reliable
place for online shopping.

McDonald’s: McDonald’s saves money by hiring and training beginners instead of experienced chefs,
which lowers their spending on employee salaries.

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