Page 45 - Strategic Management
P. 45
Strategic Management 9 Generic Strategy
9.2.1 Low-Cost leadership strategy
This aims to achieve competitive advantage by way of providing a product or service at a cost that is less than that of rivals.
Competitive advantage arises when the firm is able to earn higher profits than its rivals by charging a product at market
prices. Economic factors that sustain a low-cost leadership strategy include high economies of scale, high experience curve
benefits, and varying degrees of vertical integration.
Benefits:
• Low production cost = higher profit.
• Allows the company to enter new markets.
• Most successful in price-sensitive markets.
• Creates barriers of entry to the industry
How to achieve cost leadership:
• Reduce unit costs (e.g. generic designs).
• Use cheaper materials.
• ‘No frills’ products.
• Increase productivity.
• Achieve economies of scale.
• Achieve ‘learning curves’.
Please click the advert
Download free ebooks at bookboon.com
45
