Cost Leadership

Establishing a competitive advantage by having the lowest cost of operation in the industry. This strategy can be specially effective when: - Price competition among rival sellers is especially vigorous.  - Products of rival sellers are essentially identical and supplies are readily available from any of several eager sellers - There are few ways to achieve product differentiation that have value to buyers - Most buyers use the product in the same ways - Buyers incur low costs in switching their purchases from one seller to another - Buyers are large and have significant power to bargain down prices Industry newcomers use introductory low prices to attract buyers and build a customer base. A refinement to the concept of Cost Leadership is that we now consider two versions of cost leadership, which an organization may choose to employ, as follows: Overall Cost Leadership Strategy: offering products or services at the absolute lowest price available in the market. Best Value Strategy: offering products or services at the best price-value on the market.