Cost leadership is a competitive strategy aimed at achieving the low cost that targets the broad mass market and requires aggressive construction of efficient-scale facilities, vigorous pursuit of cost reduction from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on.
If a firm becomes the lowest-cost producer in the industry, then cost leadership may be the most appropriate strategy to pursue. A low cost strategy is based on doing everything possible to lower unit costs. Cost leadership strategy is explained as ‘a firm starts to become the low- cost producer in its industry, it must identify and take advantage of all sources of cost reduction. Low- cost producers typically sell a standard product and place enough emphasis on reaping scale or absolute cost advantages from all direction. If a firm is able to accomplish and sustain overall cost leadership, then it will be in a position to earn above- average returns in its industry.The cost leader outperforms its competitors by offering products or services at a lower cost than they can. Customers prefer a lower cost product or service if it provides them the same need satisfaction as the comparable products available in the market do. When all firms offer products at a comparable price, the cost leader is able to earn above average profits due to the low cost of its products. Moreover, the cost leadership provides a margin of safety to the firm to lower price if the competition grows intense and yet earn more or less the same level of profit
If a firm becomes the lowest-cost producer in the industry, then cost leadership may be the most appropriate strategy to pursue. A low cost strategy is based on doing everything possible to lower unit costs. Cost leadership strategy is explained as ‘a firm starts to become the low- cost producer in its industry, it must identify and take advantage of all sources of cost reduction. Low- cost producers typically sell a standard product and place enough emphasis on reaping scale or absolute cost advantages from all direction. If a firm is able to accomplish and sustain overall cost leadership, then it will be in a position to earn above- average returns in its industry.The cost leader outperforms its competitors by offering products or services at a lower cost than they can. Customers prefer a lower cost product or service if it provides them the same need satisfaction as the comparable products available in the market do. When all firms offer products at a comparable price, the cost leader is able to earn above average profits due to the low cost of its products. Moreover, the cost leadership provides a margin of safety to the firm to lower price if the competition grows intense and yet earn more or less the same level of profit
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