Accounts for competitive advantage through a cost advantage, or by costs as low as possible. Thus, the company will be in a position of advantage not only from competitors but also with suppliers and customers.
For this strategy should be feasible to give a series of conditions. Therefore, it must achieve a high market share that enables the placement of large volumes of products. On the other hand, you should get a high productivity of the factors that allow a reduction in unit costs of production. You should verify a strong cost control in order to eliminate or reduce non-relevant.
The cost leadership strategy allows the company to be in a strong position against competitors, since low costs allow lower prices to cancel the margin of the closest competitor.
With suppliers, its higher margins and larger will be located in a position to negotiate. However, not all are advantages in cost leadership strategy. This strategy, if followed by a continuous basis and not always take the necessary measures to continue providing the above conditions can pose serious risks. If the company adapts its technology, productivity levels, etc.., New needs arising from changes in technology, etc. Runs the risk of seeing their cost advantage could disappear if another competitor if incorporating such changes.
Besides the danger posed to the success of such strategies, not being alert to the potential obsolescence of the processes, the danger of neglecting the potential obsolescence of products and new expectations of customers.
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Posted in Business Strategy | 
Tags: business strategies, competitive advantage, Cost Leadership, Leadership Strategy