Cost Leadership

Cost leadership is a concept developed by Michael Porter, used in business strategy. It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry. The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of production, well defined scope and other economies (e.g. a good purchasing approach), producing highly standardized products, using high technology. In the last years more and more companies choose a strategic mix to achieve market leadership. This patterns consist in simultaneous cost leadership, superior customer service and product leadership.

Cost leadership is different from price leadership. A company could be the lowest cost producer, yet not offer the lowest-priced products or services. If so, that company would have a higher than average profitability. However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management.

Other articles related to "cost, cost leadership":

Porter Generic Strategies
... identified two competencies that he felt were most important product differentiation and product cost (efficiency) ... He originally ranked each of the three dimensions (level of differentiation, relative product cost, and scope of target market) as either low, medium, or ... They are cost leadership, differentiation, and market segmentation (or focus) ...
Strategic Information System - Porter’s Competitive Advantage
... and sustain a competitive advantage in their industry in either cost or differentiation ... with good management._Porter claims that the principal types of competitive advantage are low cost producer, differentiation, and focus ... it is able to deliver its product or service at a lower cost than its competitors ...

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