Advantages and Disadvantages of a Price Leadership Approach

A company chasing a Cost Leadership Strategy can offer a decreased price when still preserving profits. This type of strategy contains its advantages, but it doesn’t work in every market. For example , high class goods consumers aren’t when price sensitive as those who buy meals staples, thus small businesses is probably not able to compete on selling price. In these cases, small businesses can advertise that it makes its pastries from scratch, that makes it more competitive.

While this tactic isn’t simple to implement, it’s a great idea for lots of firms that want to achieve a competitive advantage and lower production costs. One of many advantages of this strategy is the fact firms may reduce the fixed costs as they increase their production volumes. These costs stay consistent no matter how many units belonging to the product that they produce. Once these fixed costs will be reduced, the general production expense is lower. A strong that methods cost leadership should consider marketing and advertising as a way to reach a larger audience.

One of many challenges of cost leadership strategy is normally its low quantity. While an over-all Cost Management strategy is frequently applicable to any or all businesses, a focused Cost Leadership approach will be harder to do. A company that uses this strategy will have less volume than a universal company, but actually will focus on a selected niche market. A nearby Hispanic store, for example , uses this strategy to focus on a niche market of Latinos living in Northern Virginia.


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