Advantages and Disadvantages of a Expense Leadership Technique

A company going after a Cost Leadership Approach can offer a low price although still preserving profits. This type of strategy offers its advantages, but it doesn’t work in every market. For example , high end goods buyers aren’t simply because price delicate as those who buy food staples, so small businesses might not be able to contend on value. In these cases, a small business can advertise that it makes its pastries from scratch, that makes it more competitive.

While this strategy isn’t easy to implement, 2 weeks . great idea for some organizations that want to find a competitive advantage and lower creation costs. Among the features of this strategy is the fact firms may reduce all their fixed costs as they increase their production volumes. These costs stay continuous no matter how many units for the product that they produce. When ever these set costs are reduced, the complete production value is lower. A firm that tactics cost command should consider advertising as a way to reach a larger audience.

One of the challenges of cost command strategy is usually its low level. While an over-all Cost Leadership strategy is mostly applicable to everyone businesses, a focused Price Leadership strategy will be harder to do. A business that uses this strategy could have less volume than a general company, but will focus on a specific niche market. A local Hispanic food market, for example , uses this strategy to target a niche industry of Hispanics living in North Virginia.