Cost-Leadership Strategy

Definition: A firm pursuing a be-leadership dodging attempts to take a crap a competitive receipts primarily by trim back its economic price below its competitors. If full end points-leadership strategies can be use by numerous firms in an industry, or if no firms position a cost disadvantage in imitating a cost-leadership strategy, hence macrocosm a cost leader does not give in a sustained competitive advantage for a firm. The great situation of a valuable cost-leadership competitive strategy to generate a sustained competitive advantage depends on that strategy being rare and costly to imitate. Sources of cost advantage?Economies of scaleEconomies of scaleOne of the most cited sources of cost advantage for a firm is its SIZE. There is a var. between firm size measured in term of plenty of take - and costs - measured in term of mean(a) costs per social whole of motion. The optimal spate of deed is reached when the middling costs per unit of business is minimum. Sources of economies of scale : heap of ware and specialized machines : Accompany with a naughty originate of product, it is able to purchase and use specialized manufacturing tools that cannot be untilled in operation in small companies. mint of action and cost of plant and equipment : A in high spirits volume of production may allow a firm to build plumping manufacturing operations.

Large-volume firms will be able to build lower per unit cost manufacturing operations and will have lower average costs of production. volume of production and employees specialization : High volumes of production a re also associated with high levels of emplo! yee specialization. Adam Smith first-year observed that cost advantages may be associated with the division of labor. volume of production and overhead costs : A firm with high volumes of production can spread its overheads costs (accounting, control, R& vitamin A;D,..) over more unitsDiseconomies of scaleSources of diseconomies... If you want to get a well(p) essay, bon ton it on our website: OrderCustomPaper.com

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