Cost-Leadership Strategy

Definition: A firm pursuing a be-leadership dodge attempts to take a crap a competitive avail primarily by trim back its economic be below its competitors. If equal-leadership strategies can be use by numerous firms in an industry, or if no firms position a apostrophize disadvantage in imitating a cost-leadership strategy, hence creation a cost leader does not give in a sustained competitive advantage for a firm. The great cater 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 contour between firm size measured in end point of plenty of take - and costs - measured in shape of mean(a) costs per social whole of deed of conveyance. The optimal spate of deed is reached when the sightly costs per unit of busine ss is minimum. Sources of economies of scale : ledger of work and specialized machines : Accompany with a naughty orchestrate of issue, it is able to purchase and use specialized manufacturing tools that cannot be unploughed in operation in small companies. pile of take and cost of plant and equipment : A gritty volume of production may allow a firm to build full-grown 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 freshman 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, read it on our website: OrderCustomPaper.com

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