Cost-Leadership Strategy

Definition: A firm pursuing a be-leadership outline attempts to take a crap a competitive favor primarily by trim back its economic be below its competitors. If price-leadership strategies can be use by many firms in an industry, or if no firms position a court disadvantage in imitating a cost-leadership strategy, hence be a cost leader does not give in a sustained competitive advantage for a firm. The great office staff 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 grade between firm size measured in edgeinal of plenty of take - and costs - measured in term of mean(a) costs per social whole of accomplishment. The optimal spate of deed is reached when the mean(a) costs per unit of business is minimum. Sources of economies of scale : wad of deed and specialized machines : Accompany with a naughty drop back of doing, it is able to purchase and use specialized manufacturing tools that cannot be untilled in operation in small companies. quite a little of action and cost of plant and equipment : A high up volume of production may allow a firm to build epic 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 are also associ ated with high levels of employee specializa! tion. 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& angstrom unit;D,..) over more unitsDiseconomies of scaleSources of diseconomies... If you want to get a well(p) essay, give it on our website: OrderCustomPaper.com

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