Cost leadership is a concept developed by Michael Porter, used in business strategy. It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry. The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of production, well defined scope and other economies (e.g. a good purchasing approach), producing highly standardized products, using high technology. In the last years more and more companies choose a strategic mix to achieve market leadership. This patterns consist in simultaneous cost leadership, superior customer service and product leadership.
Cost leadership is different from price leadership. A company could be the lowest cost producer, yet not offer the lowest-priced products or services. If so, that company would have a higher than average profitability. However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management.
Famous quotes containing the words cost and/or leadership:
“Every new stroke of civilization has cost the lives of countless brave men, who have fallen defeated by the “dragon,” in their efforts to win the apples of the Hesperides, or the fleece of gold. Fallen in their efforts to overcome the old, half sordid savagery of the lower stages of creation, and win the next stage.”
—D.H. (David Herbert)
“The liberal wing of the feminist movement may have improved the lives of its middle- and upper-class constituency—indeed, 1992 was the Year of the White Middle Class Woman—but since the leadership of this faction of the feminist movement has singled out black men as the meta-enemy of women, these women represent one of the most serious threats to black male well-being since the Klan.”
—Ishmael Reed (b. 1938)