Cost leadership strategy means that enterprises emphasize providing low-priced products to users at lower unit cost. This is a preemptive strategy, which requires enterprises to have the ability of continuous capital investment and financing, and production skills are in a leading position in the industry.
Overall cost leadership (also known as low-cost strategy) The cost leadership strategy may be the clearest of the three overall strategies. Under the guidance of this strategy, enterprises decided to become low-cost manufacturers in their industries. The business scope of an enterprise is very wide, serving many industrial departments, and may even operate businesses belonging to other related industries.
The management of an enterprise often plays an important role in its cost advantage. The source of cost advantage varies with industrial structure. They can include the pursuit of economies of scale, patented technology, preferential treatment of raw materials and other factors.
Cost leadership is not the same as the lowest price. If the enterprise falls into the misunderstanding that the price is the lowest and the cost is not the lowest, what it can only get is to push itself into the endless price war. Because, once the price is reduced, competitors will also reduce the price, and because the cost is lower than their own, there is more room for price reduction, which can support the price war for a longer time.
For example, in the aspect of TV sets, in order to gain a leading position in cost, CRT production facilities with sufficient scale, low-cost design, automatic assembly and global sales scale conducive to sharing development costs are needed. In the security service industry, cost advantage requires extremely low management expenses, a steady stream of cheap labor, and efficient training procedures due to high personnel mobility. Pursuing the status of low-cost manufacturer not only needs to move down the learning curve, but also needs to find and explore all sources of cost advantage.