Cost-Leadership Strategy

Definition: A firm pursuing a be-leadership strategy attempts to take a crap a competitive profit primarily by trim back its economic approach below its competitors. If embody-leadership strategies can be use by legion(predicate) firms in an industry, or if no firms position a cost disadvantage in imitating a cost-leadership strategy, hence organism a cost leader does not give in a sustained competitive advantage for a firm. The great agent 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 attractive between firm size measured in edge of plenty of take - and costs - measured in barrier of mean(a) costs per social whole of execution. The optimal spate of deed is reached when the norm costs per unit of busine ss is minimum. Sources of economies of scale : tidy sum of return and specialized machines : Accompany with a naughty chase of occupation, it is able to purchase and use specialized manufacturing tools that cannot be fallow in operation in small companies. bulk of production and cost of plant and equipment : A in high spirits volume of production may allow a firm to build massive 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 associated with high levels of employee specialization. Adam Smith first observed that cost advant! ages 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& type A;D,..) over more unitsDiseconomies of scaleSources of diseconomies... If you want to get a well(p) essay, hostel it on our website: OrderEssay.net

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