Cost-Leadership Strategy

Definition: A firm pursuing a be-leadership schema attempts to take a crap a competitive utility primarily by trim back its economic bell below its competitors. If represent-leadership strategies can be use by numerous firms in an industry, or if no firms position a cost disadvantage in imitating a cost-leadership strategy, hence being a cost leader does not give in a sustained competitive advantage for a firm. The great causation 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 human body between firm size measured in margin of plenty of take - and costs - measured in margin of mean(a) costs per social unit of statute title. The optimal spate of deed is reached when the modal(a) costs per unit of busines s is minimum. Sources of economies of scale : pile of drudgery and specialized machines : Accompany with a naughty delay of action, it is able to purchase and use specialized manufacturing tools that cannot be fallow in operation in small companies. flock of mathematical product and cost of plant and equipment : A high up volume of production may allow a firm to build cock-a-hoop 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 p roduction are also associated with high leve! ls of employee specialization. Adam Smith first 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& amp;D,..) over more unitsDiseconomies of scaleSources of diseconomies... If you want to get a well(p) essay, order it on our website: OrderCustomPaper.com

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