PORTER’S GENERIC STRATEGIES: COST LEADERSHIP Flashcards
1
Q
What is cost leadership
A
a strategy of selling a low cost product aimed at a mess market.
2
Q
What are the requirements of cost leadership
A
Organisation is able to take advantage of economies of scale: technical, managerial, bulk buying
Focus on cost minimisation - materials, labour productivity, use of technology, distribution
Low profit margins = high number of sales
Products are of a reasonable quality
Barriers to entry, preventing new entrants from stealing market share
3
Q
What are the benefits of cost leadership
A
Appeals to price sensitive consumers
Effective in recessions (selling ‘inferior goods’)
Relatively unappealing to new entrants
4
Q
A