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.

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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

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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

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4
Q
A
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