A focused cost leadership strategy requires competing based on price to target a narrow market.
A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Instead, it charges low prices relative to other firms that compete within the target market.
2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
5. Focused cost leadership strategy
• A focused cost leadership strategy
requires competing based on
price to target a narrow market.
• A firm that follows this strategy
does not necessarily charge the
lowest prices in the industry.
Instead, it charges low prices
relative to other firms that
compete within the target
market.
6. Examples of Focused cost leadership
Redbox uses vending machines placed outside grocery stores and other retail
outlets to rent DVDs of movies for $1.
7. Cost Leadership
• Perhaps the most famous
cost leader is Walmart,
which has used a cost
leadership strategy to
become the largest
company in the world.
• The firm’s advertising
slogans such as “Always
Low Prices” and “Save
Money. Live Better”
communicate Walmart’s
emphasis on price slashing
to potential customers.
8. Common characteristics
• The ability to charge low prices
and still make a profit is
challenging.
• Cost leaders manage to do so
by emphasizing efficiency.
• As part of the effort to be
efficient, most cost leaders
spend little on advertising,
market research, or research
and development.
• Many cost leaders rely on
economies of scale to achieve
efficiency. Economies of scale
are created by selling more
items.
9. Examples of Cost leadership
• McDonald's - McDonald's
has been extremely
successful with this
strategy by offering basic
fast-food meals at low
prices. They are able to
keep prices low through a
division of labor that allows
it to hire and train
inexperienced employees
rather than trained cooks.
10. Examples of Cost leadership
• Ikea -The Swedish
furniture retailer Ikea
revolutionized the
furniture industry by
offering cheap but stylish
furniture. Ikea is able to
keep its prices low by
sourcing its products in
low-wage countries and
by offering a very basic
level of service.
11. Examples of Cost leadership
• Southwest Airlines -
Southwest attempts to
offer the lowest prices
possible by being more
efficient than traditional
airlines. They minimize
the time that their planes
spend on the tarmac in
order to keep them flying
and to keep profits up.
