Define the concept of cost leadership. Explain how a company might achieve cost leadership and the primary benefits to be gained.
What will be an ideal response?
Cost leadership refers to a competitive advantage gained by a company when it achieves extraordinary efficiency in internal processes. For example, a company may choose to limit its product line to minimize inventory and service costs. It may also design products to use common components to take advantage of simplified sourcing and quantity discounts. By optimizing internal efficiency and costs, the company has larger margins to work with and thus has more flexibility when considering pricing strategies. In addition to pricing flexibility, the cost savings can also be directed to the bottom line or reinvested to support growth objectives.
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