0A cost leadership strategy is often used by firms to increase their consumer base and sales, by reducing their costs of operation in comparison to competitors.
Price levels influence the conventional customer's purchase decision, and more often than not, people always buy products that are reasonably priced.
A cost-leadership strategy is a result of economies of scale and production efficiencies, achieved through innovation and higher output levels within the firm.
To become a cost leader, an organization must adopt at least one of the following strategies:
- Maximize profits by cost reduction while maintaining industry-average prices.
- Charging lower rates for a product or service that leads to an increase in sales and market share, registering overall profits on each sale.
