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Ch5 Note - Cost-leadership Strategy Do everything to...

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Cost-leadership Strategy Do everything to achieve a CA through producing products or services at a lower unit cost (lowering cost structure) charge a lower price. Increase efficiency and lower costs – the manufacturing and materials management functions are the center of attention A low-level of product differentiation – it means that you do not want to be the industry leader in differentiation. Target the average customer – Scale and Focus, not Product Variety - ignores the different market segments – focuses on mass market.
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Advantages and Disadvantages of Cost-leadership Strategy Advantages - charge a lower price yet make the same level of profit. - win in the price war. - low-cost as an entry barrier. - protected from rivals. - less affected by powerful buyers and suppliers. - room to reduce its price to compete with substitute products. Disadvantages - technological advancement makes the low cost advantage outdated.
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