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What is Cost Leadership?

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Cost leadership is a business strategy that seeks to produce a product or service at a cheaper price than all other competition.
It is often a difficult strategy to realize, as costs in many industries are similar from one producer to the next. Cost leadership is typically achieved with economies of scale, lower input costs such as labor, process optimization and innovative methods.
Cost leadership gives a firm flexibility on pricing with higher margins at every price point than the competition. It should be noted that the cost leader doesn't necessarily offer the lowest price. In fact, they may have a strong brand or superior quality that allows them to charge a premium.
Overview: Cost Leadership
Type
Product Strategy
Definition
A strategy to achieve the lowest cost structure for a product or service.
Value
Allows for higher margins at every price point relative to the competition.
Related Concepts
Price Leadership
Diseconomies Of Scale
Economies Of Scale

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