Some points on advantages and disadvantages of cost leadership strategy are discussed below. To learn more about leadership also check out advantages and disadvantages for more information.
Advantages : Cost leadership Strategy
- It charges lower price than competitor but it makes the same level of profit
- Cost leadership withstand competiton based on price
- High capacity utilization and accurate forecasting is to be done to realize cost advantages
- Economis of scale are to be attained which leads to lower per unit cost of product or service
- In cost leadership strategy high level of standardization of products is needed
- Capacity to absorb increases price
- Effective entry barrier, price reduction,cost advantage and minimize threat
Disadvantages : Cost leadership Strategy
- Competitors may lower their cost structure
- Competitors may try to copy or imitate the cost leader's methods
- Cost reduction may affect the demand
- Dilution of customer focus
- Reduction in scope of product or service
- Possibility of the duplication of cost reduction technique