From the MUST KNOW checklist that was going around awhile back… It’s under the Equity heading… I can’t seem do find this in my notes, does anyone know what they are? Thanks
no, sry
Cost leadership…that’s the only one that comes to mind right now.
Cost Leadership, Differentiation, Focus
Which chapter or study session is this referring to? What is cost leadership? could someone explain.
pepp Wrote: ------------------------------------------------------- > Which chapter or study session is this referring > to? > > What is cost leadership? could someone explain. It is in SS11. It describes three possible generic strategies that can be used to position a company for above average profitability, cost leadership is one of the three as stated above. - The market price will tend to be set near the cost of the least efficient producer whose output is still demanded. - The low cost producer can exert leadership by threatening to lower cost levels still profitable for itself, but (possibly) not profitable for others. - Achieving cost leadership usually requires large scale production facilities, vigorous cost control, large capital investment, proprietary technology. Risks in this strategy: - Requires standardization (reduces flexibility) if competitors imitate, it will lose its differentiation. - A technological change can make large investments in old technology obsolete. Yet, a firm with much invested in old technology may be unable to abandon it. - Product must be comparable to avoid discounted prices. Therefore cost leaders must achieve cost parity (acceptable/comparable products) and cost proximity (prices with good spread over costs, yet low enough to offset competitors’ better quality). - Requires a cost leader - if there is no clear cost leader, rivalry can be intense. - If firm loses control of key, low-cost inputs (raw materials), the firm’s competitive advantage threatened.