Cost Leadership Strategy is an effective marketing strategy that helps marketers to establish their organization in the market through competitive advantage. Cost Leadership Strategy refers to having the lowest cost of operation and producing the lowest-priced goods in the market. It helps the organization to outbid rival brands and gain a large chunk of market share. What is Cost Leadership Strategy? - Maximize profits by cutting the costs so that the product prices are industry-average - Increase market share by cutting the price as this will lower costs and earn decent profits per sale. Cost Leadership Strategy Features - Investing available capital in technology to minimize costs Example – Walmart - Efficient logistics Example – Amazon - Low-cost base strategy to lower cost Example – Chinese contract manufacturers Cost Leadership Strategy Risks - The cost lowering methods can also be used by the competitors. - The strategy puts a burden on the firm to maintain its position which means reinvestment. Cost leadership vs. Price Leadership Cost leadership refers to having the advantage of lower operational costs and Price leadership refers to offering products at the lowest prices. How to Achieve Cost Leadership? Economies of Scale Following a large-scale production method will minimize production costs and this will achieve economies of scale. Size Advantage A large size organization produces enormous product quantities and requires raw material in bulk. It can easily bargain for discounts and lower costs. Technology Adapting to technological innovation lowers the cost Focus Business organizations focused on one product and a specific market share can achieve low costs Access to raw materials Having access to raw materials at lower prices automatically cuts down the costs Efficient operations Utilizing the available resources, minimizing waste, and automating processes leads to better efficiency and reduced costs Cost Leadership Strategy Advantages - Expansion in the market size - Low financial threats and strengthened business sustainability - Higher revenues and profit maximization - Raises barriers of entry for competitors and gains competitive advantage Cost Leadership Strategy Examples 1. Walmart 2. IKEA 3. McDonald's This video is on Cost Leadership Strategy and it has the following sub-topics. Time Stamps 0:00 Introduction 00:22 What is Cost Leadership Strategy? 01:04 Cost Leadership Strategy Features 01:30 Cost Leadership Strategy Risks 01:47 Cost leadership vs. Price Leadership 02:11 How to Achieve Cost Leadership? 03:51 Cost Leadership Strategy Advantages 04:45 Cost Leadership Strategy Examples 04:49 Cost Leadership Strategy Examples Walmart 05:36 Cost Leadership Strategy Examples IKEA 06:18 Cost Leadership Strategy Examples McDonald's