cost leadership

Small businesses can also be cost leaders if they enjoy any advantages conducive to low costs.

On the other hand, cost leaders must maintain quality that is close to, or equal to, that of the competition.

The cost leader delivers a product of acceptable quality at the lowest possible cost.

"If we have a market here, we feel confident we will be a cost leader," he says.

However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management.

The problem in gearing up investment to shoot off down the experience curve and become the cost leader is that you may be overtaken by technology.

The bad news for G.M. is that it is still far less efficient than the industry's cost leaders.

Aiming High If it all sounds very much like what Compaq has done to become the PC industry cost leader, it is no accident.

If atomic vapor laser isotope separation works and USEC remains the cost leader in the industry, it could well become a cash cow.

EnCana is also a technical and cost leader in the recovery of oil through steam-assisted gravity drainage (SAGD).

Largely because of the exchange rate, the average price of a London meal (drink, tax and service included) runs about $40, compared with the $24 of America's restaurant cost leader, New York.

Moreover, Miller and Friesen (1986) have tested Porter's position on this point and concluded that differentiators do also employ cost-leadership strategies and that cost leaders do employ differentiation policies.

In fact Porter really offers just two possible competitive strategies (i.e. be a cost leader or differentiate your product) which can be applied over either a broad range of products in an industry or just in a special niche.

A reputation as a cost leader may also result in a reputation for low quality, which may make it difficult for a firm to rebrand itself or its products if it chooses to shift to a differentiation strategy in future.