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Understanding cost leadership
This term has been stated by Michael Porter in his work on competitive strategy formulation. According to Porter there are three activities which allow companies an edge. The first of those activities is cost leadership. Now this process calls upon an organization to create standardized commodities and sell them for average prices.
What this process does according to Cost Leadership Strategies (Type 1 and Type 2) Homework Help experts is attract those customers that are sensitive to prices. For Porter very clearly there are two distinguished methods of executing cost leadership. They are:
- Type 1 –
The focus in this type is attracting cliental based on the low costs that they provide. A huge section of the target population buys a commodity based on its price. Therefore such clients are easily attracted using this method.
- Type 2 –
This method is similar to type 1 but instead of highlighting the aspect of price directly, the concept of best value is inculcated. Another section of consumers are both price and quality conscious, what type 2 does is attract such persons to buy the product.
Our Cost Leadership Strategies (Type 1 and Type 2) Assignment Help will help deal with such distinctions. All the student must understand on a simple level is that the first type focuses on the mass market through its policy of low costing and the second type seeks to eliminate competition by claiming superiority in the sphere of quality-price relation value. Porter through these classifications has simplified the dynamics of competition in business.
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